Have been thinking of writing this up for some time now, as a logical companion to my "Renting a house in Bangalore" post. These are some questions I had, when I decided to explore buying an apartment. I hope these would be useful for someone in a similar situation. An entire book can be written on this topic, I don't intend to be that comprehensive. So, I'll just model this post as an FAQ, to keep it crisp.
Disclaimer (upfront): This is based on my experience, and at the end of the day, it's just my opinion. I'm not a lawyer & I don't claim it's 100% legally accurate, so please do your due diligence. It's not going to cover all possible cases, because I don't have experience of all possible cases. Caveat Emptor!
Q. What is the scenario you have experience on?
A. Buying an apartment, not a house. From a seller (resale), not from Builder. Ready to move in, not under-construction. Some processes/documents could be common though. This is for Bangalore (India), I'm not sure of processes in other cities.
Q. What's the high-level process of buying a home?
A. Here's a 30,000 ft view of the typical process:
- Choose a property
- Indication of interest: Pay a token amount
- Get copy of property papers from Seller
- Get property papers verified by a lawyer
- Negotiate price, Sign a Sale agreement, Pay an advance
- Approach bank for Loan, pay fee, get approval
- Sign Sale Deed, Register it, Pay seller (with Bank's help), take possession of house
- Bank takes Sale Deed, provides you a copy
Q. What's the high-level cost breakup?
A. Here are some heads to consider:
- Base price
- Stamp duty
- Registration charges
- Brokerage, if an Agent is involved
- Bank legal & processing charges, including Stamp duty for agreement
- Khatha transfer fees
- Residents Association membership transfer fees, if applicable
- Renovation costs, if applicable
- Monthly maintenance charges (recurring monthly/quarterly)
- Property Tax (recurring annually)
- Loan EMI (recurring monthly)
Q. Do I need to get papers verified from a lawyer? Wouldn't the bank do it before approving the loan?
A. You don't have to, but it's strongly recommended. Reason: you're buying the home, you should be aware of risks, if any. Bank does run some checks before lending money, but the liability is yours. You can ask your lawyer to provide a written report that lists all documents, with key dates, and calls out what's missing. This report is quite useful as a lot of property papers are in local language (Kannada). A written report does cost more than a verbal report.
Q. How much do lawyers charge for verifying papers?
A. It varies, depending on whether its a house or an apartment or a land, new or resale. Also varies from lawyer to lawyer.
TIP: For new apartments, most (if not all) set of papers are common for all units in the complex. So, you could get in touch with other interested buyers, and share the lawyer fees.
Q. Is there a standard list of documents required for an apartment?
A. The most frequent question amongst the FAQs! No, I found many different checklists on the internet, for lands, apartments & houses. Finally went with the checklist provided by the lawyer I consulted. It was quite comprehensive, and practically, not all of the papers in the list were available. Not all of the papers were applicable too. But, it was a good list to start with.
A lawyer would know best, which documents are important. And lawyers would be aware of the applicable rules/laws. So, it's recommended that you consult a lawyer & ask for a checklist. Depending on how important a document is, your lawyer might indicate whether it's required before signing sale agreement, before Registration or just a Nice to Have. If he/she doesn't mention it, do ask. It's confusing just picking up a checklist from someplace and going with it, as not all documents are equally important. There's a chance you might ignore an important document, or let a deal fall through for lack of a less important document.
So, I won't mention the list here, but here's a categorization of the nature of documents you can expect in the checklist.
- Documents related to agreement/arrangement between the land owner & builder (examples: Construction Agreement, General power of attorney, Joint development agreement etc.)
- Document relating to sanctions by Governments bodies (examples: sanctioned plan, layout map, approvals from NHAI/AAI, BESCOM, BWSSB, work commencement certificate, completion certificate, occupancy certificate etc.)
- Ownership documents: indicating chain of owners & current owner for apartment (example: Khatha, Encumbrance certificate, BESCOM bill, Sale Deed, tax receipts, any backing documents for Parking etc.)
- NOCs for Sale (examples; NOC from Residents welfare association mentioning No Dues & any fees you'll be expected to pay, NOC from Seller to Bank incase of mortgage)
- Documents related to Land (examples: Mother deed, Survey documents, conversion documents incase of agricultural land)
- Ownership documents for land (examples: Sale deeds, Khatha, encumbrance certificate, tax receipts)
- Documents relating to Builder's company
- Documents supporting any special cases (example: any minor claims, pending cases, ownership change by gift/partition/will/death certificates etc.)
For the documents relating to land, it's good to go back 30 years. It's important to keep in mind though, that these checklists are non-standard, & seller might not have all documents ready. For some, he/she might have to go back to builder, so be patient & considerate to see the deal through.
Also, for documents where a seller has physical possession of original documents, it's a good idea to have your lawyer accompany you to seller/builder & inspect the originals.
Q. Why is a Sale Agreement needed? Is there a standard format for it?
A. A Sale agreement is a formal agreement between the buyer and seller on the terms and conditions they agree upon for selling/buying a property. There are standard formats available online, but I recommend using them only as a starting template. It's good to document everything that you've agreed upon. Ideally, there should be no verbal clauses that are not contained in this document. A bank typically asks for the copy of the Sale agreement when you approach it for a loan, and the original before disbursement. Here are some things that this agreement typically contain:
- Names and addresses of buyer & sellers
- Address of Property
- Details of property, like Khatha numbers, super built-up area, built-up area, common area, parking spaces included, undivided share of land
- Mention any change in ownership between original owners and current owners
- Price agreed upon (Base), not including Registration and stamp duty
- Assumptions of sale: state things like all taxes are paid, the seller is legal owner, there are no legal cases pending, seller hasn't entered into agreement with any other buyer etc.
- Advance paid, along with mode of payment (Cheque/DD details)
- List of documents that the seller needs to provide to the buyer, with due date
- Maximum time by which sale must be completed, failing which the agreement would become null and void and seller would have to return the advance paid by buyer. Factor in the time it'll take for seller to provide all documents and time it'll take for buyer to get the loan approved.
- Any other Exit clauses
Q. Do I have to take loan from the same bank that the seller has a loan with?
A. No, but if your loan is with a different bank, it often leads to the following Catch-22 situation: Seller's bank won't part with the original papers/sale deed till the seller's loan is Paid. The process could take a day or two. Buyer's bank will ask for papers at the time of disbursement. In this situation, either buyer has to come up with the funds to payback loan & get Sale Deed released, or one of the banks has to agree to break the deadlock.
This situation gets eased if you go to the same bank that the seller has a loan with. In that case, seller provides NOC to the bank to process your loan on the same property, clear his loan using part of your disbursement, and transfer papers from his account to buyer's account
Q. In case of loan with the same bank, how do I make sure that the original sale deed is indeed transferred under my account?
A. After a month of disbursement, you can request the bank to provide a signed & stamped copy of the original Sale deed. Banks provide such copies on request. If you get the copy, the bank was able to retrieve the original for your loan account. Hope there's no else here.
Q. After registering the property, what other papers would I need to get in order?
A. Apply for Khatha transfer, BESCOM meter transfer in your name. Get Apartment association membership transferred in your name.
Q. Compared to renting, what are the factors to check while buying?
A. A lot of things are common. The key difference being: there are some things that can be changed easily, and some can't be. Things that can be easily changed can be ignored when you're buying. Anyways, here are some important things I recommend checking:
- Woodwork present? Is it good enough to retain, or will you have to re-do? Factor in costs.
- Availability of water supply
- Power backup, check if it's minimal or partial or full
- Reserved parking. Open or closed?
- Association membership transfer charges, factor in costs
- Monthly maintenance charges, factor in costs
- Condition of doors
- Check if there's any seepage present, this could be a deal breaker
- Check for any major structural deviations from apartment plan
- Natural lighting in apartment
- Vastu compliance, if applicable
- Check for recent sales in the apartment complex to get an idea of baseline rates. Mark up/down based on condition of apartment.
- Security in area
- Factor in all renovation costs into the price and evaluate if the price is still good.
- Check water pressure.
- Check condition of bathroom and kitchen fitments
- Check for any termites around woodwork & kitchen sink
- Get an feel of the kind of crowd in apartment complex
- Visit the apartment at least twice, once during day time and other in the evening, take notes (unless you have a photographic memory)
- Ask yourself: Does it feel good? Do you see yourself happily living there? There are some intangible things that the mind cannot measure but the heart can feel. Listen to the voice inside!
Q. Any other tips before moving-in
A. It's easier to get renovation and painting completed before you move in. Keep some spare paint and brushes to touch-up, in case shifting causes some marks on walls.
Also good to get pesticide/insecticide treatment done before your stuff moves in.
Hope this is helpful ... All the Best!
[Trivia: This post comes 953 days after my last post, I thought of waiting till 1000 days but couldn't]
Labels: apartment, bangalore, buying, checklist, India, process, property, purchasing