“Imagine, living in the heart of the IT corridor, in a
community that offers you everything and more. Imagine living in close
proximity to some of the best educational institutions, entertainment centers
and malls. Too good to be true? Well, that’s exactly what XYZ offers
you“!!!!!!!!!!!!!!
Is this the 10,000th time you are seeing such an ad on the
newspaper. Is your dream home just around the corner as the ad says! Or you are
still in doubt if the process of buying a home is that simple as advertised?
Everyone in india, atleast in the cities, dream of owning a
house. Be it flat or apartment or plot, the process is long and tedious. So are
people’s efforts for realizing their dreams. Often, the only time you feel
happy about building/buying a house is when u r dreaming!!!!! From then, till
you buy one or construct one or get cheated in the process, the effort is
gigantic and there is a sinking feeling that government has done very little to
ensure credibility of real estate business.
This post documents some of the efforts/issues/process of
buying a new flat in bangalore. if you are buying plot or buying second hand
flat or buying a yet to be built flat there will be some modifications in the
procedures but still this post will act as a good starting point.
The process.
a) Search for appropriate location and visit various flats
of builders – big and small.
b) Check with your budget if things are working out and your
requirements/dreams met.
c) Try to compromise on dreams and conflicting requirements.
d) Finalise on the flat or the builder
e) Buy
Sounds simple!!!!!!! But, more often than not, the
implementational procedures, the rights and wrongs are so difficult that it
becomes impractical to implement the simple procedure above.
Hence my efforts in documenting the procedure and
technicalities involved. The post is not an encyclopedia of all real estate
terms, but atleast it will give the basics of how real estate works and helps
you save time while you are learn by trial and error!
Technical terms
First get introduced to whats tax paid receipts,
encumberance certificate, khata, sale agreement, sale deed and a list of words
used in real estate vocabulary.
a) Tax paid receipts for the property:- Once you have liked
the flat and the budget suits you, some documents need to be verified. First
among them is to get the latest tax paid receipts (issued by BBMP). Collect
xeroxes of the latest tax paid receipts from the builder
For the land he has constructed on
For the flat if its more than an year old.
Remember that sub registrar office deals with Registration,
Khata etc. BBMP office is only for tax payment. Usually BBMP will look at
Saledeed, Khata and will issue the receipts of Tax in your name. It can be in
previous owner or builder's name, but better to change it to your name once you
have bought the property.
To know the details of property tax, go to
http://www.bbmp.gov.in and follow the correct links. You need to enter
2008-2009 tax receipt number and you can verify the details about whose name
the tax is being paid for the property, how much amount has been paid, which
year and so on.
b) Encumberance certificate:- This document is issued by the
sub registrar office in the same locality. This basically tells if the
land/plot/flat is mortgaged for some loan, that is, if a loan has been bought
on this property.
c) Khata certificate:- There will be a computerized document
with the sub registrar office which basically talks about the owner of the
plot/land in case flat is yet to be built, or the flat itself, if you are
purchasing second hand. In case of first purchase of the flat, get the khata
certificate for the land the builder has bought. I am not sure about the exact
nature of this document but just that its a registered computerized information
available with the government about the plot. If khata has not been purchased,
it can be done if the property is not in dispute and all other documents (like
tax paid receipts, sale deeds etc) are in proper order.
More information about khata here
d) Legal heirs document:- Again iam not 100% clear on this.
But there are documents which tell whose name the property is in, from whom did
they buy, who are the legal heirs of the builder, previous owner of the land
from whom builder purchased etc.
So first step before you book a flat and go for the sale
agreement is that, you ask for
- Latest tax paid receipts for the plot and the flat
- Encumberance certificate for the plot and the flat
- BBMP approval certificate for the building
- Khata certificate for the land and the flat
All other related documents like legal heir documents (just
ask for xeroxes of all land documents with the builder).
Go to a real estate lawyer (Find a reputed lawyer on your
own)
Ensure that the papers are in proper order.
If the lawyer wants any more documents, ask for it, get it
and finally the lawyer will give a legal opinion certificate. Once you have it,
it means that there are minimal chances for cheating.
e) Sale agreement – (Optional - This has very limited legal
value and is only between buyer and seller) First agreement to be signed on
stamp paper between the buyer (you!) and the builder. The information it will
give is: booking advance you are giving to the builder, which apartment you
will be buying, what is the total area (like super built up, built up and
carpet area), whats the final amount you will pay the builder & by when you
should give the final amount.
Catch:
1) If you are paying in black (explained later), then either
the agreement will mention a lower value or no agreement will exist. In that
case, only trust on builder can help!!!!!!!!!1
2) Many builders will not give the sale agreement
immediately. Yet again, either just dont take that flat or trust the
builder!!!!!!!!!!!!!!!!!
3) Booking advance will mostly be non-refundable. So be very
careful. Take your time. Ask for a draft first, verify it and then only
proceed. Once the booking advance is paid, you cannot do anything if things go
wrong. Remember the sale agreement will mention it as non-refundable. So even a
case in court will not help.
4) Ensure that the sale agreement mentions that the amount
to be given by the buyer includes VAT, service tax, common amenities charges,
car parking etc. ONLY the registration cost will not get mentioned in the sale
agreement. Apart from it, all other costs have to be mentioned. Thumb rule is
that the total amount you incur = Total amount to the builder in sale agreement
+ registration charges to be given as DD to the sub registrar of that locality.
f) Sale deed: This document is the almost the final document
that basically states that you are the owner of the apartment. It should be
certified by the sub registrar of that area. It basically states for what
amount you are buying the apartment, its address. Its a conformation that the
government is aware that the property is in your name and in its records is
registered in your name. For the registration, you need to shell out quite a
good percentage of total amount of your flat (say 7.85% of the total amount you
are paying the builder for the flat).
Catch:
h) Black Vs White money:-
This is also very common, certainly illegal practice in real
estate in many cities in india including bangalore. My guess is that 90% of the
real estate dealings deal with black money (very sorry state of affair, but
remember the poor politicians should somehow earn crores of money before the
next elections, what is the easier way than money in black).
Basically black money means money not being part of any
receipt to avoid payment of tax.
So suppose if your flat costs Rs. 50 lakhs, and you are
showing only the guideline value in the sale deed, say 16 lakhs. Then there are
good chances that you will pay Rs. 34 lakhs as black (i.e without a receipt, or
without mentioning in sale deed). This money is unaccounted as far government
is concerned (i.e no tax will be paid on the rest of the amount, it is the
builder’s black money).
So while enquiring about rates and before finalising your
sale agreement and giving the booking amount, clearly ask if the deal is
black/white. If white, aal izz well.. If black, your risk.
Details while asking for the price:
There are lot of ways to deceive people about the actual cost
that will be finally borne by the buyer.
Generally the per square foot cost which the builder says
should include all charges i.e service tax, VAT, common amenities cost etc.
Just confirm that the rate he tells covers all this (This will clearly be specified
in the sale agreement). The only other cost you have to pay is the registration
charges to be given as DD to sub registrar of the locality.
Bribes:
Indian systems dont work without a bribe (as of jan 19
2010). Some amount will go as bribe in the sub registrar office, for getting
khata etc etc. Ask the builder about this and ensure that it is not beyond
reach.
Hope you have understood some technicalities involved in
real estate business.
Summary is:
1) Get the xeroxes of tax paid receipts, encumbarence
certificate, khata and related land documents, get it verified by lawyer and go
ahead only if he gives a legal opinion that is favourable.
2) Get the draft of sale agreement and the sale deed and get
it verified by lawyer.
3) Then give the booking amount and take the sale agreement
from builder on stamp paper.
4) Give the final amount within the date mentioned in sale
agreement.
5) Get the sale deed registered from the sub registrar in
the locality.
6) Get the khata for the property.
Thats it.
Hope you are enlightened a little more about purchasing a
dream home.
In my next post i will write about getting a home loan and
the practicalities/difficulties involved.
All the best……!!!!!!!!!!!!
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