Checking credentials

Shweta Jain, executive director of Cushman and Wakefield, says that quite often
projects face hurdles in obtaining legal approvals from all the authorities. This
not only leads to delay in implementation , but also, sometimes, can force the
developer to scrap the project which can cause a huge loss to the buyer.
Before finding out whether a builder has secured all the approvals to start
construction, you must check the ownership of the land on which the project is to
be developed. For this, you can ask the developer to show the allotment letter of
the land, if it has been purchased from a government agency.
If the land has been acquired from farmers, check the title paper which mentions
the owner. This will also help you determine whether the title of the property is
clear or not. The next step should be to find out whether the developer has
secured all the approvals or not.
The major set of approvals that must be obtained by a builder are building plans
and floor plans, structural safety certificates, no-objection certificates from the
civic authorities, environment clearances, urban land ceiling certificates ,
commencement certificates and title deed. They will also have to secure an NOC
from the water authority to use water for construction.
Written agreement
You must insist on a written agreement with the developer. It should clearly
mention the specifications of the apartment and all the terms and conditions,
including payment plan, time of delivery and quantum of penalty if any party
defaults construction deadline in the case of the developer and payment
schedule in case of the buyer. This will also take care of hidden costs, if any. If
one is buying a house in a completed project, the buyer should physically check
the occupation certificate, fire safety equipment and mechanism, water and
electricity connections and property tax receipts for the project.
This is very important as the country does not yet have a real estate regulator
and well-laid-out guidelines for the sector. The occupation certificate from a
government authority, in particular, is very important. It signifies that the
building is complete and fit for living; and, that, it has not only got all the
approvals in place but also that it has adhered to all the norms and building
bylaws.
In NCR, purchasing a property is even more risky if one does it through power of
attorney - in this, the title of the property remains with the original allottee but
the rights to its use and all other benefits vest with the last buyer, who can also
transfer the property rights to a new buyer. Even the share certificate of a
property in a society continues in the name of the original allottee.

In this situation, it is difficult to find out who is the last owner. This leads to fraud
many a times, and a person who is in possession of the property can claim to be
the owner of the property with false documents and even sell it off. This is one
reason why banks refuse to give a loan to a buyer who is buying a property from
a person who owns it through power of attorney. Therefore, it is advisable to buy
freehold property from the legal owner alone and get it registered in your name.
Using bank for checking
If you are planning to buy a flat, the best course of action is to buy it through a
bank loan. A senior official of HDFC Ltd says that since the bank accepts the
apartment - which is yet to be constructed in a new project - as collateral when
they give a home loan, they do all the checks, including that of the credentials of
the builder, to ensure that the market value of the collateral does not diminish.
So, even if you have adequate money, take a small loan from a bank so that it
too is involved in the whole process. Later, if you want, you can prepay the loan
as this does not attract any penalty.
It pays to be cautious
When buying a property, no amount of scrutiny is enough. It always pays to be
cautious. We tell you how to figure out the value and track record of a developer
and get the best deal when you have made your choice.
Background check of the developer :
This will help assess the execution capability of the developer on timeliness and
quality. It will also help to compare the project with that of the developers'
competitors. The financial soundness of the builder should also be studied as it
will indicate his capability to execute and complete the project in absence of
external borrowings. The developer should have a traceable track record which is
a good reference point for new launches and under-construction projects. The
number of projects delivered by the builder and the time taken for delivery
should be considered. It is also important to be aware of the
developers'involvement in any legal feud in the past so one can judiciously make
the buying decision.
Fundability of the project and financial institution affiliations:
If the flat has to be mortgaged, it is always helpful to identify lenders and
financiers for the project. This ensures authenticity of the titles and approvals as
these would have been investigated with greater diligence.
Specifications:
The buyer should monitor structural and finishing specifications which are spelt
out when the project is launched and marketed. However , one should supervise

the progress through frequent visits to the site and ensure the specifications, as
shown in the sample flats, are adhered to. In case of any difference, one can
write a formal complaint to the developer and also approach the consumer court.

Price of the apartment:

The total price of the apartment is a factor of the basic selling price (BSP) and
the cost incurred for external and internal development , power back-up ,
preferential location charges, club membership, maintenance and parking. The
costs that are not generally accounted for by the buyer are stamp duty and
registration charges and maintenance cost per square foot. Most builders may
also take the society maintenance charges for up to two years in advance.
Typically, the developer markets the projects on BSP and mentions additional
costs separately . In certain projects, pricing may vary depending on the
amenities and specifications. Brokers may offer discounts and pay back
commissions to the buyer. The buyer should compare the prevailing rates and
values with those of similar projects in the area or comparable locations.
Mode of payment:
Although there are a number of payment modes offered by developers for underconstruction or newly-launched projects, most prevalent are down payment,
construction linked and flexi-payment plans. Down payment plan requires the
buyer to pay around 10-15 % of the cost as booking amount, around 80-90 %
within 45-60 days of booking and the remaining at the time of possession. This
plan is the most economical as the developer offers huge discounts but the risks
are higher if there is delay in completion. The construction-linked plan has a
relatively lower risk although it may the most expensive. In this plan, the buyer
pays 10% of the total cost of the apartment or a specific amount for booking and
the rest is paid at various construction milestones. The flexi plan is a
combination of the earlier two plans whereby one is required to pay around 3040 % at the time of booking and a similar amount is pegged to construction
milestones with the rest to be paid at the time of possession.
Buyer-seller agreement
This agreement has all the clauses, terms, conditions and legal implications for
the buyer and developer should there be a default on either side. Important
points are interest, penalty and default charges for a buyer and clauses of refund
of payment in case the project is not completed or is scrapped. Also, the penalty
in case of structural defects and delay in construction should be included. The
agreement should also include a clause to transfer the undivided and common
land to the society and owners which will ensure no further development or
construction by the developer after the project is completed and handed over.
The agreement should be registered.

Area of flat
The buyer should check the area of the apartment as usually the area marketed
and sold is the super built-up area which is then used to work out the cost of the
apartment. The developer charges for the built-up area, which includes the area
enclosed by the walls and the area occupied by the walls, while the actual usable
area is the carpet area which is the area within the walls
Design and layout
Buyer should find out about contractor, architect and structural engineer in order
to assess quality of work as this is critical if flat is for own use. Cross-ventilation
and ample sunlight should be
Checklist
Check with people living in a developer's earlier projects about the quality of
work Prefer projects which are about to be completed Check project's legality
land title, status of layout plan and other NOCs Check difference between super
area and carpet area of fl at In the name of super area, developer adds
proportionate area of common facilities to each flat . This 'load' can range from
15% to 45% Go for construction-linked plan because you have to pay according
to the pace of construction For loan, avoid banks suggested by developer Seek
service of bank lawyer who can provide you the valuation and legal status of
property for a nominal fee, usually Rs 3,500-4 ,000
Documents
For Delhi:
Perpetual lease deed | Conveyance deed | Sale deed in case of resale properties |
Mutation paid | Last paid house tax receipt | Last paid electricity and water bills |
Completion certifi cate | Sanctioned plans
For Noida/Greater Noida:
Allotment letter from Noida Authority (in case of a plot or flat built by authority) |
Registered perpetual lease deed | Proof of payment of lease rental, one-time or
yearly | Transfer memorandum and registered transfer deed in case of resale
property | NOC from Jal Department | Share certificate and NOC from society
(where applicable as some old sectors or group housings have been allotted to
societies) | Completion certificate for houses with sanctioned building plans |
Mutation letter in name of current owner
For Gurgaon:
Allotment letter/builder-buyer agreement in case of DLF or HUDA properties |

Registered sale deed in name of current owner with all originals from previous
owners | Sanctioned building plans and completion certifi cate in case of
independent houses | Mutation letter from DLF or HUDA | Proof of up-to-date
payments of power and water and house tax charges | NOC from RWA or
maintenance offi ce in case of group housing
Titles and documentation
The risk of clear titles and documentation is significantly less if the property is
purchased from the urban development authorities. However, if the flat is to be
purchased from a private developer or colonizer, one should seek legal
assistance to check documents related to land ownership, licences and
approvals, allotment letter, sanctioned plans etc.
Certificates
Certificate from society
One should check the share certificate issued by a society. This establishes the
identity of the seller. The share needs to be transferred in your name as the
purchaser. This certificate forms a part of your ownership deed.
NOC from society
Check NOC issued by the society in case of a resale. This NOC states there are no
dues payable by the seller to the society and that the seller has complied with
the conditions laid down by the society.
Ownership titles for group housing cooperatives.
It is essential to have the shares or the ownership documents allotted or
transferred to ascertain the legal rights.
Title papers
If you are buying the property directly from a builder, you should check the title
papers showing who the owner is. This will tell you whether the title is clear or
the property is under litigation, whether the land is freehold or leasehold,
whether the seller has the authority to develop and sell the property, and if the
property is free of encumbrances. A clear title can be ensured when there's a
conveyance deed in favour of the seller.
Checking by bank
For those availing a loan, the bank normally appoints its own lawyer to check the
title deeds. Or, you hire a lawyer and ask for originals, don't accept photocopies.

Municipal clearances
Another important document is the completion certificate issued by the
municipal authorities. It shows whether a building complies with the rules in
respect of height and distance from road, besides other things, and whether it is
built according to the approved plan. You should also check the occupation
certificate . It certifies that water, sewage and electrical connections are in place.

Purchase agreement

Another document that needs to be checked is the purchase agreement between the developer
and the authority or the agency from which the developer has bought the land. It ensures the
seller (developer) is entitled to sell the property, states if there is a mortgage on the property,
and shows if the mortgage money has been paid off.

Development agreement
If the property has been developed jointly by the owner and a builder, scrutinize the joint
development agreement, which mentions the terms of development of the property.
List of approvals
Often a project faces delays in getting legal approvals from a number of authorities.
Noncompliance may result in scrapping of the project and reduction in market value. The
approvals to be obtained are building plans and floor plan approvals, structural safety
certificate , no-objection certificate from the civic authority, environment clearances, urban
land ceiling certificate, commencement certificate and title deed. Upon possession, the buyer
should physically check the occupation certificate, fire safety equipment and mechanisms,
water and electricity connections and property tax receipts.