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Property Buying Guide for Indian Families

 

UNDERSTANDING THE NEED

When it comes to buy a property, the first thing we should understand is the need of that purchase. It is clear, then comes the next question, i.e. what to buy.

A person can choose from residential formats, like Residential plot, apartments, single floors, multi-storey flats and independent houses.

Besides, various things also matter. Say, if you have the required funding, then ready-to-move-in is certainly a good option for an end-user. However, this property would be considerably more expensive than the property at the launch stage, but the buyer is protected against time, the EMI payment during the period when the house is under construction, and also against the cost over-runs.

If an investor is looking for regular rental returns from his property investment, a ready-to-move-in property brings immediate rental income which positively helps in paying back the loan to complete the possession.

The choice of builder becomes a big decision, when the project is new. However, before jumping to a decision, do a background check on developers and make your assessment about where you would feel safe to invest. Checking the builder’s track record, his financial strength, his ability to deliver on time, and also the construction quality and the payment terms will certainly bring positive results for you. This must be checked, especially in the case of a local builders and real estate brokers.

SHORTLISTING YOUR PROPERTY

Now, that you have decided what to buy, next stage is shortlisting your property.

For those buyers, who have required funding, ready-to-move-in is the ideal option for a home buyer. Whereas, for an investment purpose, a ready-to-move-in property is feasible, as one can buy and put it up for lease without waiting for even a single day.

While, a house under construction eases the financial burden as one can finance his/her property through bank loans and pay less cash down payment.

A person can also decide the type of property according to the chosen budget. Besides, the size of your family can also be a determining factor while choosing the type of house a buyer is looking for.

Today’s the market abounds in various housing formats and offers a wide range to choose from – like 1, 2, 3 and 4BHK apartments, studio apartments, villas, row houses, independent houses and builder floors. Multi-storey projects and townships with all amenities in one project – clubhouse, swimming pool, meditation centre, health clubs, departmental stores, schools, cinemas, sports facilities, and banquet/party halls are also on top list of the buyers today.

CHOOSING THE RIGHT LOCATION FOR YOUR PROPERTY

Now, that you have shortlisted your property, let’s find the right location.

Many people ask where should invest their money, in big cities or small?

Always keep a few things in mind, while investing in a big city. If you are purchasing a property for your personal use, make sure it is in a neighbourhood that has all the conveniences that you require and it also has good accessibility to the rest of the vicinity.

You can find properties that suit your budget, even in premium localities, if you keep searching. If premium rates are out of your reach, look for a locality on the fringes of your area of choice. This will have all the advantages of proximity to the main locality but sport lower price tags.

If you are investing in a new property where development work is yet to begin, the prices remain very low. However, once the infrastructure work begins, prices rise by about 25 per cent.

When the property development reaches mid-way, there is another 25 per cent escalation in prices. Six months from completion there is yet another 25 per cent escalation. Once possession is handed over there is another 25 per cent increase in rates.

CHOOSING AN AGENT

Things you should keep in mind before choosing a broker:

  1. Find out as much as possible about the agent before hiring his services. Ask for references. Also, ask family and friends to recommend real estate agents they have worked with.
  1. Check if the agent is licensed and can work full-time on your real estate needs.
  1. Ensure that all agreements between your agent and you are in writing.
  1. Do not pay money upfront to your real estate agent. This could be a loss to you if you don’t buy or sell a property with this agent.

TAX IMPLICATION

Capital Gain is applicable when:

  1. The property sold has been withheld by a person for a period of more than three years from the date of possession.
  1. The sale proceeds are invested in a residential property which was bought one year before the sale of property or two years after the sale of the first property.
  1. The new property is bought after the sale of the first property.
  1. Capital Gains Tax can also be saved by investing the sale proceeds in Capital Gain Bonds.
  1. Taxes will be saved only if the new property is registered in the name of the person who receives the capital gain, i.e. the owner of the previous property.

LEGAL PERSPECTIVE

How to check if the project has legal approvals from authorities?

  1. Ensure the documents of Title of the property you intend to purchase are clear. A defective Title will create problems.
  1. Ensure that the building has been constructed as per the sanctioned plan and deviation, if any, is in the allowed limits. It should not be in a low-lying area or in a filled-up water body.
  1. Ensure the developer has clearance certificates from the Electricity Board, Water and Sewage Board and other concerned departments.
  1. Commencement Certificate and Occupancy Certificate are other important documents that are necessary while buying property. Check out the genuineness of these documents with the concerned authorities.
  1. Ensure Agreement for Sale and Sale Deed, duly stamped, executed and registered are in your possession. Both should contain fair clauses for both the parties.

HOME LOAN

Things you should keep in mind before getting a home loan:

  1. Your income and your track record of repaying previous loans – this is obtained from the Credit Bureau.
  1. Your current expenses including other loans you are servicing. The amount of loan related to the property value.
  1. Ownership of the property – this means that the lending bank should be comfortable that the seller has full and complete ownership of the property.
  1. Getting a loan depends on the report of the local bank surveyor who will inspect the property and give his recommendation.
  1. Home loan eligibility depends on your ability to pay (ie based on your salary) and not on the age of the building. However, the quantum of loan depends on the age and undivided share too, in addition to your repayment ability.

MANAGING FINANCE

What is the best way for a first-time buyer to set a budget to purchase a home?

Your EMI should not be more that 30-40 per cent of your take-home salary. If the property markets in your city are very expensive and you cannot afford the property that you want to stay in, invest in whatever is affordable even in the periphery.

Most banks allow you to exit one loan and take another. So, you can sell off the smaller priced property in a peripheral location and use that as seed money to buy where you would like to stay. Else, you will always be behind the market in terms of finance.

For calculating the monthly home loan instalment, consider your monthly family income – now and expected in the future. Family income includes yours as well as your parent’s or spouse’s income. Secondly, your family’s current expenses, including all other loans you are servicing, are very important to be considered. Do not spend more than 50 per cent of the total income on EMI.

RETURN ON INVESTMENT (ROI)

Is a 1BHK apartment good for investment and rental returns?

Buying a 1BHK unit in any project is an investment which gives reasonable returns on a small investment along with an opportunity of an increase in the capital value of these properties.

Investment in such a property near any commercial space is likely to give good returns. A 1BHK property is always rented out easily.

In many cases, the developer arranges a tie-up with an agency, which maintains the property and also leases such property with corporate companies. This type of arrangement gives good and assured returns.

EXITING THE MARKET

How to make a safe exit from real estate?

The only safe and consistently profitable route is long-term investment. This is why it is extremely important to know what will happen a few years down the line – to the property market in general, the location, the property in particular and one’s own finances.

The housing society share certificate and the sale/purchase deed of the property are the main documents required to sell a residential property. If the property has been sold and bought multiple times, a copy of previous deeds may be required to prove the authenticity of the deal. Other than these, copies of Stamp Duty and registered house documents will also be needed.

Irrespective of the timing, a property investor must always focus on having the highest-quality asset base. This means the quality and specifications of the building, the specific location, the depth of the infrastructure and accessibility.