Buying a house is one of the happiest moments of one’s life but it may turn into a nightmare if one doesn’t conduct a proper due diligence. Project delays, poor quality of construction, loan not sanctioned are among the most common problems buyers face these days. So, the onus falls on the buyer to do due diligence properly beforehand than to regret it later.
- Check if all the clearances are in place: Builders have to a take more than 40 approvals during a project’s lifetime. But often they start selling properties without taking the necessary approvals. When planning to buy, ask for a copy of land use certificate, which shows whether the land can be used for residential purposes. If the construction of the property is complete, look for completion and occupancy certificates. Take the help of a lawyer to vet these documents.
- Check the builder’s track record: Try to get as much information possible about the builder by visiting their site, consumer forums and Ministry of Corporate Affairs’ site. See how many projects have been delivered so far, how many have been delayed and the reasons for the delay. If possible, visit the completed projects of the builder to check the construction quality.
- See which banks have approved the project: Before the start of the project, builders approach banks for the initial capital. Before agreeing to fund the project, banks evaluate the viability of the project. If you see trusted banks financing the project, you’d know it’s a good project to invest in and that you can get a loan for the property.
- Ask for encumbrance in case of resale property: In case of resale property, ask for an encumbrance certificate, which says the property is free from any kind of mortgage. Ensure that all previous dues on the property have been paid off, including electricity and water bills. Ask the owner for the latest receipt of property tax.
- Read the fine print very carefully: Before signing the sales deed, read every point carefully. Check whether all that was promised is included in the agreement. Keep a note of date of possession, penalties on delay in possession, mode of payment, payment period, and penalties on delay in payment. If you don’t agree with any of the terms, try to get them changed.
Once you zero in on the project, the next big step is the home loan. Keep in mind the following:
- Loan eligibility: Before applying for loan, calculate the amount you are eligible for. In fact, you can do this even before you start house-hunting so that you know your house budget. Take the help of online EMI calculators to see how much amount can be sanctioned to you based on your income. If you feel this amount is not enough, I suggest you explore the option of joint loan.
- Down payment: Keep in mind, banks finance only 80% of the property cost. So you would have to arrange for the remaining amount, along with registration fees, brokerage and other expenses.
- Loan tenure and EMI: Home loans are available for tenure of up to 30 years, though mostly people opt for the 20-year term. Using online EMI calculators compute your EMI to find out which loan amount and duration is feasible for you.
- Interest rate and other charges: Currently, banks are passing on the benefits of rate cuts to consumers. At present, you can avail home loans at an interest rate of 8.80% (8.75% for women applicants). Do note other charges applicable for a home loan application, such as processing and administrative fees.
Table 1: Home loan interest rates of top banks
State Bank of India
Table 2: EMI forecast for various loan amounts for 20 years @9.75%
Rs 25 lakh
Rs 50 lakh
Rs 75 lakh
Rs 1 crore
First published in Deccan Chronicle