How to buy home or flat in Mumbai safely and smartly
Vinod Sampat 19 November 2013

In the 2nd part of the multi-part series on legal issues and remedies for consumers, Vinod Sampat lists out the key points you need keep in mind when buying home or flats

Buying property in India is fraught with perils and risks. Very often, the terms of contract is sided towards the builders or developers and not the consumers. Therefore, consumers have to be careful while buying real estate and must ensure that everything is checked and examined in detail, including the fine print. Unfortunately, not many developers handhold consumers or take care of them. Many are scrupulous and are interested in selling properties at exorbitant rates, with some of them even flouting the law without you ever knowing about it. They don’t disclose many things, so you have to on your footing to check and verify all details in the agreement.
 

In the run up to the Moneylife Foundation seminar to be held on 23rd November, Advocate Vinod Sampat has highlighted key things to keep in mind while buying real estate. Before reading the rest of the article, you may want to register for the seminar beforehand as seats are on first-come, first-served basis and limited in numbers.
 

First, you would need to check the type of property—whether it is freehold or leasehold. Each has its own plus and minuses.
 

Freehold

Leasehold

Advantages

Disadvantages

Advantages

Disadvantages

Peace of mind

Costly

Cheaper

Yearly lease rent to be paid

No recurring expenses

 

 

Check the lease period. After lease period property may not be renewed

No difficulties at the time of redevelopment

 

 

Possibility of litigation i.e. Bombay Port Trust property lease renewed only for five years at exorbitant rates

 

 

 

Problems may arise at the time of redevelopment.

 

Besides deciding on whether to opt for freehold or leasehold, you will need to keep in mind the following as well:

Take search (obtain a search report of the property)

Issue public notice (in local newspapers)

Read original agreement drafted by the builder and see all agreements are duly registered

Have a clause in the agreement that if the seller terminates the agreement or does not give possession on the due date then he will pay double the amount that has been collected by him till date (emphasis added)

Take irrevocable power of attorney from seller

Insist for clear and marketable title certificate from the advocate of the vendor

See that the earlier chain of agreement is duly stamped and registered

Insist for no objection certificate from the cooperative housing society

Have the area physically measured. Also see that the carpet area tallies with the society record as well as with the records of the Bombay Municipal Corporation (BMC). There are instances were builders have fooled flat purchasers by selling open passages. The area as reflected in municipal records is the correct records

Have clear cut idea of hidden expenses like transfer fees, brokerage etc

Be specific and ask hard hitting questions i.e. what all furniture items will be kept. Prepare an inventory of the same

Have separate agreement for furniture item. This will help you in saving stamp duty which is 3% on moveable property and 5% on immovable property

See that the seller has paid all his tax dues

Inquire if there are any notices received pertaining to the flat. Take an affidavit from the seller. In case of dispute this can help you to initiate criminal action against the seller

Documents should be signed before a notary and the notary number must be mentioned in the document otherwise it becomes a defective affidavit

Inquire about incidental benefit i.e. car parking spaces that would be allotted by society, club facilities, etc

Before paying token amount get the draft of all the papers approved from the seller

Ensure that the seller is holding the flat not as a trustee

Find out the market value of the property as well as the impact of capital gains tax on the seller. At times deals get cancelled if the seller has to pay high amount of tax, like tax deduction at source (TDS)

Check the status of the property after verifying the property card

Ensure that the entire chain of documents are mentioned in the agreements

In the event the flat is acquired by the transferor on account of demise of his family members insist for probate/letter of administration. In the alternative insist on the consent of all the legal heirs preferably as confirming parties

You have to ensure that proper precautions are taken else you can face problems when you offer the flat as collateral or at the time of transfer of flat

Take a token bank loan (banks have own method of doing verification of the property title). It will give peace of mind

Check if the occupation certificate/ building completion certificate is received

Deal with reputed persons be it broker or vendor

Your flat is priceless do not compromise by telling illiterate persons to prepare transfer documents
 

Stay tuned for the 3rd part which will be published tomorrow in the run up to Vinod Sampat’s seminar. Register for the Moneylife Foundation Event by Vinod Sampat.
 

Check the first part over here:

 

 

NOTE:
Those seeking help or advice on CHS issues can contact
Moneylife Foundation’s Legal Resource Centre (LRC) ( http://moneylife.in/lrc.html )

Comments
Karan
8 years ago
Great article Mr. Sampat!

Please can you elaborate when you say that BPT renews leasehold property for only 5 Years??

So if a 99 Year Lease is expiring it will only be renewed for 5 Years?

Also what is the thumb rule of discount/difference in price between Freehold and Leasehold property.

So say all else equal (identical building, location etc, amenities etc) if the price of Freehold Apartment is say going for Rs 10,000 PSF how much should a Leasehold Property go for APPROX?

Look forward to your response!

Vishrut Patel
Replied to Karan comment 7 years ago
Dear Mr Karan,

Thanks for posting your comment.

As you may be aware Moneylife Foundation has launched a Legal Resource Centre ( http://lrc.moneylife.in/ ) to provide advice and help in such matters.

We request you to send your query through the LRC by clicking in this link http://moneylife.in/lrc.html

Best Regards,
Vishrut Patel
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