Here you will find listed the main things that you need to check to make sure the property you are buying is legally transparent.
1. Check for clear title papers
It is essential that you check the legal documents of a property before you make the payment for it. The most important of which is checking if the title is clear or not and regarding this it is advisable to consult a property lawyer.
2. Check to see if it is approved by leading banks
One sure way of knowing if the property is more or less legally clear is to see if it has been approved by leading banks. Banks will only approve of properties which have legal clearances with valid documents.
3. Check if there are any mortgages on the property (in case of resale)
An individual who owns a property can avail of a loan against it. While buying a property (in case of resale), be sure to make a thorough research if the property has been mortgaged or not.
4. Check the constructed area and the sanctioned area
Before deciding on a property, ask the builder for the sanctioned plan and compare it with the actual built up area. This is because sometimes there are illegal constructions that are not in accordance with the sanctioned plans.
5. Check for encumbrance certificate
An encumbrance certificate contains the details of previous registrations which can be availed from the sub registrar’s office. It has a multifaceted advantage, it is a proof of free ownership and it also testifies that the property is free of any legal dues or mortgages,
6. Check if property tax has been paid regularly
Since paying the property tax is an annual thing, it helps to make sure that all the papers are in order. It shows a sense of responsibility on the part of the owner and also is an assurance of his having valid documents.
7. Check if property has a registered society (in case it’s not a new construction)
The presence of a registered society (in case it is a completed construction) of a property increases its chances of being legally clear. Since the process of registering a society itself involves a legal process, it makes it necessary to have all its papers in order.
It might seem a lot to do before buying a property, but since you will be investing a lot of your savings and maybe also take a loan for this purpose do take this seriously. After all a legally clear property also brings with it, peace of mind.
Small tweak, big problem
It is also important to ensure that the house you are buying is exactly as per the approved layout; even small changes are not acceptable—you can be hauled up for changes like adding a roof to your garden space. All residential projects needs approval for every sq. ft that is used for occupancy. Floor area ratio (FAR) or floor space index (according to the development plans and zoning laws of individual states) denotes how much area you are allowed to construct on a given plot size. It is the ratio of the total floor area in the building to the total plot area. The constructed area would include the basic structure, walls, and staircase or lobby space, if any. FAR is calculated using a simple formula: total covered area of all floors divided by the plot area. Say, a builder has got a plot of 1,000 sq. mt and the permissible FAR, according to development plans, is 1.5 sq. mt. This means the builder is allowed to construct a building on 1,500 sq. mt.—which means a three-storey building if each floor is 500 sq. mt. Again, FAR differs from place to place. Any construction beyond the permissible area is illegal. If you don’t fully understand all the details, big and small, consult a lawyer and get the documents checked professionally.
Too cheap to be legal
If you are getting a project below the market value, it’s a definite red flag. “You should ask questions such as why is a builder being so kind to you? Why is the quoted price below the market price? The problem is that people get excited with discounts. They assume that real estate prices will appreciate, and believe the sales talk could be the last opportunity for them to buy a project at such a price. You should remember that you are not buying a Rs.10 or a Rs.100 product, but putting in lakhs and crores. Due diligence is a must,” said Himanshu Shekhar, a lawyer for the Campa Cola Residents’ Association. Builders need buyers for their illegal projects. If the documents are not in place and there is less or no demand for such projects, builders tend to sell below the market value. While there is advantage of price, there is a risk of being thrown out of your house.
The other use of a loan
If a financial institution refuses you a loan, this, too, is a red flag indicating that the house you are planning to buy is illegal. “Banks or housing finance companies are very cautious in giving home loans and hence, do a certain amount of due diligence. They generally verify the title search documents and the approval papers to ensure that the project is legal. Taking finance from a reputed bank or non-banking finance company helps you validate if the project that you plan to take a loan on is valid. Banks generally reject loan applications for projects that don’t have a clear title, or don’t have an OC or a no-objection certificate,” said Anuj Puri, chairman and country head, Jones Lang LaSalle India, an international property consultancy. So, a rejected loan application because of lack of documentation is a warning sign.
Dreams of approval
A house is likely to be the most expensive purchase you ever make. That should be reason enough for you to be responsible when buying a property and diligently getting all the required information on the property and the builder. An illegal construction can be very troublesome, and you would need to spend a lot of money and time sorting out the issues. “Risk of demolition is a major problem. Considering the increasing awareness of issues relating to illegal constructions, obtaining financing using illegal premises as collateral or further sale of illegal construction may also be more challenging. Additionally, if the relevant rules are applied more strictly, it may be difficult to obtain utilities at illegal constructions,” said Joshi. Apart from the threat of a legal battle, you also compromise on safety. “Illegal construction continues to mushroom in unplanned areas of our cities to accommodate the growing population. There is no homogeneity in terms of plot sizes, street widths, height, and gross built area in these locations. Old buildings that collapse are ones that have been built without proper permits and lack structural safety standards,” said Sachin Sandhir, managing director, RICS South Asia, a self-regulatory professional body dealing in land, property and construction. You must remember that if the government decides to evict you from your house, which is proven to be illegal, you have no choice but to vacate. Living in the anticipation that the house will eventually get approved is like betting in a casino.