Ebook MagicBricks Guide To Buying A House Open House

Content
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The Need To Buy Property Shortlisting Your Property Choosing The Right Location How To Choose An Agent Tax Implication Legal Perspective Home Loan Managing Finance Return on Investment (ROI) Exiting the market Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 01 08 12 18 22 26 30 36 38 40
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Introduction
Searching/Short listing a house

Buying a house can be tedious or pleasurable according to how you go about it. Here are a few tips to make it a pleasurable activity. To make sure you find the right property at the right price in the right location, there is no getting away from the fact that you need lots of information at your fingertips and a lot of options to choose from as well. Firstly, make sure you know why you are buying. Normally property buyers fall into two major categories: 1 End Users 2 Investors Being sure why you are buying also influences various choices you make. This includes choosing:
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The stage of construction
The developer
The price bracket
There are no right and wrong decisions whatever your reason for buying a house, it is the right one. But there can be right and wrong ways of going about it.
End Users:
Locality profile: If you are buying for self use, it has to be where you would like to stay in the long term. The profile of other buyers and the neighbourhood, facilities and amenities that come with it, future infrastructure projects in the area, transport connectivity and state of roads are all issues you would want to find out before you buy. Each of these affect the quality of your stay and also determines the price that you have to pay. If you are buying for future use, you will be able to compute the profile of the neighbourhood into the future. Check out MagicBricks Neighbourhoods. Stage of construction: A new property can be purchased at three stages At launch, mid-way through construction and at the possession stage. Old properties can be purchased either in as-is condition, requiring maintenance and repair before use or renovated or redeveloped and ready-to-use. If you are currently staying in a rented accommodation, you may want to invest in a property that is ready for possession soon or you will have the burden of the rental outflow as well as the EMI on your housing loan.Buying closer to possession entails a higher value than at launch but being an end user balance the pros and cons. Developer: You need to check out the past track record of the developer. If he has been giving possession on time, whether the past users are happy with the quality of construction and services, who will manage the property in the long term and whether the developer is part of a network such as CREDAI which brings in a little more accountability to his profile. Price Bracket: Your monthly EMI should not exceed 40 per cent of your monthly pay packet or you will find it difficult to meet the EMIs. (Check out our chapter on Pricing).
Investors:
This category of buyer purchases property primarily as a means to grow money. Here too, there are multiple options: At launch: You get the best values and even an inaugural discount in many cases. You are investing in a property that is 24-36 months away from possession but you get the best rates for this. Going by the track record of the past few years, the risk is that your project may be delayed and possession comes after another year or two. This makes a difference to those who wish to remain invested to the end and exit the project only once possession is taken and property values have correspondingly risen. There are some investors who purchase by paying a 10 per cent value and then pay a subsequent second and third instalment and then encash the differential. This money can then be invested in another project that has been launched and so on. This type of investor books short-term profits. This is a high-risk-high-return game and the buyer needs to be very aware of the progress of the project and the market values. Currently, there are no formal sources of monitoring the value of property on a weekly basis. Local brokers are the best source. Semi-Constructed: Buy a semi-constructed property in a locality that you want to stay in. This will shorten the lifecycle of twin payments (rental and EMI). You have to pay a slightly higher value than if you pick up at launch but the flip side is that you will be sure when you get possession. At Possession: Alternatively, you may want to opt for one that has already reached the possession stage. Here, the values are at least 25 per cent higher than while it is under construction but there is no risk as the property is ready-to-move-into or for fit-outs.
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Looking for the right property

There are many ways of looking for a property. This includes:
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Checking out the options available online in property portals such as MagicBricks.com. Check out print ads that appear in newspapers and magazines. Use brokers in the neighbourhood who will be able to advise you on various options. Choose a developer and see what he has to offer.
MagicBricks.com also allows you to post queries on Open House and get them answered by experts. This gives you access to experts that you would otherwise not have. Check out the property advice section which offers advice on various issues from a number of experts. Newspaper Supplements: These give property related information and also carry advertisements of property launches. Once you have made up your mind to buy property, it is useful to regularly check out advertisements. This helps you understand which locations offer new properties, what are the amenities offered and also future infrastructure such as metro links, new transport corridors etc. Brokers: Many cities are broker dominated. They work as agents for specific developers or projects or both and are able to suggest options across different corridors. They also offer 1-4 per cent discount which they aggregate from developers as part of the agent activity. They are also able to suggest second-sale options in areas of your choice and your budget. However, India does not have a system of registration and rating of brokers and it is best to use a broker who has earlier given good service to someone known to you. You can also use online services of portals to find the brokers operating in that locality or neighbourhood. Developers: If you have strong preference for which developer you would like to go with, track the projects he has come up with in different locations and choose the one best for you.
Online Options: Statistics show that over 80 per cent of property searches today begin online even if actual transactions conclude offline. The advantage of looking online is that property portals such as MagicBricks.com aggregate the range of properties in the market and allow you to search for options on the basis of city, location, developer or even price brackets. Use the search box to fill in the details of your requirements. You get a drop-down of the properties that are actively available in your range. It also gives you contact details of those who have posted the properties. Online searches also allow you to compare different properties on different parameters. This makes it easier to shortlist the properties. Also, check out floor plans, building schedules as well as walkthroughs so that you only need to physically visit those properties that meet your criteria.
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The first steps

What are the things to actually look for when zeroing in on a house?
Budget, location, type of property, objective of buying and choice of property are the determining factors for purchase of property from an end users perspective. Real estate values are governed by demand and supply. This may vary on a project to project basis. The projects which see good demand normally do not see a price correction.
While buying a house the top questions to keep in mind are:

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When to Buy? What to Buy? Where to Buy? How to Buy? How much to pay for it? Which locality to buy in? What type of property to buy? How to extract maximum return from your property investment?
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CHAPTER-1
Realt! Check
The Need To Buy Property

When to Buy?
The common dilemma that the consumer at our Open House forum poses is what is the right time to buy? The right time to buy your house is when you feel that you are ready for the responsibility that comes along with buying a house. It is important to consider the objectives of buying a house. Ask yourself why you want that house? What really is the motivating factor when it comes to your decision to buy that house? Do you want to buy it because you want to live in it with your family or do you look for an extra income that the house will bring in the form of rent? Or, are you simply buying it for long-term value leverage? The more you know about why you should buy a home, the more focused your search will be and the better you will be able to select one that meets your requirements.
What makes more sense Rent or Buy?
Own A Home
There is a simple way of judging whether to buy a property or whether you should lease one now. If you find a house that you would like to stay in, that is close to your workplace or easily accessible from there, then buy it. But remember that the Equated Monthly Instalments (EMI) on your property should not be over 40 per cent of your monthly salary. That way you would be comfortable paying it back. You need 10-15 per cent of the cost as your personal contribution to the purchase, as banks do not lend 100 per cent. If you are paying a monthly rent that would constitute over 75 per cent of your EMI please think in terms of buying. (Check out the MB Buy Vs Sell Calculator which can serve as a broad indicator on whether you should lease or buy).
What to buy?
There are many residential formats to choose from - Residential plot, apartments, single floors, independent houses and multi-storey flats. Given below is a representation of how each type of property is represented city-wise on the MagicBricks.com portal. This is a representation of property in the top six cities. Each type of property has its own advantages and disadvantages. Given below are some comparisons made by experts on Open House, the consumers forum on MagicBricks.com. Plot Vs Multi-storey? In India, plots are much in demand. Even today most small cities are witnessing more demand for plots than for apartments. Multi-storey apartments are becoming the norm in established urban areas where cost of land and the convenience and security that apartments offer have pushed demand from the younger generation. Also, as family sizes become smaller, many are selling large plotted developments in established city areas for smaller more compact apartments with centrally managed facilities, normally in gated communities in the suburbs. Independent plot or apartment within a gated community? Gated Community is a form of residential complex, sometimes characterised by high walls and fences. It boasts of controlled entrances, surveillance of those entering the
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Should I take a home on rent or should I buy?
All figures in percentage

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There is no harm in renting a property till you are ready with enough finances to buy. If you find a place where you want to stay and can manage to get enough formal finance, look at buying as your monthly outflow will lead to creating an asset. But make sure your EMI is not more than 35-40 per cent of your monthly salary.
premises, clean surroundings and amenities. These communities offer freedom from the hassles of everyday civic problems, ranging from water cuts and pebble-strewn streets to living with the stench of unpicked garbage cans. An apartment in a gated community by a reputed developer is normally a safe bet. An independent house, on the other hand, is normally customised to the buyers requirements. The advantage of having an independent house is that it provides ample open space and clutter-free living. Whatever the choice, make sure you pre-determine who is to look after the common facilities such as roads, water and power supply and back-ups etc. There are some developments where villas or townhouses are provided within the gated complex with all the advantages that normally come with apartments. These are more expensive but a safer and hassle free bet. You should however, be prepared to pay enhanced maintenance charges for these facilities. Single-floor Unit Vs Multi-storey Apartments A single floor apartment is one where the builder buys a piece of land, often old plots which are up for redevelopment, constructs flats on each floor according to the permissible Floor Area Ratio (FAR) and building byelaws and sells them as independent units within the same building. The land belongs proportionately to all the buyers of single floors. Since there are smaller numbers of units than in a multistorey apartment, these lack economies of scale and so have fewer common facilities such as maintenance and back-ups compared to larger multi-storey apartments. But these are newer apartment units in downtown or preferred areas and come at a price lower than multi-storey units.
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Why is it necessary to own property?
In a country like India, where there is no social security, a house means a shelter from all sorts of storms. Beyond the comfort and security that owing a home offers, it has more tangible benefits too. It forms an asset that is likely to bring in return on
A multi-storey remains the most preferred housing units in metros and large cities today. It is a cluster of apartments in a high-rise building developed in a plot with all amenities available within a gated community. These units can be aggregated and constructed by developers or in the cooperative mode as Cooperative Group Housing Societies (CGHS). These need good common facilities management to take care of aggregating services and providing them to individual units for a fee. This fee is levied as monthly maintenance charges. They cover water and power supply, including back-ups, lift and common area maintenance and landscaping. Many developments also provide plumbing and electrical services for a fee.
Where to buy?
Generally, there is a price differential between different locations which will always be proportionate to its strategic placement which could be linked to accessibility to highways, markets, business districts and overall livability. It is quite possible that a particular area has good infrastructure, access to markets and entertainment means but if it is loaded with existing and upcoming projects, the price rise in that area may not be dramatic, but a gradual one. One may make an estimate of the number of available and proposed flats in an area through good brokers and ascertain the past price movement in the short term. Things to be kept in mind while finalizing the location for your house:
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The location should be within approved/sanctioned master plan. The location should have good connectivity. Infrastructure services such as power, water supply, drainage and sewerage should be present.
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How can I be sure of the property selection? The best way is to ensure that you do your own research. Use the data that is available in property portals such as Magicbricks.com and in print supplements but after finalising a few choices do visit the sites and check them out.
Location should be within an active business activity such as educational institutions, hospitals, IT parks, entertainment hubs, etc. Location should be accessible easily from your workplace.
When is the best stage to buy? If you have the required finances, ready-to-move-in is the ideal option for an enduser. This property would be significantly more expensive than at the launch stage but the buyer is protected against time and cost over-runs and also the EMI payment during the period when the house is under construction. For an investor who wants regular rental returns from his property investment, a readyto-move-in property brings in immediate rental income which even helps pay back the loan secured to buy the property. If you are a new investor with limited finances, look for an under-construction property with a suitable payment plan and keep a horizon of 2-3 years for possession. But make sure you go for a reputed builder. When you purchase a house at the pre-launch or launch stage, the buyer pays small sums linked to the progress of construction but also has a longer wait period before the asset is liveable or starts paying for itself. This option is good in new and evolving growth areas on the peripheries of cities where infrastructure itself is under development and there is a wait period before it is liveable. Since, both infrastructure and housing are being developed at the same time, the user gets the advantage of moving in when both are ready. It also comes cheaper as property values are always lower when the infrastructure in the area is under development. The downside of this type of property is that possession will happen only after a minimum of 24-36 months. During this period you would have to shell out a monthly rental for the place of stay and the EMIs for the new property.
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Being an investor should I keep invested in one project or should I keep re-investing? There is no scientific method to calculate, whether it is a right time to exit a property or not. But one should exit a property base on its holding period, return on investment achieved, cost of funds, etc.
What to rent? When you buy a property, the choice of locality is limited to those where properties are available within your budget. But when you are looking at renting a property, your canvas is much wider. Since a lessee has the option of seeking property that matches all his/her requirements, it is always good to make a checklist. Budget is always a prime consideration. Check your finances and see how much you can allocate to rent. This should be an amount that you will be able to pay monthon-month at the same time. Accommodate it within your house rent allowance package or just a tad over for best results. Now assess how big your accommodation should be. Remember that you have not only to take up lodging, but also service it monthly, including the maintenance and municipal charges which have to be paid by the lessee. The annual property taxes and asset maintenance are the responsibility of the landlord. Look that facilities such as public transport, security and daily grocery needs are easily accessible. They make your stay more comfortable. Transport connectivity with minimum traffic pressure points makes the daily commute to work less stressful. Look for a neighbourhood where you have like-minded community so that there is minimum clash of interests.
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How to buy?
Once you decide upon the locality, the next step is to check the developers who are building there. The best way to do this is to do your own research. Find out who the developers are and what they have to offer. Check out the floor plans and the types of property that they are constructing. Many of these are available online so this can be done at your convenience. Once you have shortlisted some properties, do your own footwork. Check out the projects on-site. Get an expert such as a broker to show you around. Sometimes what looks good on paper may not feel right when you see it on the ground. If the project is new, the choice of builder is a big decision. Check the builders track record, his financial strength, his ability to deliver on time, construction quality and the payment terms, especially in case of a local builder. Do a background check on developers and make your assessment about where you would feel safe to make your investment. One should always check with local real estate brokers the last transaction price or the price of similar property in that location. Negotiating Ability: After considering all the above, your negotiating ability is crucial which means, leveraging the available information and a fair understanding of the points discussed to strike a good deal. The area concept is very vaguely used in the housing industry. Some builders and sellers take advantage of this ambiguity. Carpet area is defined as the precise area within the walls of your home. If you had
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What is the difference between plinth, carpet and covered area in a flat/apartment? Plinth area is the total land on which the flat is built. Covered area is the covered portion over the plinth and carpet area is the actual usage area or the area within the walls.
to lay out a wall-to-wall carpet in your entire home, the area covered would be the carpet area. Built-up area is inclusive of not just the carpet area but also the area being occupied by the walls of your home. Super built-up area takes into account all the area under the common spaces which is the apartments proportionate share of the lobby, staircase, elevator and the corridor outside the apartment. The confusion over super built-up area arises over what all is exactly included under this definition according to the judgment of the builder. Some may even include the terrace, security room, electrical room and/or pump room. The cumulative total of these extras is taken into account and divided by the number of apartments in proportion to their size.
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If you get a quote for 1,000 sq ft, immediately find out if it is the carpet area or super built-up area. There is no fixed ratio of super built-up to built-up or carpet area. Generally, the ratios in multi-storey apartments are 75:35 (super built-up area to carpet area). In a single floor there is very little loading of common areas to the tune of 5-10 per cent.
Tips to Customers who wish to buy property:

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Check for proper conveyance of title in favour of the Builder Check the License/Development right/approvals of the Builder
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Check clear and marketable title of the project Ensure execution of proper Allotment Letter/Sale Agreements on your payments Ensure whether reputed financial companies approve the project. This will help you in getting financial loans See the tentative Layout/Building Plan Verify plinth area of the Apartment Check carpet area of the apartment and find out if the difference between plinth area and carpet area is reasonable Ask for Occupation/Completion Certificate. Ensure the Conveyance Deed is registered after entire payment has been made.
Does investment in Tier II & III cities make sense? Yes capital investment in Ter II and III cities makes sense considering that maintenance is not high, provided it's a loan free investment because if the property rates don't go up, interest per month will still be a regular outflow.
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Our panel of contributors for this chapter are:

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Niranjan Hiranandani, MD, Hiranandani Group Paras Gundecha, President, MCHI-CREDAI (Mumbai) Getamber Anand, Vice President, CREDAI Mohit Arora, Director, Supertech Ltd Partho Mukherjee, Principal Advisor, MagicBricks.com Ananta Raghuvanshi, Director-Sales and Marketing, DLF India
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CHAPTER-2
Selection
Shortlisting Your Property

How to choose the right property?
One should buy property in an area which has adequate basic amenities such as power, water, sewerage, etc. It is important to do your checks and balances while deciding on a project. Infrastructure in the area, connectivity, builders goodwill and price of the property are key components a buyer needs to take into consideration. A buyer should also carefully check points such as the builders experience, number of projects completed and delivered, banking institutions involved and present buy options available to suit your requirements. It is better you conduct a field survey before identifying a suitable property meeting your budget and location preference.
What do you think is the best way to buy property?

You can choose options from websites. These days all information, including model apartments, is available on the internet. After this it is important that you or your relatives visit the sites of shortlisted properties and experience the brand before booking.
Search Drivers
What is the market checklist before buying re-sale property?

Some important tips one should keep in mind before buying re-sale property are:
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Locality: Generally, the price difference prevails for different locations but when it comes to price rise, it will always be proportionate to its strategic placement which could be linked to accessibility to highways, markets, business districts and overall living conditions. There is a price differential between different properties within the same complex or even the same building. In India vastu compliant units have a premium on them. Similarly, East or South facing properties fetch better values than North and West facing properties. Users pay more for a view in urban settings. In Mumbai, for instance the price per unit rises as you go higher. If the property is sea-facing, there is a hefty extra that the buyer has to shell out. In other cities that are not quite used to high-rises yet, the premium is for the ground to sixth floor. Higher floors do not command a premium vis-a-vis lower floors. Pool or park facing properties have a higher value. The concept of Preferred Location Charges (PLC) for new properties was based on these principles. Currently, PLC is arbitrary and there are no fixed norms for it. There are developers who charge a PLC on every unit in the complex, which defeats logic.
Area-wise Demand and Supply: Price of properties within a certain area is also dependent on the volume of supply. Qualities such as good infrastructure, access to markets and office and entertainment hubs are common to a locality. However, the volume of units available for sale in the market also determines the prevailing price. If it is a new growth corridor, the first project to get off the ground normally comes at a reasonable price. As more developers launch projects it becomes an area in demand and the values keep rising steadily, normally by about 8-10 per cent per year. A developer may break the norm in an existing locality
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Where can I find authentic information about properties?
by launching a project that is richer in features and therefore commands a higher value. Once there are a couple of projects in a locality that command a higher value, it pushes the base value up. Developers too allow investors to make money by periodically revising values of projects that are still under construction. Once this new value is released, brokers and underwriters, small and big investors offload their properties at a value higher than the original sale price but lower than the new sale price. They thus book shortterm profits. This cycle happens at least two to three times during the development cycle. End users enter towards the end of the cycle and purchase at values that are at least 50 per cent higher than the original sale price. However, with very little holding time, they get to buy very close to possession. If you are buying on a corridor where there are several projects, check on price and specifications of multiple projects to get the best deal. If there is more stock than demand, you have a better chance at negotiating a better value in the secondary market
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You can choose options from property websites such as MagicBricks.com which post property details, including model apartments. It is important that you or your relatives visit the site and experience the brand before booking.
Builder/Developer: Check the builders track record, his financial strength, his ability to deliver on time, construction quality and the payment terms, especially in the case of a local builder.
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When is the best stage to buy?

If you have the required finances, ready-to-move-in is the ideal option for a home buyer. For an investor, a ready-to-move-in property is feasible for business as he can buy and put it up for lease without any waiting period. Whereas, a house under construction eases the financial burden wherein you can finance your property through bank loans and pay less cash upfront. The downside of this type of property is
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Is the property boom for real or is it a bubble ready to burst any time? The trick lies in investing wisely with known developers; you cant go wrong with property investments if you do diligent homework before purchasing.
that possession will happen only after a certain time period. If you are a new investor with limited finances, look for an under-construction property with a suitable payment plan and keep a horizon of 2-3 years for possession. But make sure you go for a reputed builder.
How do you choose the right type of property?

Depending on the chosen budget, one can decide the type of property. If you are an end-user, the size of your family, along with the budget can be a determining factor while choosing the type of house you need. There is a wide range to choose from today as the market abounds in various housing formats from 1, 2, 3 and 4BHK apartments, to studios, villas and row houses, to builder floors and independent houses. Multi-storey projects and township with all amenities in one project clubhouse, swimming pool, meditation center, health clubs, departmental stores, schools, cinemas, sports facilities, banquet/party halls are what most end-users are looking at today.
What are the documents you need to check before buying?

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Check for proper conveyance of Title in favour of the builder. Check the licence/development right/approvals of the builder. Check clear and marketable title of the project. Ensure execution of proper Allotment Letter/Sale Agreements on your payments. Ensure whether reputed financial companies approve the project. This will help you in getting financial loans.
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What are the documents required for registering a flat?
Check the tentative layout/building plan and verify the plinth area of the apartment. It is advisable to check the carpet area of the apartment and find out if the difference between plinth area and carpet area is reasonable. Ask for Occupation/Completion Certificate. Ensure the Conveyance Deed is registered after the entire payment has been made. For buying a property you need to check Deed of Conveyance, Mutation Certificate (for complete property), Land Registration Status, Sanction Plan, Search Report and Payment Schedule (for under construction). It is a must that you go through all the documents relating to the origin of the property, chain of Title, Occupancy Certificate, sanctions from various authorities dealing with building plans, fire safety and Completion Certificate. For re-sale property, check demand notice relating to renovation, tax dues and latest receipts of payments made towards various out-goings such as water, electricity and ground rent.
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Chain of original conveyance, sale deeds/agreement from the seller, share certificate issued by the society in favour of the seller indicating membership to the society, NOC from the society to the transfer of the share in favour of the purchaser, identity proof, and address proof.
Which is good for investment plot or flat?

If you are a long-term investor, say 5-10 years, a plot is the best option. If you want annual returns to manage a part of EMIs, flats are better.
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What is a better investment city or suburb?

Ideally, it is always better to invest when land cost as a percentage to sale price is 15 to 20 per cent, so that it grows. With land cost being very high within cities, hovering at approximately Rs 7,000-14,000 per sq m, it is always better to invest in growing corridors depending on whether you want for pure investment or want to move in.

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Niranjan Hiranandani, MD, Hiranandani Group Hafeez Contractor, Founder & Principal Architect, Architect Hafeez Contractor Ananta Raghuvanshi, Director-Sales & Marketing, DLF Homes Partho Mukherjee, Principal Advisor, MagicBricks.com Bopanna Madayya, VP Sales & Marketing, QVC Realty S Padmanabhan, VP , Maangalya Developers S Ramakrishnan, CEO, MARG ProperTies
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CHAPTER-3
Spot On
Choosing The Right Location

INVESTING IN CITIES Should one look at investing in big cities?
When it comes to choosing a location, the consumer looks at connectivity and availability of basic urban and social infrastructure in that area. Big cities have that advantage. Land values are very high in many big cities. When investing in a big city, keep a few things in mind. If you are purchasing for self use, buy in a neighbourhood that has all the conveniences that you require and also has good accessibility to the rest of the city. Even in premium localities, if you keep searching, you will find properties that suit your budget. If you cannot afford the premium rates, 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. Also, look for property that is being re-developed in city areas. They will be new and come with a maintenancefree period. Older houses come cheaper but make sure you invest in refitting and refurbishing the old plumbing and electrical lines before moving in if you want a hassle-free stay. If you are looking at more open spaces with modern complexes, move to growth corridors on the suburbs and peripheries of cities. Since, they are built to suit modern lifestyles and social facilities benchmarks are raised, you will get more add-ons such as landscaping, cycling and jogging tracks, club houses and swimming pools and other sports facilities. As they are at a distance from the city centre, they come with cheaper price tags and construction linked instalment plans.
Location Is Key
How much appreciation can be expected by investing in big cities?

Typically there is a 10 per cent escalation in prices annually across city areas. If you are investing in a new property in a virgin corridor where development work is yet to begin, before infrastructure comes into the new corridor, prices are very low. Once infrastructure work begins prices rise by about 25 per cent. When the property development reaches mid-way point, there is another 25 per cent escalation in prices. Six months from completion there is another 25 per cent escalation. Once possession is handed over there is another 25 per cent increase in rates. This is true for places where Greenfield development is taking place. The mid-end and affordable housing segments will record healthy appreciation in capital values in the short term from a low base. High-value property yields lower rates of appreciation. In new growth corridors where development work precedes real estate, the growth in values is normally about 50-70 per cent. However, these are broad estimates. There is another return that has not been factored in which is the rental yield. Property value attains its true potential when the neighbourhood is fully populated. If you are a long-term investor and want to wait for the property to attain full potential, lease out the property and capitalise on the regular rental returns. The annual yield is computed
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What makes an area a preferred location for home buyers?
as a ratio of capital to rental values. Normally residential property gives a simple yield of 2-4 per cent. Appreciation largely depends on industrial, commercial and infrastructure development in the area. Project-specific price increases can be expected across these markets. This pertains specifically to projects that are being delivered or are nearing completion.
Focus on residential properties that have potential for assured rental yields and capital appreciation. Projects close to workplace catchments, industrial hubs, and locations with high appreciation value should be considered.
What could be the possible downside of investing in big cities?

Land is extremely expensive in big cities. Therefore, the land component in property prices in big cities is very high. As downtown areas of the city become more expensive, buyers have to move further and further away to the suburbs and peripheries to buy property that fits their budget. Moreover, population in cities is increasing at an alarming rate and demand for housing is directly proportional to the increase in population. This is a reason for properties becoming expensive in big cities.
Should one invest in small cities?

In small cities, the appreciation is usually less but so is the initial investment compared to the metros. However, with major infrastructural developments, cities like Indore, Coimbatore, Bhubaneshwar and a few others are witnessing growth in prices as well as returns. Always choose a city that has good economic drivers such as IT, ITeS or manufacturing hubs. This ensures continued user interest for re-sale when you want to exit an investment or for rental returns while you hold the property till it is wellleveraged and gives good returns.
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Which will give better returns small town or big cities?
Is it good to invest near airports?

Yes, presence of an airport nearby brings appreciation of values to residential property. Take for instance, with the new international airport coming up in Navi Mumbai, Panvels future seems very promising. Therefore, the area is attracting lot of developers and real estate investors. Similarly, Bandlaguda, located in South Hyderabad, is witnessing immense interest from buyers and investors, especially for plots. Located close to the airport, Hi-Tech City and Outer Ring Road are the major advantages of this locality. North Bangalores property values rose and buyer interest peaked after the new airport was commissioned.
When it comes to choosing a location, look at connectivity and availability of basic civic and social infrastructure in that area. Areas that come under new infrastructure and industrial gowth plans are those that will grow in the years to come.
Is it preferable to buy in commercial hubs?

The growth prospects of residential real estate is promising in fast growth corridors driven by manufacturing, IT and ITeS sectors, supported by social infrastructure such as educational institutions, hospitality and healthcare. These industries drive demand for houses.
INVESTING IN PERIPHERY AND SUBURBS What are the advantages of investing in suburbs of big cities?
Proximity to the metro city, affordable property prices, quality infrastructure and availability of spacious and well managed residential spaces are the key factors driving the growth of suburbs.
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Do infrastructure, transport and connectivity drive real estate prices? What really opens up new avenues is connectivity. If you look at Delhi-NCR, Gurgaon is one area where new axis corridors are opening whether it is the Northern Peripheral Road, KMP Highway, or the Southern Peripheral Road. These bring the area under development zone.
What are the drivers that make suburbs the preferred investment hubs?
As city centres become tediously expensive in commercial real estate, secondary business districts have been evolving close to the suburbs. In Mumbai, Nariman Point gave way to the Bandra Kurla Complex and also the Andheri stretch. Thane is expected to become a Commercial Business District in a few years. In Delhi, the business district has moved from New Delhi to Secondary Business Districts such as Nehru Place and Bhikaji Cama Place and now to suburban business districts such as Gurgaon, Noida and Ghaziabad. Suburbs are chosen because of proximity to the work place, accommodation that is within user budgets and good connectivity, schools and hospitals in the vicinity and therefore a better lifestyle. There is good potential if the developers keep the real demand in mind. For instance, Noida and Ghaziabad being suburbs of Delhi have picked up pace when it comes to being the preferred location for home buyers. This is basically because of availability of affordable homes for the middle and uppermiddle class in these two areas.
What are the advantages of investing in peripheral areas?

Peripheral areas are further from the core city than the suburbs. They form the fringes of suburban areas and are chosen by buyers because they are cheaper than city centres and even suburbs. You can get bigger spaces at affordable prices with modern facilities which are not available in age old properties within city limits. Rate of return on investment is more in peripheral areas, depending on the location. You also get more greenery and open space in the peripheral areas.
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What are the disadvantages of investing in peripheral areas?

Lack of accessibility to public transport and connectivity to city centres, underdeveloped infrastructure and sometimes even lack of basic amenities such as water, electricity, etc as compared to the main city could be some disadvantages. What should one check for before buying property in peripheral areas? Infrastructure in the area, connectivity, builders reputation and potential to deliver and price of comparable properties are key components a buyer needs to take into consideration. A buyer should also carefully check points like builders experience, number of projects completed and delivered, banking institutions involved and present buying options available to suit your requirements. It is better to buy at the beginning of a development cycle in peripheral areas as it will take at least 4-5 years to become liveable.
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Should I invest in suburbs and peripheral regions for higher returns? Decide on the time horizon i.e. long term (5-7 years) or short term (2-4 years). Over a longer period suburbs offer very good returns as the price arbitrage with Central Business Districts reduces. Over 3-5 years one can expect to make 20-30 per cent per annum in a suburb depending on the micro location and the developer.
Are suburbs and peripheries of large cities witnessing an escalation in prices?

As expansion of commercial districts into suburbs takes place, it fuels demand for rental accommodation. Most IT/ITeS/manufacturing facilities demand rental accommodation and that drives up prices.
Is it good to invest near Highways and Expressways?

Today, the Expressways and National Highways are where all the property development is taking place. People look for affordable housing and these can only be provided along these high-speed transport corridors that offer good connectivity and affordable options. Highways provide good connectivity to far-off as well as nearby places thus, bringing appreciation in prices due to increased demand. In metros, Highways and Expressways open up new avenues or development zones which always form a part of a larger master plan. You should keep a horizon of four to five years while investing around new Expressways.
What are the long term benefits of investing in Tier-3 cities?

The benefit of investing in Tier-3 cities is that with very little investment you can become a part of the growth bandwagon. Lucknow and Hyderabad are two cities which are worth looking at.

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Satish Magar, President, CREDAI, Pune Paras Gundecha, President, MCHI-CREDAI, Mumbai Getambar Anand, Vice President, CREDAI T Chitty Babu, President, CREDAI, Chennai Manoj Gaur, President, CREDAI, Western UP Harsh Vardhan Patodia, President, CREDAI, West Bengal Kunal Banerjee, President, M3M Ltd Sushant Muttreja, Earth Infrastructure Sanjay Chawla, CEO, ERA Landmarks Ish Anand, CEO, Phoenix Hodu Developers Pvt Ltd Bopanna Madayya, VP Sales & Marketing, QVC Realty Ananta Raghuvanshi, Director-Sales and Marketing, DLF India Ltd
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CHAPTER-4
Transactor
How To Choose An Agent

What do you suggest is the best medium to buy a property through a realtor, a developer or an individual?
It depends on the property you are buying and who offers it to you. In case the seller is a realtor, it is best to buy through him after doing a background check on his reputation because he would know what legal checks must be made by you before putting the money on the table. In case a seller is an individual he must hire the services of a good lawyer to do a due diligence on title, etc before you write that cheque. This money spent on due diligence may pinch today and seem unnecessary but in the long run you will realize that this is a wise decision.
Where to search for a broker?

Numerous real estate agencies are listed in the phonebook and on the Internet. Do not pick one randomly. Look for an agent in the area where you are planning to invest.
How to choose a broker?
Broker Tips
Besides simplifying your home search, your real estate agent will help market your property, therefore, evaluate the proposals that you get and choose the most profitable one. Also, use caution while you choose.
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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. Check if the agent is licensed and can work full-time on your real estate needs. Ensure that all agreements between your agent and you are in writing. Do not pay money upfront to your real estate agent. This could be a loss to you if you dont buy or sell a property with this agent.
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How much brokerage should an authentic broker charge?

If you are planning to buy property from a broker, then you have to pay 0.5 to 2 per cent of the deal value. In lease transactions, the brokerage value is one months rental or 8.33 per cent of the deal.
DEVELOPERS Can any builders association curb errant developers?

There are currently two associations that developers are aligned to The Confederation of Real Estate Developers Associations of India (CREDAI) and National Real Estate Development Council (NAREDCO). Credai has been doing a lot of good work in terms of making developers sign the pledge for good ethics and evolving a
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Where should I search for an authentic broker?
model code for them to follow. However, in the event of a developer not being a member of either association or even not adhering to the rules there is no mandatory code that can be enforced. In such cases, consumers have to resort to consumer courts and the legal machinery.
Numerous real estate agencies are listed in property websites, the phonebook and on the Internet. Dont pick one randomly. Look for an agent in the area where you are planning to invest.
What are the advantages of choosing a reputed developer?

It is always advisable to go for a reputed agent and developer, especially for property which is under construction because it covers a great part of the risk. For built-up property, a bigger area in a reasonably good complex with a good clear title would definitely be a good buy. With a builder having market standing you can be assured of the title and delivery. You may end up paying slightly higher, but it is worth the peace of mind.
How to choose a builder?

Mental notes while buying property:
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Check for all the legal pre-qualifications and due diligence mentioned earlier. Choose a builder who has a previous track record Ask how many million sq ft he has already constructed and how many projects are underway Check out his past track record for time delivery If public listed, check out balance sheet and quarterly reports to see how the company has been faring financially
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Should one buy property with lesser area from a well-known developer or go for a larger area by a lesser-known developer? Definitely the first option is better. This is only true for property which is under construction because it covers a great part of your risk. For built-up property a bigger area in a reasonably good complex with a clear title would definitely be a good buy.
Check if the project you are interested in is a Joint Venture. If so, check out JV partner as well and the details of the JV. Also check the neighbourhood market and features and rates in the vicinity of other re-sale property. Once you benchmark a property on the corridor you will be able to decide if the price asked for is justified
Is there a public website where people can check the legitimacy of a property?
Every state government has sites for registered documents and you can understand what all you have to check. Currently, there is no public portal where all approvals are displayed. Also, banks and financial institutions that finance your loans would have done due diligence and can provide you with correct information.
How to safeguard yourself from being cheated?

Registering your property agreement gives you protection. You can even register the agreement to sell as a provisional document to protect your transaction. However, once you get the possession, the Stamp Paper is valid for four months only and it is a good idea to register within four months. An agreement with a blank date is really no agreement and cannot also be implemented. Read the agreement carefully.
Besides the per sq feet charges, what are the other charges in a multi-storey apartment?
The other charges are maintenance, security, registration charges, preferred location charges, external development charges, internal development charges, service tax, etc. You must read the fine print to plan your budget properly.
How to find out the built-up area and actual carpet area?
The application form and the buyers agreement is available at the time of launch in the builder's office and the clause explaining the super area loading is also a part of this document.
How can a buyer be protected if the project is delayed?

As far as delay in completion of the project is concerned, it is important to check if there is a clause for damages provided in the agreement for sale/allotment letter. On the approvals, you have to ask the developer to furnish copies of the approvals received from the statutory authorities like the municipal authorities, development authorities and other statutory bodies.
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If a builder delays possession of the flat, what legal recourse do consumers have? You have an option either to cancel the booking and to take the refund with interest or you can move to the court. Brochure should have these provisions.
Can the developer impose 10 per cent payment before showing documents related to registration, title, ownership & approvals while booking a flat?
You should agree to such a clause only if your own risks are covered. Ask the developer if the money is refundable under any circumstances. That means that if you are not satisfied with the authenticity of teh documents or approvals and you decide not to purchase the property at all, you should get your money back without going through the formality of a notice and tedous procedural formalities.

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Getambar Anand, Vice President, CREDAI Asha N Basu, S Jalan & Co., Solicitor on MagicBricks.com Ananta Singh Raghuvanshi, Director-Sales and Marketing, DLF India Ravindra Pai, MD, Century Real Estate Holding Sudhir Vohra, Architect & Urban Planner, Sudhir Vohra Consultants Rohtas Goel, MD, Omaxe
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CHAPTER-5
Mone! Matters
Tax Implication
What are the taxes you have to pay while purchasing property?
If you are buying a new property, you have to pay Service Tax, VAT and Stamp Duty on the total amount of purchase. If you buy re-sale property, then you do not have to pay any of these taxes.
When is the transaction of sale considered complete?

The transaction of sale is considered complete when either the possession is given or Conveyance Deed is registered.
When are capital gains applicable and how can capital gain tax be saved/reduced?
Capital Gain is applicable when:
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The sold property has been withheld by a person for a period of more than three years from the date of purchase/possession. The sale proceeds are invested in a residential property which is bought one year before the sale of property or two years after the sale of first property. The new property is bought after the sale of the first property. Capital Gains Tax can also be saved by investing the sale proceeds in Capital Gain Bonds.
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What is the difference between long-term capital gain and short-term capital gain?
When a property is withheld by a person for more than three years, it results in Long Term Capital Gain (LTCG) on sale of that property, on which Capital Gain Tax can be saved by investing that money in a residential property. When a property is withheld by a person for less than 36 months, it results in Short Term Capital Gain (STCG) on which tax cannot be saved. STCG is added to the income of a person and tax is calculated according to the slab rates of the Income Tax.
How much tax has to be paid in case of LTCG and STCG?

In case of LTCG, 20 per cent of capital gain has to be paid as tax if the money is not invested in residential property or Capital Gain Bonds. In case of STCG, the sale proceeds are added to the income of the property owner and tax is calculated according to the slab rates of Income Tax.
For the purpose of capital gain, what is considered the date of purchase - date of stamp duty paid, date of registration or date of possession?
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To save your Capital Gain Tax, the Sale Deed or the Purchase Deed would be the valid document to determine the date of purchase or the date of sale. However, when the property is purchased in instalments, the letter of possession will be the date for such purpose. Finally, the answer will depend on the facts and circumstances of each case.
How much tax will be paid in case of short- and longterm capital gain?
Can the capital gain amount be used for clearing loans?

Yes, the amount can be used to clear loans but in that case the tax on Long Term Capital Gain cannot be saved.
In case the property is held for more than 36 months and then it is sold, the resultant capital gain would be long term capital gain on which the capital gain tax @ 20% would be payable. The short term capital gain is to be added with the other income of the assesses and tax will be calculated at the slab rates of Income-tax.
If a person invests a part of his capital gain amount in residential property, then is the remaining amount exempted from Income Tax?
No. Income Tax is payable on the remaining amount unless it is invested in Capital Gain Bonds.
Can Capital Gain Tax be saved if the amount is invested in a commercial property, agricultural land or plot?
No, Capital Gain Tax cannot be saved if the sale proceeds are invested in a commercial property, agricultural land or plot. However, tax could be saved in a plot if a residential building is constructed within three years of selling the property.
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If one sells a commercial property, can tax be saved by investing in a residential property?
Yes. One can buy a residential property from sale proceeds of a commercial property to save capital gain taxes.
Can two properties be bought from sale proceeds of one property to save Capital Gain Tax?
No. One has to invest in one property to save taxes. In case two properties are sold, one can either buy a single or two properties to save taxes.
What is the last date for depositing capital gain amount as per the Capital Gain Account scheme?
The last date to deposit the capital gain amount in the Capital Gain Account is the last day by which one has to file the Income Tax return.
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What are the capital gains and other taxation rules pertaining to selling and buying land by a Non-Resident Indian?
The rules and laws are same for both Indians and Non Resident Indians (NRI). In fact, the sale proceeds of an NRI from a property in India can be invested in a residential property outside India to save Capital Gain Tax.
I am planning to buy a commercial shop from my sale proceeds of a residential plot. How much capital gain tax do I have to pay?
In whose name should a new property be registered to save taxes?

Taxes will be saved only if the new property is registered in the name of the person who receives the capital gain, ie. the owner of the previous property. In case the sold property was owned in a joint name, the new property should also be in the joint name of the same two people.
How many properties can one own?

One can own unlimited properties.
As you are planning to buy a commercial property, there is no way to save capital gain tax. You will have to pay the required tax. capital gains tax can be saved only by investing the sale proceeds of any property in a residential propertyplot or apartment.
What are the charges deductible from the capital gain for the purpose of Income Tax?
If stamp duty and registration charges are paid by you, the same will be allowed to be deducted from the capital gain amount. Likewise, if you have taken any loan for purchase of the property for which you have not taken any tax deduction under any of the provisions of the law, then such interest on loan can also be deducted from the capital gain amount. Finally, if you have spent any amount to renovate the flat, the same would also constitute as a deductible amount. Thereafter, whatever is the net amount of gain, the same will be added to your income and income-tax would be payable thereon as per the slab system.
Are retired pensioners exempted from paying STCG Tax?

You will be called upon to make payment of Income Tax on the STCG amount irrespective of the fact that you are retired personnel. Investing in property too will not save any Income Tax for you.

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CHAPTER-6
Advisors
Legal Perspective
What documents and formalities are required while buying property?
Documents required while buying property are Identity Proof like Voters ID Card, Passport, Driving License, Ration Card and Pan Card. Be careful of the Sale Deed/Agreement and also check that the complete property chain is mentioned in the Deed.
Things you should check at the time of signing the agreement?

Here are the important things to check before you sign the agreement with the developer:
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Specific apartment allotted, tower number and size Details of area including super area, covered area and carpet area Costing Date of possession, penalty in case of delay Exit option Specifications committed Payment plan Details of Land on which project is constructed and the project approval details Possession related charges
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How do you know that a project has legal approvals from authorities?
The best way is to check if the banks are funding the project. Generally, banks approve projects and start disbursement only after all the approvals are in place.
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Ensure that the documents of Title of the property you intend to purchase are clear. A defective Title will create problems. 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. Ensure that the developer has clearance certificates from the Electricity Board, Water and Sewage Board and other concerned departments. Commencement Certificate and Occupancy Certificate are other important documents that are necessary while buying property. Check out the genuineness of the documents with the concerned authorities. 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.
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Legal aspects one should keep in mind while purchasing a resale property?
Is there any difference in the rights of primary and coapplicant of a property?

Firstly, though the term co-applicant and co-owner are often used interchangeably, there is a thin line that distinguishes a co-applicant from a co-owner. All co-applicants of property need not necessarily be co-owners.
For a resale property check if the property is registered, the construction date, is the property free from debts or disputes, is the title clear, check also for NOCs from various authorities. No insurance premiums are available for insuring plots.
Can primary applicant sell property without the consent of the co-applicant?
If the co-applicant is also the co-owner, then under the Transfer of Property Act every co-owner has propriety right on the entire property unless there are specific conditions given in the contract regarding the rights of the primary and the co-owner of the property. Hence, in the absence of any specific terms, any sale of the property has to be done with the consent of the co-owner.
Can you buy property without appointing a power of attorney?

You can always buy a property without appointing a power of attorney (POA). You can go about it yourself. You just need to check that all the required papers are in order. For this, you can also seek legal advice and guidance from a lawyer.
Can you sell property without the original registry?

First, you need to file a police complaint about the lost paper. Then you can apply for a Certified Copy from the sub-registers office. Also, give a public notice in newspapers.
Is a daughter eligible for equal share in her parents property?

Yes. As per the prevalent law, son and daughter are eligible for equal share in their parents property.
Can a son sell property on his fathers behalf if the latter is elsewhere and bed-ridden?
Yes, a son can sell a fathers plot on his behalf if the father appoints him and grants him the power of attorney to do so.
Can a property which has been transferred through Gift Deed be sold by the person after getting it registered in his/her name?
Note that an occasion is not required for making a gift of property. The person receiving the gift can sell the property from day one after receiving the same as a
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What is a certificate of Title and how to procure it? Title deed is the chain of documents through which the vendor acquires the right, title and interest in the property. There are cases where the seller mortgages the property but does not inform the buyer, so you must inspect the originals before buying property. For certificate of Title, you have to hire services of a legal practitioner who does due diligence work.
gift. There is no Income Tax on the gift amount of the property, especially if it is from a blood relative. Generally, the gift made is irrevocable.
Can a builder be made to pay compensation if he faults on delivery?

What is important and considered by authorities is your agreement with the builder and not the brochure that the latter floats. Check your payment terms with construction stage/s. If you have delayed payment or not fulfilled the agreed terms as per your agreement, getting any relief from any judicial agency would be very difficult. If you are ready to accept the penalties awarded to you for your defaults, you can demand specific performance on the part of the builder from the consumer grievances forum.
Can you make a Gift Deed for a property in an unauthorised colony?

Any self-acquired property having a clear Title can be gifted by the owner to anyone as per his/her wish. So, if they have any legal evidence of ownership about the property (not ancestral), they have a right to gift it to you, if he/she wishes so.
Why do people prefer an 11 month lease agreement for renting out a residential flat?
An 11-month lease license is preferred by owners as it gives the right to stay only. But, in an agreement which goes beyond 11 months, the Lease Right Title and interest is transferred, wherein eviction becomes difficult.
Is it possible to build the third floor above the second floor without a No Objection Certificate?
You need a No Objection Certificate (NOC) to get your plan sanctioned. You can build the third floor only if it is approved.
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Can a residential property without any Will be divided or sold?

Children will have to mutate their names and sell the property.
Can registry be done by the builder without your presence?

If you have given him the Power of Attorney, the registry can be done by your builder in your absence.
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What are the formalities to be observed by a foreigner interested in buying property in India?
Formalities would differ based on what you mean by a foreigner. There are different rules for NRIs, foreigners of Indian origin and foreigners of Non-Indian origin. Also, it would depend upon the residential status and the kind of property such a person would wish to buy. Depending on the category of foreigners, there are different protocols to be followed.
Panel of Contributors
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Asha N Basu, S Jalan & Co., Solicitor on MagicBricks.com Subhash Lakhotia, Tax Consultant, MagicBricks.com Dhirajlal Rambhia, Chief Advisor, MagicBricks.com Gaurav Gupta, Director, SG Estates Ltd
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CHAPTER-7
Borro ing Funds
Home Loan
What are the factors you should keep in mind before getting a home loan?
The main criteria are:
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Your income and your track record of repaying previous loans this is obtained from the Credit Bureau. Your current expenses including other loans you are servicing. The amount of loan related to the property value. Ownership of the property this means that the lending bank should be comfortable that the seller has full and complete ownership of the property. Getting a loan depends on the report of the local bank surveyor who will inspect the property and give his recommendation. 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 age and undivided share too, in addition to your repayment ability.
Smart Credit
What are the advantages and disadvantages of getting a home loan insured? Is it necessary to get property loan insured?
It is always better to get the property loan insured. I would rather recommend a big term plan of Insurance Policy to safeguard future problems.
Why does home loan interest rate differ?

The bankers home loan interest rate differs from bank to bank because of the cost of funding.
Do you get tax benefits on loan?

Yes, tax benefit on repayment of housing loan is available as per section 80C of the Income Tax Act, within the overall limit of Rs 1 lakh.
What is pre-EMI interest?

The pre-EMI interest is the interest charged by the bank in respect to the loan provided by the bank for the period of disbursement of the actual loan to you and the effective starting of the EMI.
What is the meaning of moratorium on home loan and capitalisation of interest?

Moratorium: A period from the date of disbursement of loan, during which the borrower is not required to pay EMI but the outstanding amount continue to incur interest.
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With a monthly salary of Rs 30,000 - 40,000, what is the amount of home loan I am eligible for? The amount of the loan you are eligible to, will vary on the existing debts and your past record of repayment. You can get a loan of Rs 20-25 lakh, assuming you have no other debt still pending.
Capitalisation: It is nothing but compound interest. The interest is added to the borrowed amount and further interest accrues on that amount. This is done every month.
How does tenure affect cost of loan?

The tenure of loan may affect the cost of loan depending upon the product profile and other connected matters. Also, banks currently offer floating rates for a small period which are then revised according to market conditions. The older loans do not get the benefit that is offered to new borrowers. Also, if loan rates rise, either the EMI amount or the tenure of the loan also rises.
Can there be flexibility in the EMI to be paid?

Generally, there will be no flexibility in the payment of an EMI. In case the EMIs are not paid on time, you might have to incur heavy penalty.
Can I pay back the loan amount before schedule?

You can pre-pay the loan amount, though some banks will levy penalty on prepayment. But there are exceptions. For example, the State Bank of India does not charge any penalty for pre-payment of loan. One should always ask the bank about the pre-payment rules so that they do not face problem at a later date. Today, it is wise to go with a bank that allows periodic part pre-payment of loans. This allows you to keep paying back the principle amount when you get increments or sales incentives or any other lump sum amount.
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Can I sell my property with the home loan outstanding? You can sell your property with the home loan outstanding. In such a case, the buyer purchasing your home will have to repay your bank. Alternatively, the buyer's bank might pay your bank directly through a loan transfer.
What are the documents a bank asks for while approving a home loan?
The documents required for approval of home loan will vary from bank to bank. However, the bank would require details of the property as also the details of your pay slip and copy of two years income-tax returns.
Is there any difference in the rights of primary and coapplicant of property?

An additional person seeking to obtain a loan with a primary applicant is a coapplicant. One reason a potential borrower might want a co-applicant is to increase his odds of qualifying for a loan or to qualify for a larger loan. A co-applicant is also desirable if the loan is for the purchase of property that will be owned equally by both borrowers, such as business partners or spouses. If the loan is granted, the applicants will become co-borrowers, and each will be equally responsible for its repayment.
Can you sell property even when your home loan is outstanding?
You can sell property even when the home loan is outstanding. In such a case, the buyer purchasing your home will have to re-pay your bank. Alternatively, the buyers bank might pay your bank directly through a loan transfer.
What is a reverse mortgage and how does it work?

In a typical mortgage, you borrow money in lump sum right at the beginning and
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What are the documents required to get a home loan approved? The documents required for approval of home loan will vary from bank to bank. However, the bank would require details of the property as also the details of your pay slip and copy of two years incometax returns.
then pay it back over a period of time using EMIs. Reverse mortgage is a type of mortgage in which a home owner can borrow money against the value of his home. Reverse mortgage is the loan given to senior citizens for their monthly expenditures against their own property. The loan is given till the death of the owners and the amount is recovered against the property after their death. The National Housing Bank in India promotes a scheme in which the tenure is 15 years and the owner of the house and his/her spouse continue to live in it till their death which can occur later than the tenure of the reverse mortgage.
What is the eligibility for reverse mortgage loan?

Generally, the reverse mortgage loan would be available for senior citizens. The Reserve Bank of India has prepared draft guidelines for reverse mortgage loan. A house owner over 60 years of age is eligible for a reverse mortgage. The maximum loan is up to 60 per cent of the value of the residential property. The maximum period is 15 years. The borrower can opt for a monthly, quarterly, annual or lump sum loan.
What should a senior citizen do to get a home loan which is usually difficult to procure?
With age, the buying as well as re-paying capacity goes down. For this reason, banks do not approve loans for senior citizens. In case a senior citizen needs loan, they should consider having a co-applicant who has the capacity to take up the responsibility of the loan payment. You can also take loan with the property as collateral.
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Home Loans
How does an individual investor raise money to invest in commercial property?

We all know that there are funding issues on commercial property. Housing is encouraged under all government and bank policies, so commercial investment is primarily through self-funding or instalment plan with the developer.
How can I raise a loan against a property owned by someone else?

You can mortgage a property owned by someone else if the owner of the property becomes a co-borrower and guarantor for the same. The procedure requires mutual consent from both the parties.
What is the loan procedure an NRI property buyer has to follow?

The basics - such as income, financial obligations and re-payment track record
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remain the same, though the mechanics may be slightly different. Some banks may insist on having a resident Power of Attorney in India.
In the current economic scenario, is it better to opt for fixed or floating interest rate? Floating rates are advisable. Housing loans have lowest rates of interest. Floating rates are supposed to come down as and when the cash flow increases. The correct and the current fixed and floating interest rate on housing property loan can be ascertained from your banker.
Can multiple people get a collective loan on one property?

Usually, this is possible when all applicants are members of the same family. In certain cases, when non-familial members are willing to get home loan, it is possible to get it from public as well private banks subject to the individual eligibility. However, for this the property should be jointly owned.
In the current economic scenario, is it better to opt for fixed over floating interest rate?
Experts would advice floating rate. Housing loans have lowest rates of interest. Floating rates are supposed to come down as and when the cash flow increases. The correct and the current fixed and floating interest rate on housing property loan can be known from your banker. Enquire from your bank and make it a point to visit two to three banks to get the best rates.
How long does it take to get the application processed and the loan sanctioned?
The time line depends a lot on the nature of the property and applicant. You should wait for two weeks at least.
Can I take a home loan for construction in one city while working in another city?
Yes, it is possible that you are working in a particular city while procuring home loan for construction of your house in another city. It is legally allowed for you to purchase property in another city. Domicile is not a pre-condition to buying property any more.

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Ish Anand, CEO, Phoenix Hudo R Murugesan, CEO, Shriram Properties Manish Sinha, Consumer Assets, HSBC India Kaustuv Roy, ED, Cushman & Wakefield Dhrirajlal Rambhia, Chief Advisor, MagicBricks.com Subhash Lakhotia, Tax Consultant, MagicBricks.com
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CHAPTER-8
Handle !our Finance
Managing Finance
Is real estate a better investment as compared to the stock market?
The real estate market is similar to the stock market, with its peaks and troughs always seeming to make perfect sense in retrospect. Also, both markets reflect the economy of the country and offer good investment opportunities. However, the risks must be understood along with the opportunities. Realty index will appreciate five times, but not the stock market. Investing in stocks: The profit margin inherent in stock investment has always been higher when compared to other asset classes. Stock market investments offer advantages such as liquidity and flexibility, which real estate does not. Stocks also offer growth rates that the real estate market can rarely match. Investing in real estate: Home ownership is the most primary form of real estate investment. Unlike stocks, real estate is a tangible asset that provides for greater psychological comfort, security and satisfaction. Also, the return on investment for real estate is reasonably consistent because of the phenomenon of property appreciation. Stock markets are far less predictable.--
Money matters
What per cent of total income should a person in the age group of 25-39 years invest in real estate?
At a young age, you can invest 300 per cent of your total assets by borrowing for your first house. Experts believe that your total monthly instalments should not exceed 3035 per cent of your gross monthly income. This is a good starting point and you should work towards reducing that number over a period of time.
What per cent of total income should a person in the age group of 40-60 years invest in real estate?
As you retire, the capacity to earn as well as pay back reduces to some extent. By the age of 40-45, you should bring your investment down to 30 per cent of your total assets so that the going gets easy and you enjoy your sunset years as much as you enjoyed your youth.
What is the best way for a first-time buyer to set a budget to purchase a home?
Many new home buyers get excited and forget to consider the amount of cost they need to pay to acquire a home. Over-expectation from your income can put you in a financial stress. 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
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of the city, if it is from a good developer and fits your budget, but at the launch stage and when you exit, you get some value appreciation. That becomes your seed money. 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.
When is the stamp duty supposed to be paid?
Is there a formula to calculate how much loan I should take to buy a house?
In general, there is Stamp Duty to be paid every time there is a transfer of ownership. It is calculated on the basis of the total value of your property. The amount to be paid varies from city to city.
What are the factors that one should consider while calculating the home loan instalment per month?
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 parents or spouses income. Secondly, your familys 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 a monthly EMI.
There is no set formula but statistics show that if your home loan Equated Monthly Instalments (EMIs) are more than 40 per cent of your income, you may find it difficult to pay back the loan.
Why do bankers home loan interest rates differ?

Most often your own bank (e.g. where you have your salary account and most banking relationships) will give you the best interest rate. Also banks have preferred or invitation pricing and you can benefit from these special schemes.
Can I enter into a sale agreement with any buyer without clearing the mortgage? What will be the modality of the transaction?
Remember to value the said property which is mortgaged to a bank. In the first place, you will be required to clear the loan of the bank and then proceed to register the property in the name of the buyer. It is also possible that you, the new buyer, as well as the bank execute the agreement simultaneously.
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Managing Finance

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Niranjan Hiranandani, MD, Hiranandani Group of Companies Getambar Anand, MD, ATS Infrastructure Ltd Kaustuv Roy, ED, Cushman & Wakefield Dhrirajlal Rambhia, Chief Advisor, MagicBricks.com Subhash Lakhotia, Tax Consultant, MagicBricks.com Ish Anand, CEO - Phoenix Hudo Rohtas Goel, CMD, Omaxe Ltd. Amit Grover, National Director, DLF Offices Business Manish Sinha, Consumer Assets, HSBC India R Murugesan, CEO, Shriram Properties
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CHAPTER-9
Profit on propert!
Return on Investment (ROI)

What would be a safe and sound approach to buy property?
Do your complete research on the Web and physical survey of the projects. Invest in projects which are at least 25-30 per cent complete as this will be comfortable in terms of approvals. Brokers may sometime offer better rates than the developers sales team. Bank approved projects are preferred since they give comfort in terms of the approvals.
What kind of return should you expect from your purchase after two years?
It is impossible to predict a return in two years. Property buying as an investment must be looked at in terms of long-term holding capacity. While in the last two years, certain properties in metros have gone up by 20-80 per cent, in some cases that cannot be an indication of what the future holds. An exit after four years usually yields great returns.
Price it right
Is a pre-launch project with a good discount better than a newly-launched one in terms of investment?
Pre-launch is a great time to invest but is fraught with risk. It is purchased on the assumption that while the developer has not received all his approvals, it is expected that these will come through. The problem arises if the approvals are delayed inordinately. If you have an appetite for risk, you can go for pre-launched property. There is high risk but the return even in the short term can be very rewarding if the approvals come soon. If you have missed the opportunity, a newly launched project by a reputed builder in a good location can also be considered. There is lower risk in this property.
How to estimate growth in the value of land in future?

Infrastructure development has to keep pace with the swanky townships being planned in most cities. If water supply, electricity, safety or security, law and order, road infrastructure, etc are progressive, we can only expect appreciation in the land value.
Which location city, suburb or periphery ensures best return on investment?

Identifying a suitable location is one of the most important tasks of buying a property. Users normally question about choosing best location to reap good returns on their investment. Connectivity of the property with city and other location plays a vital role in boosting the re-sale value. Buyer should ensure that the property is located in an ideal area with good connectivity to the bus station, railway station, airport and super market etc.
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Is it advisable to sell an apartment and buy a plot instead?

There are a few points that you will have to keep in consideration before selling your apartment. The advantage of a plot is that it will appreciate more. However, if you are looking for a rental yield, an apartment is better. The rental values of independent houses are generally less than apartments.
Is a 1BHK apartment good for investment and rental returns?
What is a better investment residential or commercial property?
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 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 lease such property with corporate companies. This type of arrangement gives good and assured returns.
If you are planning to buy for self use in the future, then you should buy residential property and if it is for business go for commercial property. If you are going for residential property, its better to invest around IT, ITeS, manufacturing hubs that generate good rental demand.
What is the best investment in the Rs 50 lakh bracket that will ensure good rental returns?
Invest in commercial property to get good rental returns, especially those with ready infrastructure and connectivity.
Is it wise to invest in Panchayat-approved land or is government approval mandatory?

There is a risk of not having access to civic amenities like roads, sewage, street lights, etc with Panchayat approved lands. If the projects are not approved by the municipal government, one may not get a bank loan.
Considering high profit margins of developers, is there any scope to gain from real estate investments?
High profit margin is only possible if land has been purchased historically at a very good price. Presently, in competitive markets, the buyers are getting fantastic deals and the developers are competing for market shares.
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Niranjan Hiranandani, MD, Hiranandani Group of Companies Kunal Banerji, President, M3M Group Ananta Singh Raghuvanshi, Director-Sales and Marketing, DLF India R Murugesan CEO, Shriram Properties Shishir Gupta, Expert on Open House, Magicbricks.com Ashwani Prakash, ED, Paramount Group of Companies Bopanna Madayya, VP-Sales & Marketing, QVC Realty Anuj M Bhandari Director, BU Bhandari Landmarks Gaurav Gupta, Director, SG Estates Ltd
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CHAPTER-10
Reap the benefits
Exiting the market

On what basis should I decide to sell my property?
Your decision to sell your property depends on the following factors: Property market in your city/locality: The residential property market is locationspecific and the prices will vary for different areas. How soon do you need the money? Do not sell your property in a hurry if you do not need the money urgently. Getting the best deal may require patience or even spend some money to add value to your house. You also need to consider the rental return from the property as it will be a source of steady income. Price it right: The biggest mistake sellers make is in pricing their property too high. The best way to determine the ideal price for your property is to check with brokers in the locality or by listing it on property portals online.
Winding up
Consider the taxes: How much you actually get after you sell the property will depend on how long you held the investment. If you sell your house within three years of buying it, you will lose the tax benefits. In case of a mortgaged property: Selling a house that has an outstanding loan requires a lot of documentation. So, try to pay the loan and then sell the house.
How do I sell my property?

Selling property is much more difficult than buying one. Unless you know of people who are willing to give a good price for your house, a property broker may be your best bet. Brokers usually have a wider reach and are more clued in to the local property market than an individual seller. You can also list your property online. Property portals such as MagicBricks.com allow individual sellers to list one property for free. It is also worth listing as a nominally paid service as the portal offers additional services for the fee.
What is considered as the right time to exit a real estate investment?

Real estate is not a get rich quick investment route. It pays off only when one invests in a property for at least 3-4 years. Even with a long-term investment horizon, one needs to have a clear exit strategy in mind before one buys real estate as an investment.
How to make a safe exit from real estate?

Selling the property as fast as possible in challenging market conditions is a wrong investment strategy. 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 and property in particular and ones own finances. A savvy real estate investor must know unrealised gains are meaningless and when to take money off the table.
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What is considered What all things should be kept in mind before exiting the market? the right time to The property investor must decide on the investment horizon (period between exit a real estate purchase and re-sale). A detailed analysis has to be done on the tax impact of investment? exiting a property investment. Expenses such as legal fees and brokerage expenses
need to be factored in pre-payment penalties for early loan closure and stamp duty impact for the buyer must be considered. 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.
Real estate pays off only when one invests in a property for at least 3-4 years. There is no scientific method to calculate but one should exit a property based on its return on investment achieved and cost of funds.
Is the commercial market bleak as compared to the residential market?

Commercial property market has been hit more than residential property due to slowdown in industrial growth. Surplus commercial realty space has also put pressure on lease rental values. Commercial projects in Tier-2 cities have been negatively impacted by escalation in construction cost and weak demand for commercial real estate.
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What documents are necessary if one wishes to sell off his property?
The main documents required to sell a residential property are the housing society share certificate and the sale/purchase deed of the property. The Sale Deed confirms that the land is in the name of the seller and that he has the right to dispose it off. If
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Can an NRI/PIO/ Foreign National buy property in India? Yes a NRI/PIO/ Foreign National can buy Property in India. NRIs can own non-agricultural NA land only. If you have agriculturist relatives you can buy agricultural land, in the name of your blood relatives.
the property has changed hands more than once, the buyer may also ask for a copy of the previous deeds, in order to confirm the authenticity of the deal and property.
What are the documents I need to sell a property in a housing society?

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. In case of property being mortgaged, these papers will be held by the bank and you can use a photocopy of the required documents to initiate a deal. Depending on the kind of property and ownership, some more documents, such as a No-Objection Certificate from the housing society and a documented consent in case of jointly owned property, may be required.
Can a Non-Resident Indian sell his property in India? Who can he sell his property to?
Yes, an NRI can sell residential or commercial property in India. He can sell to:
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A person resident in India the definition of resident in this case will be as per Foreign Exchange Management Act (FEMA) An NRI A Person of Indian Origin (PIO)
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What are the benefits of investing in commercial real estate compared to residential for a salaried person? It is better to invest in a residential market where demand is fairly predictable. Commercial real estate is influenced by multiple factors including corporate requirements.
However, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen.
Can an NRI sell and repatriate proceeds of property received as a gift?

Yes, an NRI can sell property received as a gift. The sale proceeds of such property should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD 1 million per financial year, subject to the satisfaction of authorized dealer and payment of applicable taxes.

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Anuj Puri, Chairman & Country Head, Jones Lang LaSalle, India Kunal Banerji, President, M3M Group Vikas Vasal, Executive Director, KPMG India (The Times of India) Niranjan Hiranandani, MD, Hiranandani Group of Companies Kaustuv Roy, ED, Cushman & Wakefield Sunil Mantri, CMD, Sunil Mantri Realty (The Economic Times) Ramesh Bhojwani, a Mumbai-based financial expert (The Economic Times)
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A C K N O W L E D G E M E N T S CONTACT US
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Post your feedback to content@magicbricks.com Join our discussion forum at openhouse.magicbricks.com For business enquiries sales@magicbricks.com
OPEN HOUSE EBOOK TEAM

Content & Research: l E Jayashree Kurup l Indrani Rajkhowa Banerjee l Shradha Goyal Proofing: l Renu Arya Layout Design: l Harsha Khattar Cover Page Design: l Rahul Nair Marketing: l Raghav Krishnan

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Content

Searching/Short listing a house

The stage of construction

The price bracket

Looking for the right property

The first steps

While buying a house the top questions to keep in mind are:

The Need To Buy Property

What makes more sense Rent or Buy?

Should I take a home on rent or should I buy?

All figures in percentage

Why is it necessary to own property?

Tips to Customers who wish to buy property:

Our panel of contributors for this chapter are:

Shortlisting Your Property

What do you think is the best way to buy property?

What is the market checklist before buying re-sale property?

Where can I find authentic information about properties?

When is the best stage to buy?

How do you choose the right type of property?

What are the documents you need to check before buying?

What are the documents required for registering a flat?

Which is good for investment plot or flat?

What is a better investment city or suburb?

Our panel of contributors for this chapter are:

Choosing The Right Location

How much appreciation can be expected by investing in big cities?

What makes an area a preferred location for home buyers?

What could be the possible downside of investing in big cities?

Should one invest in small cities?

Which will give better returns small town or big cities?

Is it good to invest near airports?

Is it preferable to buy in commercial hubs?

What are the advantages of investing in peripheral areas?

What are the disadvantages of investing in peripheral areas?

Are suburbs and peripheries of large cities witnessing an escalation in prices?

Is it good to invest near Highways and Expressways?

What are the long term benefits of investing in Tier-3 cities?

Our panel of contributors for this chapter are:

How To Choose An Agent

Where to search for a broker?

How to choose a broker?

How much brokerage should an authentic broker charge?

DEVELOPERS Can any builders association curb errant developers?

Where should I search for an authentic broker?

What are the advantages of choosing a reputed developer?

How to choose a builder?

How to safeguard yourself from being cheated?

How can a buyer be protected if the project is delayed?

Our panel of contributors for this chapter are:

When is the transaction of sale considered complete?

How much tax has to be paid in case of LTCG and STCG?

Can the capital gain amount be used for clearing loans?

In whose name should a new property be registered to save taxes?

How many properties can one own?

Are retired pensioners exempted from paying STCG Tax?

Our panel of contributors for this chapter are:

Subhash Lakhotia, Tax Consultant, MagicBricks.com

Things you should check at the time of signing the agreement?

Is there any difference in the rights of primary and coapplicant of a property?

Can you buy property without appointing a power of attorney?

Can you sell property without the original registry?

Is a daughter eligible for equal share in her parents property?