guide to buying a house

The Need To Buy Property Chapter 1 01

Shortlisting Your Property Chapter 2 08

Choosing The Right Location Chapter 3 12

How To Choose An Agent Chapter 4 18

Tax Implication Chapter 5 22

Legal Perspective Chapter 6 26

Home Loan Chapter 7 30

Managing Finance Chapter 8 36

Return on Investment (ROI) Chapter 9 38

Exiting the market Chapter 10 40

ContentPage No.

Introduction

Searching/Short listing a house

g u i d e t o b u y i n g a h o u s e

End Users: Locality profile: If you are buying for self use, it has to bewhere you would like to stay in the long term. The profileof other buyers and the neighbourhood, facilities andamenities that come with it, future infrastructure projectsin the area, transport connectivity and state of roads areall issues you would want to find out before you buy.Each of these affect the quality of your stay and alsodetermines the price that you have to pay. If you arebuying for future use, you will be able to compute theprofile of the neighbourhood into the future.Check out MagicBricks Neighbourhoods.

Stage of construction: A new property can bepurchased at three stages – At launch, mid-way throughconstruction and at the possession stage. Old propertiescan be purchased either in as-is condition, requiringmaintenance and repair before use or renovated or re-developed and ready-to-use.

If you are currently staying in a rented accommodation,you may want to invest in a property that is ready forpossession soon or you will have the burden of the rentaloutflow as well as the EMI on your housing loan.Buyingcloser to possession entails a higher value than at launchbut being an end user balance the pros and cons.

Developer: You need to check out the past track recordof the developer. If he has been giving possession ontime, whether the past users are happy with the quality ofconstruction and services, who will manage the propertyin the long term and whether the developer is part of anetwork such as CREDAI which brings in a little moreaccountability to his profile.

Price Bracket: Your monthly EMI should not exceed 40per cent of your monthly pay packet or you will find itdifficult to meet the EMIs. (Check out our chapter onPricing).

Investors: This category of buyer purchases property primarily as ameans to grow money. Here too, there are multipleoptions:

At launch: You get the best values and even aninaugural discount in many cases. You are investing in aproperty that is 24-36 months away from possession butyou get the best rates for this. Going by the track recordof the past few years, the risk is that your project may bedelayed and possession comes after another year ortwo. This makes a diff erence to those who wish to remaininvested to the end and exit the project only oncepossession is taken and property values havecorrespondingly risen.

There are some investors who purchase by paying a 10per cent value and then pay a subsequent second andthird instalment and then encash the differential. Thismoney can then be invested in another project that hasbeen launched and so on. This type of investor booksshort-term profits. This is a high-risk-high-return game andthe buyer needs to be very aware of the progress of theproject and the market values. Currently, there are noformal sources of monitoring the value of property on aweekly basis. Local brokers are the best source.

Semi-Constructed: Buy a semi-constructed property in alocality that you want to stay in. This will shorten thelifecycle of twin payments (rental and EMI). You have topay a slightly higher value than if you pick up at launchbut the flip side is that you will be sure when you getpossession.

At Possession: Alternatively, you may want to opt for onethat has already reached the possession stage. Here, thevalues are at least 25 per cent higher than while it isunder construction but there is no risk as the property isready-to-move-into or for fit-outs.

Buying a house can be tedious or pleasurable according to how you go about it. Here are a few tips to make ita pleasurable activity. To make sure you find the right property at the right price in the right location, there is nogetting away from the fact that you need lots of information at your fingertips and a lot of options to choose fromas 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:

lThe location l The stage of construction l The developer l The price bracket

There are no right and wrong decisions – whatever your reason for buying a house, it is the right one. But therecan be right and wrong ways of going about it.


Looking for the right propertyThere are many ways of looking for a property. Thisincludes:

l Checking out the options available online in propertyportals such as MagicBricks.com.

l Check out print ads that appear in newspapers andmagazines.

l Use brokers in the neighbourhood who will be able toadvise you on various options.

l Choose a developer and see what he has to offer.

Online Options: Statistics show that over 80 per cent ofproperty searches today begin online even if actualtransactions conclude offline. The advantage of lookingonline is that property portals such as MagicBricks.comaggregate the range of properties in the market andallow you to search for options on the basis of city,location, developer or even price brackets. Use thesearch box to fill in the details of your requirements. Youget a drop-down of the properties that are activelyavailable in your range. It also gives you contact detailsof those who have posted the properties.

Online searches also allow you to compare differentproperties on different parameters. This makes it easier toshortlist the properties. Also, check out floor plans,building schedules as well as walkthroughs so that youonly need to physically visit those properties that meetyour criteria.

MagicBricks.com also allows you to post queries onOpen House and get them answered by experts. Thisgives you access to experts that you would otherwise nothave. Check out the property advice section whichoffers advice on various issues from a number of experts.

Newspaper Supplements: These give property relatedinformation and also carry advertisements of propertylaunches. Once you have made up your mind to buyproperty, it is useful to regularly check outadvertisements. This helps you understand whichlocations offer new properties, what are the amenitiesoffered and also future infrastructure such as metro links,new transport corridors etc.

Brokers: Many cities are broker dominated. They work asagents for specific developers or projects or both andare able to suggest options across different corridors.They also offer 1-4 per cent discount which theyaggregate from developers as part of the agent activity.They are also able to suggest second-sale options inareas of your choice and your budget. However, Indiadoes not have a system of registration and rating ofbrokers and it is best to use a broker who has earliergiven good service to someone known to you. You canalso use online services of portals to find the brokersoperating in that locality or neighbourhood.

Developers: If you have strong preference for whichdeveloper you would like to go with, track the projects hehas come up with in different locations and choose theone best for you.


Budget, location, type of property, objective ofbuying and choice of property are thedetermining factors for purchase of propertyfrom an end user’s perspective. Real estatevalues are governed by demand and supply.This may vary on a project to project basis. Theprojects which see good demand normally donot see a price correction.

While buying a house the topquestions to keep in mind are: l When to Buy?

l What to Buy?

l Where to Buy?

l How to Buy?

l How much to pay for it?

l Which locality to buy in?

l What type of property to buy?

l How to extract maximum return from yourproperty investment?

The first steps

What are the things to actually look for when zeroing in on a house?

Own A Home

Realty Check

The Need To Buy PropertyWhen to Buy?The common dilemma that the consumer at our Open House forum poses is what isthe right time to buy? The ‘right’ time to buy your house is when you feel that you areready for the responsibility that comes along with buying a house. It is important toconsider 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 foran extra income that the house will bring in the form of rent? Or, are you simplybuying it for long-term value leverage? The more you know about why you should buya home, the more focused your search will be and the better you will be able toselect one that meets your requirements.

What makes more sense — Rent or Buy?There is a simple way of judging whether to buy a property or whether you shouldlease one now. If you find a house that you would like to stay in, that is close to yourworkplace or easily accessible from there, then buy it. But remember that theEquated Monthly Instalments (EMI) on your property should not be over 40 per cent ofyour monthly salary. That way you would be comfortable paying it back. You need10-15 per cent of the cost as your personal contribution to the purchase, as banks donot lend 100 per cent.

If you are paying a monthly rent that would constitute over 75 per cent of your EMIplease think in terms of buying. (Check out the MB Buy Vs Sell Calculator which canserve 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 arepresentation of how each type of property is represented city-wise on theMagicBricks.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 aresome comparisons made by experts on Open House, the consumers’ forum onMagicBricks.com.

Plot Vs Multi-storey?In India, plots are much in demand. Even today most small cities are witnessing moredemand for plots than for apartments. Multi-storey apartments are becoming thenorm in established urban areas where cost of land and the convenience andsecurity that apartments offer have pushed demand from the younger generation.Also, as family sizes become smaller, many are selling large plotted developments inestablished city areas for smaller more compact apartments with centrally managedfacilities, 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 highwalls and fences. It boasts of controlled entrances, surveillance of those entering the

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CHAPTER-1g u i d e t o b u y i n g a h o u s e

Should I take ahome on rent orshould I buy?

There is no harm inrenting a propertytill you are readywith enoughfinances to buy. Ifyou find a placewhere you want tostay and canmanage to getenough formalfinance, look atbuying as yourmonthly outflow willlead to creating anasset. But makesure your EMI is notmore than 35-40per cent of yourmonthly salary.

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premises, clean surroundings and amenities. These communities offer freedom fromthe hassles of everyday civic problems, ranging from water cuts and pebble-strewnstreets to living with the stench of unpicked garbage cans. An apartment in a gatedcommunity by a reputed developer is normally a safe bet.

An independent house, on the other hand, is normally customised to the buyer’srequirements. The advantage of having an independent house is that it providesample open space and clutter-free living. Whatever thechoice, make sure you pre-determine who is to look afterthe common facilities such as roads, water and powersupply and back-ups etc. There are somedevelopments where villas or townhouses areprovided within the gated complex with all theadvantages that normally come withapartments. These are more expensive but asafer and hassle free bet. You should however, beprepared to pay enhanced maintenance chargesfor these facilities.

Single-floor Unit Vs Multi-storey ApartmentsA single floor apartment is one where the builder buysa piece of land, often old plots which are up for re-development, constructs flats on each flooraccording to the permissible Floor Area Ratio (FAR)and building byelaws and sells them as independentunits within the same building. The land belongsproportionately to all the buyers of single floors. Sincethere are smaller numbers of units than in a multi-storey apartment, these lack economies of scaleand so have fewer common facilities such asmaintenance and back-ups compared to largermulti-storey apartments. But these are newerapartment units in downtown or preferredareas and come at a price lower than multi-storey units.

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All figures in percentageCities Delhi Mumbai Chennai Hyderabad Pune Bangalore

Multi-storey Apartment 37 88 30 54 85 51

Single Floor 50 NA 23 4 2 11

Indpendent House 9 11 8 10 5 9

Residential Plot 2 1 34 23 4 23

Villa 2 NA 5 9 4 6

The Need To Buy Property

A multi-storey remains the most preferred housing units in metros and large citiestoday. It is a cluster of apartments in a high-rise building developed in a plot with allamenities available within a gated community. These units can be aggregated andconstructed by developers or in the cooperative mode as Cooperative GroupHousing Societies (CGHS). These need good common facilities management to takecare of aggregating services and providing them to individual units for a fee. This feeis levied as monthly maintenance charges. They cover water and power supply,including back-ups, lift and common area maintenance and landscaping. Manydevelopments also provide plumbing and electrical services for a fee.

Where to buy?Generally, there is a price differential between different locations which will always beproportionate to its strategic placement which could be linked to accessibility tohighways, markets, business districts and overall livability. It is quite possible that aparticular area has good infrastructure, access to markets and entertainment meansbut if it is loaded with existing and upcoming projects, the price rise in that area maynot be dramatic, but a gradual one. One may make an estimate of the number ofavailable and proposed flats in an area through good brokers and ascertain the pastprice movement in the short term. Things to be kept in mind while finalizing thelocation for your house:

l The location should be within approved/sanctioned master plan.

l The location should have good connectivity.

l Infrastructure services such as power, water supply, drainage and sewerage shouldbe present.


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Why is it necessaryto own property?

In a country likeIndia, where thereis no socialsecurity, a housemeans a shelterfrom all sorts ofstorms. Beyond thecomfort andsecurity that owinga home offers, ithas more tangiblebenefits too. Itforms an assetthat is likely tobring in return on

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How can I be sureof the propertyselection?

The best way is toensure that you doyour own research.Use the data that isavailable inproperty portalssuch asMagicbricks.comand in printsupplements butafter finalising a fewchoices do visit thesites and checkthem out.

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l Location should be within an active business activity such as educationalinstitutions, hospitals, IT parks, entertainment hubs, etc.

l 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 end-user. This property would be significantly more expensive than at the launch stage butthe buyer is protected against time and cost over-runs and also the EMI paymentduring the period when the house is under construction.

For an investor who wants regular rental returns from his property investment, a ready-to-move-in property brings in immediate rental income which even helps pay backthe loan secured to buy the property.

If you are a new investor with limited finances, look for an under-construction propertywith a suitable payment plan and keep a horizon of 2-3 years for possession. Butmake sure you go for a reputed builder.

When you purchase a house at the pre-launch or launch stage, the buyer pays smallsums linked to the progress of construction but also has a longer wait period beforethe asset is liveable or starts paying for itself. This option is good in new and evolvinggrowth areas on the peripheries of cities where infrastructure itself is underdevelopment and there is a wait period before it is liveable. Since, both infrastructureand housing are being developed at the same time, the user gets the advantage ofmoving in when both are ready. It also comes cheaper as property values are alwayslower when the infrastructure in the area is under development. The downside of thistype 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 stayand the EMIs for the new property.

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What to rent?When you buy a property, the choice of locality is limited to those where propertiesare available within your budget. But when you are looking at renting a property, yourcanvas is much wider. Since a lessee has the option of seeking property thatmatches 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 youcan allocate to rent. This should be an amount that you will be able to pay month-on-month at the same time. Accommodate it within your house rent allowancepackage or just a tad over for best results.

Now assess how big your accommodation should be. Remember that you have notonly to take up lodging, but also service it monthly, including the maintenance andmunicipal charges which have to be paid by the lessee. The annual property taxesand asset maintenance are the responsibility of the landlord.

Look that facilities such as public transport, security and daily grocery needs areeasily accessible. They make your stay more comfortable. Transport connectivity withminimum traffic pressure points makes the daily commute to work less stressful. Lookfor a neighbourhood where you have like-minded community so that there isminimum clash of interests.

How to buy?Once you decide upon the locality, the next step is to check the developers who arebuilding there. The best way to do this is to do your own research. Find out who thedevelopers are and what they have to offer. Check out the floor plans and the typesof property that they are constructing. Many of these are available online so this canbe done at your convenience. Once you have shortlisted some properties, do yourown footwork. Check out the projects on-site. Get an expert such as a broker to showyou around. Sometimes what looks good on paper may not feel right when you see iton the ground.

If the project is new, the choice of builder is a big decision. Check the builder’s trackrecord, his financial strength, his ability to deliver on time, construction quality and thepayment terms, especially in case of a local builder. Do a background check ondevelopers and make your assessment about where you would feel safe to makeyour investment. One should always check with local real estate brokers the lasttransaction price or the price of similar property in that location.

Negotiating Ability: After considering all the above, your negotiating ability is crucialwhich means, leveraging the available information and a fair understanding of thepoints discussed to strike a good deal.

The ‘area’ concept is very vaguely used in the housing industry. Some builders andsellers take advantage of this ambiguity.

Carpet area is defined as the precise area within the walls of your home. If you had


Being an investorshould I keepinvested in oneproject or should Ikeep re-investing? There is no scientificmethod tocalculate, whetherit is a right time toexit a property ornot. But one shouldexit a propertybase on its holdingperiod, return oninvestmentachieved, cost offunds, etc.

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What is thedifferencebetween plinth,carpet andcovered area in aflat/apartment?

Plinth area is thetotal land on whichthe flat is built.Covered area isthe coveredportion over theplinth and carpetarea is the actualusage area or thearea within thewalls.

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to lay out a wall-to-wall carpet in your entire home, the area covered would be thecarpet area.

Built-up area is inclusive of not just the carpet area but also the area being occupiedby the walls of your home.

Super built-up area takes into account all the area under the common spaces whichis the apartments’ proportionate share of the lobby, staircase, elevator and thecorridor outside the apartment.

The confusion over super built-up area arises over what all is exactly included underthis definition according to the judgment of the builder. Some may even include theterrace, security room, electrical room and/or pump room. The cumulative total ofthese ‘extras’ is taken into account and divided by the number of apartments inproportion to their size.

l If you get a quote for 1,000 sq ft, immediately find out if it is the carpet area orsuper built-up area.

l There is no fixed ratio of super built-up to built-up or carpet area. Generally, theratios 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:l Check for proper conveyance of title in favour of the Builder

l Check the License/Development right/approvals of the Builder

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l Niranjan Hiranandani, MD, Hiranandani Group

l Paras Gundecha, President, MCHI-CREDAI (Mumbai)

l Getamber Anand, Vice President, CREDAI

l Mohit Arora, Director, Supertech Ltd

l Partho Mukherjee, Principal Advisor, MagicBricks.com

l Ananta Raghuvanshi, Director-Sales and Marketing, DLF India

Our panel of contributors for this chapter are:


l Check clear and marketable title of the project

l Ensure execution of proper Allotment Letter/Sale Agreements on your payments

l Ensure whether reputed financial companies approve the project. This will help youin getting financial loans

l See the tentative Layout/Building Plan

l Verify plinth area of the Apartment

l Check carpet area of the apartment and find out if the difference between plintharea and carpet area is reasonable

l Ask for Occupation/Completion Certificate.

l Ensure the Conveyance Deed is registered after entire payment has been made.

Does investment inTier II & III citiesmake sense?Yes capitalinvestment in Ter IIand III cities makessense consideringthat maintenanceis not high,provided it's a loanfree investmentbecause if theproperty rates don'tgo up, interest permonth will still be aregular outflow.

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How to choose the right property?One should buy property in an area which has adequate basic amenities such aspower, water, sewerage, etc. It is important to do your checks and balances whiledeciding on a project. Infrastructure in the area, connectivity, builder’s goodwill andprice of the property are key components a buyer needs to take into consideration. A buyer should also carefully check points such as the builder’s experience, numberof projects completed and delivered, banking institutions involved and present buyoptions available to suit your requirements. It is better you conduct a field surveybefore 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 modelapartments, is available on the internet. After this it is important that you or yourrelatives visit the sites of shortlisted properties and experience the brand beforebooking.

What is the market checklist before buying re-sale property?Some important tips one should keep in mind before buying re-sale property are:

l Locality: Generally, the price difference prevails for different locations but when itcomes to price rise, it will always be proportionate to its strategic placement whichcould be linked to accessibility to highways, markets, business districts and overallliving conditions.

There is a price differential between different properties within the same complex oreven 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 Westfacing properties. Users pay more for a view in urban settings. In Mumbai, forinstance the price per unit rises as you go higher. If the property is sea-facing, thereis a hefty extra that the buyer has to shell out. In other cities that are not quite usedto high-rises yet, the premium is for the ground to sixth floor. Higher floors do notcommand a premium vis-a-vis lower floors. Pool or park facing properties have ahigher value.

The concept of Preferred Location Charges (PLC) for new properties was based onthese principles. Currently, PLC is arbitrary and there are no fixed norms for it. Thereare developers who charge a PLC on every unit in the complex, which defeatslogic.

l Area-wise Demand and Supply: Price of properties within a certain area is alsodependent on the volume of supply. Qualities such as good infrastructure, accessto 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 prevailingprice. If it is a new growth corridor, the first project to get off the ground normallycomes at a reasonable price. As more developers launch projects it becomes anarea in demand and the values keep rising steadily, normally by about 8-10 percent per year. A developer may break the norm in an existing locality Search Drivers

Selection

Shortlisting Your Property


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by launching a project that is richer in features and therefore commands a highervalue. Once there are a couple of projects in a locality that command a highervalue, it pushes the base value up.

Developers too allow investors to make money by periodically revising values ofprojects that are still under construction. Once this new value is released, brokersand underwriters, small and big investors offload their properties at a value higherthan the original sale price but lower than the new sale price. They thus book short-term profits. This cycle happens at least two to three times during thedevelopment cycle. End users enter towards the end of the cycle and purchase atvalues 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 priceand specifications of multiple projects to get the best deal. If there is more stockthan demand, you have a better chance at negotiating a better value in thesecondary market

l Builder/Developer: Check the builder’s track record, his financial strength, his abilityto deliver on time, construction quality and the payment terms, especially in thecase of a local builder.

When is the best stage to buy?If you have the required finances, ready-to-move-in is the ideal option for a homebuyer. For an investor, a ready-to-move-in property is feasible for business as he canbuy and put it up for lease without any waiting period. Whereas, a house underconstruction eases the financial burden wherein you can finance your propertythrough bank loans and pay less cash upfront. The downside of this type of property is

Where can I findauthenticinformation aboutproperties?

You can chooseoptions fromproperty websitessuch asMagicBricks.comwhich post propertydetails, includingmodel apartments.It is important thatyou or your relativesvisit the site andexperience thebrand beforebooking.

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that possession will happen only after a certain time period. If you are a new investorwith limited finances, look for an under-construction property with a suitable paymentplan and keep a horizon of 2-3 years for possession. But make sure you go for areputed builder.

How do you choose the right type of property?Depending on the chosen budget, one can decide the type of property. If you arean end-user, the size of your family, along with the budget can be a determiningfactor while choosing the type of house you need. There is a wide range to choosefrom today as the market abounds in various housing formats – from 1, 2, 3 and 4BHKapartments, to studios, villas and row houses, to builder floors and independenthouses. 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 arelooking at today.

What are the documents you need to check before buying?l Check for proper conveyance of Title in favour of the builder.

l Check the licence/development right/approvals of the builder.

l Check clear and marketable title of the project.

l Ensure execution of proper Allotment Letter/Sale Agreements on your payments.

l Ensure whether reputed financial companies approve the project. This will help youin getting financial loans.

Is the propertyboom for real or isit a bubble readyto burst any time?

The trick lies ininvesting wisely withknown developers;you can’t go wrongwith propertyinvestments if youdo diligenthomework beforepurchasing.

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g u i d e t o b u y i n g p r o p e r t yg u i d e t o b u y i n g a h o u s e

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l Check the tentative layout/building plan and verify the plinth area of theapartment. It is advisable to check the carpet area of the apartment and find outif the difference between plinth area and carpet area is reasonable.

l Ask for Occupation/Completion Certificate.

l Ensure the Conveyance Deed is registered after the entire payment has beenmade.

l For buying a property you need to check Deed of Conveyance, MutationCertificate (for complete property), Land Registration Status, Sanction Plan, SearchReport and Payment Schedule (for under construction). It is a must that you gothrough all the documents relating to the origin of the property, chain of Title,Occupancy Certificate, sanctions from various authorities dealing with buildingplans, fire safety and Completion Certificate.

l For re-sale property, check demand notice relating to renovation, tax dues andlatest receipts of payments made towards various out-goings such as water,electricity and ground rent.

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 wantannual returns to manage a part of EMIs, flats are better.

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 15to 20 per cent, so that it grows. With land cost being very high within cities, hovering atapproximately Rs 7,000-14,000 per sq m, it is always better to invest in growingcorridors depending on whether you want for pure investment or want to move in.

l Niranjan Hiranandani, MD, Hiranandani Group

l Hafeez Contractor, Founder & Principal Architect, Architect Hafeez Contractor

l Ananta Raghuvanshi, Director-Sales & Marketing, DLF Homes

l Partho Mukherjee, Principal Advisor, MagicBricks.com

l Bopanna Madayya, VP Sales & Marketing, QVC Realty

l S Padmanabhan, VP, Maangalya Developers

l S Ramakrishnan, CEO, MARG ProperTies


What are thedocumentsrequired forregistering a flat?

Chain of originalconveyance, saledeeds/agreementfrom the seller,share certificateissued by thesociety in favour ofthe seller indicatingmembership to thesociety, NOC fromthe society to thetransfer of the sharein favour of thepurchaser, identityproof, and addressproof.

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‘Our panel of contributors for this chapter are:

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Location Is Key

Spot On

Choosing The Right LocationINVESTING IN CITIES

Should one look at investing in big cities?When it comes to choosing a location, the consumer looks at connectivity andavailability of basic urban and social infrastructure in that area. Big cities have thatadvantage. 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 neighbourhoodthat has all the conveniences that you require and also has good accessibility to therest of the city. Even in premium localities, if you keep searching, you will findproperties that suit your budget. If you cannot afford the premium rates, look for alocality on the fringes of your area of choice. This will have all the advantages ofproximity to the main locality but sport lower price tags. Also, look for property that isbeing re-developed in city areas. They will be new and come with a maintenance-free period. Older houses come cheaper but make sure you invest in refitting andrefurbishing the old plumbing and electrical lines before moving in if you want ahassle-free stay.

If you are looking at more open spaces with modern complexes, move to growthcorridors on the suburbs and peripheries of cities. Since, they are built to suit modernlifestyles and social facilities benchmarks are raised, you will get more add-ons suchas landscaping, cycling and jogging tracks, club houses and swimming pools andother sports facilities. As they are at a distance from the city centre, they come withcheaper price tags and construction linked instalment plans.

How much appreciation can be expected by investing in bigcities?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 isyet 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 propertydevelopment reaches mid-way point, there is another 25 per cent escalation inprices. Six months from completion there is another 25 per cent escalation. Oncepossession is handed over there is another 25 per cent increase in rates. This is true forplaces where Greenfield development is taking place.

The mid-end and affordable housing segments will record healthy appreciation incapital values in the short term from a low base. High-value property yields lower ratesof appreciation.

In new growth corridors where development work precedes real estate, the growth invalues 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. Propertyvalue attains its true potential when the neighbourhood is fully populated. If you are along-term investor and want to wait for the property to attain full potential, lease outthe property and capitalise on the regular rental returns. The annual yield is computed

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as a ratio of capital to rental values. Normally residential property gives a simple yieldof 2-4 per cent.

Appreciation largely depends on industrial, commercial and infrastructuredevelopment in the area. Project-specific price increases can be expected acrossthese markets. This pertains specifically to projects that are being delivered or arenearing completion.

What could be the possible downside of investing in big cities?Land is extremely expensive in big cities. Therefore, the land component in propertyprices in big cities is very high. As downtown areas of the city become moreexpensive, buyers have to move further and further away to the suburbs andperipheries to buy property that fits their budget.

Moreover, population in cities is increasing at an alarming rate and demand forhousing is directly proportional to the increase in population. This is a reason forproperties 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 comparedto the metros. However, with major infrastructural developments, cities like Indore,Coimbatore, Bhubaneshwar and a few others are witnessing growth in prices as wellas returns. Always choose a city that has good economic drivers such as IT, ITeS ormanufacturing hubs. This ensures continued user interest for re-sale when you want toexit an investment or for rental returns while you hold the property till it is well-leveraged and gives good returns.

What makes anarea a preferredlocation for homebuyers?

Focus on residentialproperties thathave potential forassured rentalyields and capitalappreciation.Projects close toworkplacecatchments,industrial hubs, andlocations with highappreciation valueshould beconsidered.

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Choosing the Right Location

Is it good to invest near airports?Yes, presence of an airport nearby brings appreciation of values to residentialproperty. Take for instance, with the new international airport coming up in NaviMumbai, Panvel’s future seems very promising. Therefore, the area is attracting lot ofdevelopers and real estate investors. Similarly, Bandlaguda, located in SouthHyderabad, is witnessing immense interest from buyers and investors, especially forplots. Located close to the airport, Hi-Tech City and Outer Ring Road are the majoradvantages of this locality. North Bangalore’s property values rose and buyer interestpeaked after the new airport was commissioned.

Is it preferable to buy in commercial hubs?The growth prospects of residential real estate is promising in fast growth corridorsdriven by manufacturing, IT and ITeS sectors, supported by social infrastructure suchas educational institutions, hospitality and healthcare. These industries drive demandfor 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 andavailability of spacious and well managed residential spaces are the key factorsdriving the growth of suburbs.

Which will givebetter returns -small town or bigcities?

When it comes tochoosing alocation, look atconnectivity andavailability of basiccivic and socialinfrastructure in thatarea. Areas thatcome under newinfrastructure andindustrial gowthplans are those thatwill grow in theyears to come.

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g u i d e t o b u y i n g p r o p e r t yg u i d e t o b u y i n g a h o u s e

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What are the drivers that make suburbs the preferredinvestment hubs?As city centres become tediously expensive in commercial real estate, secondarybusiness districts have been evolving close to the suburbs. In Mumbai, Nariman Pointgave way to the Bandra Kurla Complex and also the Andheri stretch. Thane isexpected to become a Commercial Business District in a few years. In Delhi, thebusiness district has moved from New Delhi to Secondary Business Districts such asNehru Place and Bhikaji Cama Place and now to suburban business districts such asGurgaon, Noida and Ghaziabad.

Suburbs are chosen because of proximity to the work place, accommodation that iswithin user budgets and good connectivity, schools and hospitals in the vicinity andtherefore a better lifestyle. There is good potential if the developers keep the realdemand in mind. For instance, Noida and Ghaziabad being suburbs of Delhi havepicked up pace when it comes to being the preferred location for home buyers. Thisis basically because of availability of affordable homes for the middle and upper-middle 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 fringesof suburban areas and are chosen by buyers because they are cheaper than citycentres and even suburbs.

You can get bigger spaces at affordable prices with modern facilities which are notavailable in age old properties within city limits. Rate of return on investment is more inperipheral areas, depending on the location. You also get more greenery and openspace in the peripheral areas.

What are the disadvantages of investing in peripheral areas?Lack of accessibility to public transport and connectivity to city centres, under-developed 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, builder’s reputation and potential to deliverand price of comparable properties are key components a buyer needs to take intoconsideration. A buyer should also carefully check points like builder’s experience,number of projects completed and delivered, banking institutions involved andpresent buying options available to suit your requirements. It is better to buy at thebeginning of a development cycle in peripheral areas as it will take at least 4-5 yearsto become liveable.

Do infrastructure,transport andconnectivity drivereal estate prices?

What really opensup new avenues isconnectivity. If youlook at Delhi-NCR,Gurgaon is onearea where newaxis corridors areopening – whetherit is the NorthernPeripheral Road,KMP Highway, orthe SouthernPeripheral Road.These bring thearea underdevelopment zone.

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Are suburbs and peripheries of large cities witnessing anescalation in prices?As expansion of commercial districts into suburbs takes place, it fuels demand forrental accommodation. Most IT/ITeS/manufacturing facilities demand rentalaccommodation and that drives up prices.

Is it good to invest near Highways and Expressways?Today, the Expressways and National Highways are where all the propertydevelopment is taking place. People look for affordable housing and these can onlybe provided along these high-speed transport corridors that offer good connectivityand affordable options. Highways provide good connectivity to far-off as well asnearby places thus, bringing appreciation in prices due to increased demand. Inmetros, Highways and Expressways open up new avenues or development zoneswhich always form a part of a larger master plan. You should keep a horizon of four tofive 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 canbecome a part of the growth bandwagon. Lucknow and Hyderabad are two citieswhich are worth looking at.

l Satish Magar, President, CREDAI, Pune

l Paras Gundecha, President, MCHI-CREDAI, Mumbai

l Getambar Anand, Vice President, CREDAI

l T Chitty Babu, President, CREDAI, Chennai

l Manoj Gaur, President, CREDAI, Western UP

l Harsh Vardhan Patodia, President, CREDAI, West Bengal

l Kunal Banerjee, President, M3M Ltd

l Sushant Muttreja, Earth Infrastructure

l Sanjay Chawla, CEO, ERA Landmarks

l Ish Anand, CEO, Phoenix Hodu Developers Pvt Ltd

l Bopanna Madayya, VP Sales & Marketing, QVC Realty

l Ananta Raghuvanshi, Director-Sales and Marketing, DLF India Ltd

Should I invest insuburbs andperipheral regionsfor higher returns?

Decide on the timehorizon i.e. longterm (5-7 years) orshort term (2-4years). Over alonger periodsuburbs offer verygood returns as theprice arbitrage withCentral BusinessDistricts reduces.Over 3-5 years onecan expect tomake 20-30 percent per annum ina suburbdepending on themicro location andthe developer.

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‘Our panel of contributors for this chapter are:

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Broker Tips

Transactor

How To Choose An AgentWhat 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 selleris a realtor, it is best to buy through him after doing a background check on hisreputation because he would know what legal checks must be made by you beforeputting the money on the table. In case a seller is an individual he must hire theservices of a good lawyer to do a due diligence on title, etc before you write thatcheque. This money spent on due diligence may pinch today and seemunnecessary 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. Donot pick one randomly. Look for an agent in the area where you are planning toinvest.

How to choose a broker?Besides simplifying your home search, your real estate agent will help market yourproperty, therefore, evaluate the proposals that you get and choose the mostprofitable one. Also, use caution while you choose.

l Find out as much as possible about the agent before hiring his services. Ask forreferences. Also, ask family and friends to recommend real estate agents theyhave worked with.

l Check if the agent is licensed and can work full-time on your real estate needs.

l Ensure that all agreements between your agent and you are in writing.

l Do not pay money upfront to your real estate agent. This could be a loss to you ifyou don’t buy or sell a property with this agent.

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 percent of the deal value. In lease transactions, the brokerage value is one month’srental 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 – TheConfederation of Real Estate Developers Associations of India (CREDAI) and NationalReal Estate Development Council (NAREDCO). Credai has been doing a lot of goodwork in terms of making developers sign the pledge for good ethics and evolving a


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model code for them to follow. However, in the event of a developer not being amember of either association or even not adhering to the rules there is no mandatorycode that can be enforced. In such cases, consumers have to resort to consumercourts and the legal machinery.

What are the advantages of choosing a reputed developer?It is always advisable to go for a reputed agent and developer, especially forproperty which is under construction because it covers a great part of the risk. Forbuilt-up property, a bigger area in a reasonably good complex with a good clear titlewould definitely be a good buy. With a builder having market standing you can beassured of the title and delivery. You may end up paying slightly higher, but it is worththe peace of mind.

How to choose a builder?Mental notes while buying property:

l Check for all the legal pre-qualifications and due diligence mentioned earlier.

l Choose a builder who has a previous track record

l Ask how many million sq ft he has already constructed and how many projects areunderway

l Check out his past track record for time delivery

l If public listed, check out balance sheet and quarterly reports to see how thecompany has been faring financially

Where should Isearch for anauthentic broker?

Numerous realestate agenciesare listed inproperty websites,the phonebookand on theInternet. Don’t pickone randomly.Look for an agentin the area whereyou are planning toinvest.

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How to Choose an Agent

l Check if the project you are interested in is a Joint Venture. If so, check out JVpartner as well and the details of the JV.

l Also check the neighbourhood market and features and rates in the vicinity ofother re-sale property. Once you benchmark a property on the corridor you will beable to decide if the price asked for is justified

Is there a public website where people can check thelegitimacy of a property?Every state government has sites for registered documents and you can understandwhat all you have to check. Currently, there is no public portal where all approvalsare displayed.

Also, banks and financial institutions that finance your loans would have done duediligence 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 theagreement 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 agood idea to register within four months. An agreement with a blank date is really noagreement and cannot also be implemented. Read the agreement carefully.

Besides the per sq feet charges, what are the other charges ina multi-storey apartment? The other charges are maintenance, security, registration charges, preferred locationcharges, 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 buyer’s agreement is available at the time of launch inthe builder's office and the clause explaining the super area loading is also a part ofthis 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 ifthere is a clause for damages provided in the agreement for sale/allotment letter. Onthe approvals, you have to ask the developer to furnish copies of the approvalsreceived from the statutory authorities like the municipal authorities, developmentauthorities and other statutory bodies.

Should one buyproperty withlesser area from awell-knowndeveloper or gofor a larger areaby a lesser-knowndeveloper?Definitely the firstoption is better. Thisis only true forproperty which isunder constructionbecause it coversa great part of yourrisk. For built-upproperty a biggerarea in areasonably goodcomplex with aclear title woulddefinitely be agood buy.

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If a builder delayspossession of theflat, what legalrecourse doconsumers have?

You have an optioneither to cancel thebooking and totake the refund withinterest or you canmove to the court.Brochure shouldhave theseprovisions.

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Can the developer impose 10 per cent payment beforeshowing 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 thedeveloper if the money is refundable under any circumstances. That means that ifyou are not satisfied with the authenticity of teh documents or approvals and youdecide not to purchase the property at all, you should get your money back withoutgoing through the formality of a notice and tedous procedural formalities.

l Getambar Anand, Vice President, CREDAI

l Asha N Basu, S Jalan & Co., Solicitor on MagicBricks.com

l Ananta Singh Raghuvanshi, Director-Sales and Marketing, DLF India

l Ravindra Pai, MD, Century Real Estate Holding

l Sudhir Vohra, Architect & Urban Planner, Sudhir Vohra Consultants

l Rohtas Goel, MD, Omaxe


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Tax Matters

Money 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 Dutyon the total amount of purchase. If you buy re-sale property, then you do not have topay 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 orConveyance Deed is registered.

When are capital gains applicable and how can capital gaintax be saved/reduced?Capital Gain is applicable when:

l The sold property has been withheld by a person for a period of more than threeyears from the date of purchase/possession.

l The sale proceeds are invested in a residential property which is bought one yearbefore the sale of property or two years after the sale of first property.

l The new property is bought after the sale of the first property.

l Capital Gains Tax can also be saved by investing the sale proceeds in CapitalGain Bonds.

What is the difference between long-term capital gain andshort-term capital gain?When a property is withheld by a person for more than three years, it results in LongTerm Capital Gain (LTCG) on sale of that property, on which Capital Gain Tax can besaved 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 TermCapital Gain (STCG) on which tax cannot be saved. STCG is added to the income ofa 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 notinvested in residential property or Capital Gain Bonds.

In case of STCG, the sale proceeds are added to the income of the property ownerand tax is calculated according to the slab rates of Income Tax.

For the purpose of capital gain, what is considered the date ofpurchase - date of stamp duty paid, date of registration ordate of possession?


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To save your Capital Gain Tax, the Sale Deed or the Purchase Deed would be thevalid 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 datefor such purpose. Finally, the answer will depend on the facts and circumstances ofeach case.

Can the capital gainamount be used for clearingloans?Yes, the amount can be used to clearloans but in that case the tax on LongTerm Capital Gain cannot be saved.

If a person invests a part ofhis capital gain amount inresidential property, then isthe remaining amountexempted from Income Tax?No. Income Tax is payable on theremaining amount unless it is investedin Capital Gain Bonds.

Can Capital Gain Tax besaved if the amount isinvested in a commercialproperty, agricultural land orplot?No, Capital Gain Tax cannot be saved if the sale proceeds are invested in acommercial property, agricultural land or plot. However, tax could be saved in a plotif a residential building is constructed within three years of selling the property.

If one sells a commercial property, can tax be saved byinvesting in a residential property?Yes. One can buy a residential property from sale proceeds of a commercialproperty to save capital gain taxes.

Can two properties be bought from sale proceeds of oneproperty 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 perthe Capital Gain Account scheme?The last date to deposit the capital gain amount in the Capital Gain Account is thelast day by which one has to file the Income Tax return.

How much tax willbe paid in case ofshort- and long-term capital gain?

In case theproperty is held formore than 36months and then itis sold, the resultantcapital gain wouldbe long termcapital gain onwhich the capitalgain tax @ 20%would be payable.The short termcapital gain is tobe added with theother income ofthe assesses andtax will becalculated at theslab rates ofIncome-tax.

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Tax Implication

What are the capital gains and other taxation rules pertainingto 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 residentialproperty outside India to save Capital Gain Tax.

In whose name should a new property be registered to savetaxes?Taxes will be saved only if the new property is registered in the name of the personwho receives the capital gain, ie. the owner of the previous property. In case the soldproperty was owned in a joint name, the new property should also be in the jointname of the same two people.

How many properties can one own?One can own unlimited properties.

What are the charges deductible from the capital gain for thepurpose of Income Tax?If stamp duty and registration charges are paid by you, the same will be allowed tobe deducted from the capital gain amount. Likewise, if you have taken any loan forpurchase of the property for which you have not taken any tax deduction under anyof the provisions of the law, then such interest on loan can also be deducted fromthe 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 thenet amount of gain, the same will be added to your income and income-tax wouldbe 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 amountirrespective of the fact that you are retired personnel. Investing in property too will notsave any Income Tax for you.

l Subhash Lakhotia, Tax Consultant, MagicBricks.com

I am planning tobuy a commercialshop from my saleproceeds of aresidential plot.How much capitalgain tax do I haveto pay?

As you areplanning to buy acommercialproperty, there isno way to savecapital gain tax.You will have to paythe required tax.capital gains taxcan be saved onlyby investing thesale proceeds ofany property in aresidential property-plot or apartment. Our panel of contributors for this chapter are:

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Tax Implication

Legally right

Advisors

Legal PerspectiveWhat documents and formalities are required while buyingproperty?Documents required while buying property are Identity Proof like Voters’ ID Card,Passport, Driving License, Ration Card and Pan Card. Be careful of the SaleDeed/Agreement and also check that the complete property chain is mentioned inthe 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 thedeveloper:

l Specific apartment allotted, tower number and size

l Details of area including super area, covered area and carpet area

l Costing

l Date of possession, penalty in case of delay

l Exit option

l Specifications committed

l Payment plan

l Details of Land on which project is constructed and the project approval details

l Possession related charges

How do you know that a project has legal approvals fromauthorities?The best way is to check if the banks are funding the project. Generally, banksapprove projects and start disbursement only after all the approvals are in place.

l Ensure that the documents of Title of the property you intend to purchase areclear. A defective Title will create problems.

l Ensure that the building has been constructed as per the sanctioned plan anddeviation, if any, is in the allowed limits. It should not be in a low-lying area or in afilled-up water body.

l Ensure that the developer has clearance certificates from the Electricity Board,Water and Sewage Board and other concerned departments.

l Commencement Certificate and Occupancy Certificate are other importantdocuments that are necessary while buying property. Check out the genuinenessof the documents with the concerned authorities.

l Ensure Agreement for Sale and Sale Deed, duly stamped, executed andregistered are in your possession. Both should contain fair clauses for both theparties.


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Is there any difference in the rights of primary and co-applicant 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-applicantsof property need not necessarily be co-owners.

Can primary applicant sell property without the consent of theco-applicant?If the co-applicant is also the co-owner, then under the Transfer of Property Act everyco-owner has propriety right on the entire property unless there are specific conditionsgiven in the contract regarding the rights of the primary and the co-owner of theproperty. Hence, in the absence of any specific terms, any sale of the property has tobe 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 cango 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 fora Certified Copy from the sub-register’s office. Also, give a public notice innewspapers.

Is a daughter eligible for equal share in her parent’s property? Yes. As per the prevalent law, son and daughter are eligible for equal share in theirparent’s property.

Can a son sell property on his father’s behalf if the latter iselsewhere and bed-ridden? Yes, a son can sell a father’s plot on his behalf if the father appoints him and grantshim the power of attorney to do so.

Can a property which has been transferred through Gift Deedbe sold by the person after getting it registered in his/hername? Note that an occasion is not required for making a gift of property. The personreceiving the gift can sell the property from day one after receiving the same as a

Legal aspects oneshould keep inmind whilepurchasing aresale property?

For a resaleproperty check ifthe property isregistered, theconstruction date,is the property freefrom debts ordisputes, is the titleclear, check alsofor NOCs fromvarious authorities.No insurancepremiums areavailable forinsuring plots.

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Legal Perspective

gift. There is no Income Tax on the gift amount of the property, especially if it is from ablood relative. Generally, the gift made is irrevocable.

Can a builder be made to pay compensation if he faults ondelivery? What is important and considered by authorities is your agreement with the builderand not the brochure that the latter floats. Check your payment terms withconstruction stage/s. If you have delayed payment or not fulfilled the agreed termsas per your agreement, getting any relief from any judicial agency would be verydifficult. 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 consumergrievances forum.

Can you make a Gift Deed for a property in an unauthorisedcolony?Any self-acquired property having a clear Title can be gifted by the owner to anyoneas per his/her wish. So, if they have any legal evidence of ownership about theproperty (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 forrenting 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 istransferred, wherein eviction becomes difficult.

Is it possible to build the third floor above the second floorwithout a No Objection Certificate?You need a No Objection Certificate (NOC) to get your plan sanctioned. You canbuild the third floor only if it is approved.

Can a residential property without any ‘Will’ be divided orsold? 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 builderin your absence.

What is acertificate of Titleand how toprocure it?Title deed is thechain ofdocumentsthrough which thevendor acquiresthe right, title andinterest in theproperty. There arecases where theseller mortgagesthe property butdoes not inform thebuyer, so you mustinspect the originalsbefore buyingproperty. Forcertificate of Title,you have to hireservices of a legalpractitioner whodoes due diligencework.

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Legal Perspective


What are the formalities to be observedby a foreigner interested in buyingproperty in India?Formalities would differ based on what you mean by aforeigner. There are different rules for NRIs, foreigners ofIndian origin and foreigners of Non-Indian origin. Also, itwould depend upon the residential status and the kind ofproperty such a person would wish to buy. Depending onthe category of foreigners, there are different protocols tobe followed.

l Asha N Basu, S Jalan & Co., Solicitor onMagicBricks.com


l Dhirajlal Rambhia, Chief Advisor, MagicBricks.com

l Gaurav Gupta, Director, SG Estates Ltd

Panel of Contributors

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Legal Perspective

Smart Credit

Borrowing Funds

Home LoanWhat are the factors you should keep in mind before getting ahome loan? The main criteria are:

l Your income and your track record of repaying previous loans – this is obtainedfrom the Credit Bureau.

l Your current expenses including other loans you are servicing. The amount of loanrelated to the property value.

l Ownership of the property – this means that the lending bank should becomfortable that the seller has full and complete ownership of the property.

l Getting a loan depends on the report of the local bank surveyor who will inspectthe property and give his recommendation.

l Home loan eligibility depends on your ability to pay (ie. based on your salary) andnot on the age of the building. However, the quantum of loan depends on ageand undivided share too, in addition to your repayment ability.

What are the advantages and disadvantages of getting ahome loan insured? Is it necessary to get property loaninsured? It is always better to get the property loan insured. I would rather recommend a bigterm plan of Insurance Policy to safeguard future problems.

Why does home loan interest rate differ?The banker’s home loan interest rate differs from bank to bank because of the cost offunding.

Do you get tax benefits on loan?Yes, tax benefit on repayment of housing loan is available as per section 80C of theIncome 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 loanprovided by the bank for the period of disbursement of the actual loan to you andthe effective starting of the EMI.

What is the meaning of moratorium on home loan andcapitalisation of interest?Moratorium: A period from the date of disbursement of loan, during which theborrower is not required to pay EMI but the outstanding amount continue to incurinterest.


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Capitalisation: It is nothing but compound interest. The interest is added to theborrowed amount and further interest accrues on that amount. This is done everymonth.

How does tenure affect cost of loan?The tenure of loan may affect the cost of loan depending upon the product profileand other connected matters. Also, banks currently offer floating rates for a smallperiod which are then revised according to market conditions. The older loans do notget the benefit that is offered to new borrowers. Also, if loan rates rise, either the EMIamount 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 notpaid 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 pre-payment. But there are exceptions. For example, the State Bank of India does notcharge any penalty for pre-payment of loan. One should always ask the bank aboutthe pre-payment rules so that they do not face problem at a later date. Today, it iswise to go with a bank that allows periodic part pre-payment of loans. This allows youto keep paying back the principle amount when you get increments or salesincentives or any other lump sum amount.

With a monthlysalary of Rs 30,000- 40,000, what isthe amount ofhome loan I ameligible for? The amount of theloan you areeligible to, will varyon the existingdebts and yourpast record ofrepayment. Youcan get a loan ofRs 20-25 lakh,assuming you haveno other debt stillpending.

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Home Loans

What are the documents a bank asks for while approving ahome 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 yourpay slip and copy of two years’ income-tax returns.

Is there any difference in the rights of primary and co-applicant of property? An additional person seeking to obtain a loan with a primary applicant is a co-applicant. One reason a potential borrower might want a co-applicant is to increasehis odds of qualifying for a loan or to qualify for a larger loan. A co-applicant is alsodesirable if the loan is for the purchase of property that will be owned equally by bothborrowers, such as business partners or spouses. If the loan is granted, the applicantswill become co-borrowers, and each will be equally responsible for its repayment.

Can you sell property even when your home loan isoutstanding? You can sell property even when the home loan is outstanding. In such a case, thebuyer purchasing your home will have to re-pay your bank. Alternatively, the buyer’sbank 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

Can I sell myproperty with thehome loanoutstanding? You can sell yourproperty with thehome loanoutstanding. Insuch a case, thebuyer purchasingyour home willhave to repay yourbank. Alternatively,the buyer's bankmight pay yourbank directlythrough a loantransfer.

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Home Loans

then pay it back over a period of time using EMIs. Reverse mortgage is a type ofmortgage 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 expendituresagainst their own property. The loan is given till the death of the owners and theamount is recovered against the property after their death. The National Housing Bankin India promotes a scheme in which the tenure is 15 years and the owner of thehouse and his/her spouse continue to live in it till their death – which can occur laterthan 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. TheReserve Bank of India has prepared draft guidelines for reverse mortgage loan. Ahouse owner over 60 years of age is eligible for a reverse mortgage. The maximumloan is up to 60 per cent of the value of the residential property. The maximum periodis 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 isusually difficult to procure?With age, the buying as well as re-paying capacity goes down. For this reason, banksdo not approve loans for senior citizens. In case a senior citizen needs loan, theyshould consider having a co-applicant who has the capacity to take up theresponsibility of the loan payment. You can also take loan with the property ascollateral.

How does an individual investor raise money to invest incommercial property? We all know that there are funding issues on commercial property. Housing isencouraged under all government and bank policies, so commercial investment isprimarily through self-funding or instalment plan with the developer.

How can I raise a loan against a property owned by someoneelse?You can mortgage a property owned by someone else if the owner of the propertybecomes a co-borrower and guarantor for the same. The procedure requires mutualconsent from both the parties.

What is the loan procedure an NRI property buyer has tofollow? The basics - such as income, financial obligations and re-payment track record

What are thedocumentsrequired to get ahome loanapproved?The documentsrequired forapproval of homeloan will vary frombank to bank.However, the bankwould requiredetails of theproperty as also thedetails of your payslip and copy oftwo years income-tax returns.

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Home Loans


remain the same, though the mechanics may be slightly different. Some banks mayinsist on having a resident Power of Attorney in India.

Can multiple people get a collective loan on one property? Usually, this is possible when all applicants are members of the same family. Incertain cases, when non-familial members are willing to get home loan, it is possibleto 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 fixedover 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 loancan be known from your banker. Enquire from your bank and make it a point to visittwo to three banks to get the best rates.

How long does it take to get the application processed andthe loan sanctioned? The time line depends a lot on the nature of the property and applicant. You shouldwait for two weeks at least.

Can I take a home loan for construction in one city whileworking in another city? Yes, it is possible that you are working in a particular city while procuring home loanfor construction of your house in another city. It is legally allowed for you to purchaseproperty in another city. Domicile is not a pre-condition to buying property any more.

l Ish Anand, CEO, Phoenix Hudo

l R Murugesan, CEO, Shriram Properties

l Manish Sinha, Consumer Assets, HSBC India

l Kaustuv Roy, ED, Cushman & Wakefield

l Dhrirajlal Rambhia, Chief Advisor, MagicBricks.com



In the currenteconomicscenario, is itbetter to opt forfixed or floatinginterest rate?Floating rates areadvisable. Housingloans have lowestrates of interest.Floating rates aresupposed to comedown as and whenthe cash flowincreases. Thecorrect and thecurrent fixed andfloating interest rateon housingproperty loan canbe ascertainedfrom your banker.

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Home Loans

Money matters

Handle your Finance

Managing FinanceIs real estate a better investment as compared to the stockmarket?The real estate market is similar to the stock market, with its peaks and troughs alwaysseeming to make perfect sense in retrospect. Also, both markets reflect the economyof the country and offer good investment opportunities. However, the risks must beunderstood along with the opportunities. Realty index will appreciate five times, butnot the stock market.

Investing in stocks: The profit margin inherent in stock investment has always been higher whencompared to other asset classes. Stock market investments offer advantages such asliquidity and flexibility, which real estate does not. Stocks also offer growth rates thatthe real estate market can rarely match.

Investing in real estate:Home ownership is the most primary form of real estate investment. Unlike stocks, realestate is a tangible asset that provides for greater psychological comfort, securityand satisfaction. Also, the return on investment for real estate is reasonably consistentbecause of the phenomenon of property appreciation. Stock markets are far lesspredictable.--

What per cent of total income should a person in the agegroup 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 yourfirst house. Experts believe that your total monthly instalments should not exceed 30-35 per cent of your gross monthly income. This is a good starting point and youshould work towards reducing that number over a period of time.

What per cent of total income should a person in the agegroup 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 theage of 40-45, you should bring your investment down to 30 per cent of your totalassets so that the going gets easy and you enjoy your sunset years as much as youenjoyed your youth.

What is the best way for a first-time buyer to set a budget topurchase a home? Many new home buyers get excited and forget to consider the amount of cost theyneed to pay to acquire a home. Over-expectation from your income can put you ina financial stress. Your EMI should not be more that 30-40 per cent of your take-homesalary.

If the property markets in your city are very expensive and you cannot afford theproperty 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 stageand when you exit, you get some value appreciation. That becomes your seedmoney. Most banks allow you to exit one loan and take another. So, you can sell offthe smaller priced property in a peripheral location and use that as seed money tobuy where you would like to stay. Else, you will always be behind the market in termsof finance.

When is the stamp duty supposed to be paid?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 paidvaries from city to city.

What are the factors that one should consider whilecalculating the home loan instalment per month? For calculating the monthly home loan instalment, consider your monthly familyincome – now and expected in the future. Family income includes yours as well asyour parent’s or spouse’s income. Secondly, your family’s current expenses, includingall 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.

Why do banker’s home loan interest rates differ? Most often your own bank (e.g. where you have your salary account and mostbanking relationships) will give you the best interest rate. Also banks have preferred orinvitation pricing and you can benefit from these special schemes.

Can I enter into a sale agreement with any buyer withoutclearing the mortgage? What will be the modality of thetransaction?Remember to value the said property which is mortgaged to a bank. In the firstplace, you will be required to clear the loan of the bank and then proceed to registerthe property in the name of the buyer. It is also possible that you, the new buyer, aswell as the bank execute the agreement simultaneously.

l Niranjan Hiranandani, MD, Hiranandani Group of Companies

l Getambar Anand, MD, ATS Infrastructure Ltd


l Dhrirajlal Rambhia, Chief Advisor, MagicBricks.com


l Ish Anand, CEO - Phoenix Hudo

l Rohtas Goel, CMD, Omaxe Ltd.

l Amit Grover, National Director, DLF Offices Business

l Manish Sinha, Consumer Assets, HSBC India

l R Murugesan, CEO, Shriram Properties

Is there a formulato calculate howmuch loan Ishould take to buya house?

There is no setformula butstatistics show thatif your home loanEquated MonthlyInstalments (EMIs)are more than 40per cent of yourincome, you mayfind it difficult topay back the loan.

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Managing Finance

Price it right

Profit on property

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 inprojects which are at least 25-30 per cent complete as this will be comfortable interms of approvals. Brokers may sometime offer better rates than the developer’ssales team. Bank approved projects are preferred since they give comfort in terms ofthe approvals.

What kind of return should you expect from your purchase aftertwo years? It is impossible to predict a return in two years. Property buying as an investment mustbe 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 thatcannot be an indication of what the future holds. An exit after four years usually yieldsgreat returns.

Is a pre-launch project with a good discount better than anewly-launched one in terms of investment? Pre-launch is a great time to invest but is fraught with risk. It is purchased on theassumption that while the developer has not received all his approvals, it is expectedthat these will come through. The problem arises if the approvals are delayedinordinately. 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 theapprovals come soon. If you have missed the opportunity, a newly launched projectby a reputed builder in a good location can also be considered. There is lower risk inthis property.

How to estimate growth in the value of land in future? Infrastructure development has to keep pace with the swanky townships beingplanned 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 landvalue.

Which location – city, suburb or periphery – ensures best returnon 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 theirinvestment. Connectivity of the property with city and other location plays a vital rolein boosting the re-sale value. Buyer should ensure that the property is located in anideal area with good connectivity to the bus station, railway station, airport and supermarket 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 yourapartment. The advantage of a plot is that it will appreciate more. However, if youare looking for a rental yield, an apartment is better. The rental values of independenthouses are generally less than apartments.

Is a 1BHK apartment good for investment and rental returns?Buying a 1BHK unit in any project is an investment which gives reasonable returns on asmall investment along with an opportunity of an increase in the capital value ofthese properties. Investment in such property near any commercial space is likely togive good returns. A 1BHK property is always rented out easily. In many cases, thedeveloper arranges a tie-up with an agency, which maintains the property and alsolease such property with corporate companies. This type of arrangement gives goodand assured returns.

What is the best investment in the Rs 50 lakh bracket that willensure good rental returns?Invest in commercial property to get good rental returns, especially those with readyinfrastructure and connectivity.

Is it wise to invest in Panchayat-approved land or isgovernment 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 themunicipal government, one may not get a bank loan.

Considering high profit margins of developers, is there anyscope to gain from real estate investments? High profit margin is only possible if land has been purchased historically at a verygood price. Presently, in competitive markets, the buyers are getting fantastic dealsand the developers are competing for market shares.


l Kunal Banerji, President, M3M Group

l Ananta Singh Raghuvanshi, Director-Sales and Marketing, DLF India

l R Murugesan CEO, Shriram Properties

l Shishir Gupta, Expert on Open House, Magicbricks.com

l Ashwani Prakash, ED, Paramount Group of Companies

l Bopanna Madayya, VP-Sales & Marketing, QVC Realty

l Anuj M Bhandari Director, BU Bhandari Landmarks

l Gaurav Gupta, Director, SG Estates Ltd

What is a betterinvestment —residential orcommercialproperty?

If you are planningto buy for self use inthe future, then youshould buyresidential propertyand if it is forbusiness go forcommercialproperty. If you aregoing for residentialproperty, it’s betterto invest around IT,ITeS, manufacturinghubs that generategood rentaldemand.

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Return on Investment (ROI)

Winding up

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 location-specific 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 notneed the money urgently. Getting the best deal may require patience or even spendsome money to add value to your house. You also need to consider the rental returnfrom 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. Thebest way to determine the ideal price for your property is to check with brokers in thelocality or by listing it on property portals online.

Consider the taxes: How much you actually get after you sell the property willdepend on how long you held the investment. If you sell your house within three yearsof buying it, you will lose the tax benefits.

In case of a mortgaged property: Selling a house that has an outstanding loanrequires 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 peoplewho are willing to give a good price for your house, a property broker may be yourbest bet. Brokers usually have a wider reach and are more clued in to the localproperty 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 forfree. It is also worth listing as a nominally paid service as the portal offers additionalservices for the fee.

What is considered as the right time to exit a real estateinvestment?Real estate is not a ‘get rich quick’ investment route. It pays off only when one investsin a property for at least 3-4 years. Even with a long-term investment horizon, oneneeds to have a clear exit strategy in mind before one buys real estate as aninvestment.

How to make a safe exit from real estate?Selling the property as fast as possible in challenging market conditions is a wronginvestment strategy. The only safe and consistently profitable route is long-terminvestment. This is why it is extremely important to know what will happen a few yearsdown the line – to the property market in general, the location and property inparticular and one’s own finances. A savvy real estate investor must know unrealisedgains are meaningless and when to take money off the table.


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What all things should be kept in mind before exiting themarket?The property investor must decide on the investment horizon (period betweenpurchase and re-sale). A detailed analysis has to be done on the tax impact ofexiting a property investment. Expenses such as legal fees and brokerage expensesneed to be factored in pre-payment penalties for early loan closure and stamp dutyimpact for the buyer must be considered. Irrespective of the timing, a propertyinvestor must always focus on having the highest-quality asset base. This means thequality and specifications of the building, the specific location, the depth of theinfrastructure and accessibility.

Is the commercial market bleak as compared to theresidential market?Commercial property market has been hit more than residential property due toslowdown in industrial growth. Surplus commercial realty space has also put pressureon lease rental values. Commercial projects in Tier-2 cities have been negativelyimpacted by escalation in construction cost and weak demand for commercial realestate.

What documents are necessary if one wishes to sell off hisproperty?The main documents required to sell a residential property are the housing societyshare certificate and the sale/purchase deed of the property. The Sale Deed confirmsthat the land is in the name of the seller and that he has the right to dispose it off. If

What is consideredthe right time toexit a real estateinvestment?

Real estate pays offonly when oneinvests in a propertyfor at least 3-4years. There is noscientific methodto calculate butone should exit aproperty based onits return oninvestmentachieved and costof funds.

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Exiting the Market

the property has changed hands more than once, the buyer may also ask for a copyof 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 housingsociety?The housing society share certificate and the sale/purchase deed of the property arethe main documents required to sell a residential property. If the property has beensold and bought multiple times, a copy of previous deeds may be required to provethe authenticity of the deal. Other than these, copies of Stamp Duty and registeredhouse documents will also be needed. In case of property being mortgaged, thesepapers will be held by the bank and you can use a photocopy of the requireddocuments to initiate a deal. Depending on the kind of property and ownership,some more documents, such as a No-Objection Certificate from the housing societyand a documented consent in case of jointly owned property, may be required.

Can a Non-Resident Indian sell his property in India? Who canhe sell his property to?Yes, an NRI can sell residential or commercial property in India. He can sell to:

l A person resident in India – the definition of resident in this case will be as perForeign Exchange Management Act (FEMA)

l An NRI

l A Person of Indian Origin (PIO)


Can an NRI/PIO/Foreign Nationalbuy property inIndia? Yes a NRI/PIO/Foreign Nationalcan buy Property in India. •NRIs can ownnon-agriculturalNA land only.

• If you haveagriculturistrelatives you canbuy agriculturalland, in the nameof your bloodrelatives.

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What are thebenefits ofinvesting incommercial realestate comparedto residential for asalaried person? It is better to investin a residentialmarket wheredemand is fairlypredictable.Commercial realestate is influencedby multiple factorsincluding corporaterequirements.

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However, an NRI can sell agricultural or plantation land or a farm house only to aperson who is resident in India and a citizen.

Can an NRI sell and repatriate proceeds of property receivedas a gift?Yes, an NRI can sell property received as a gift. The sale proceeds of such propertyshould 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 ofauthorized dealer and payment of applicable taxes.

l Anuj Puri, Chairman & Country Head, Jones Lang LaSalle, India

l Kunal Banerji, President, M3M Group

l Vikas Vasal, Executive Director, KPMG India (The Times of India)



l Sunil Mantri, CMD, Sunil Mantri Realty (The Economic Times)

l Ramesh Bhojwani, a Mumbai-based financial expert (The Economic Times)



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Exiting the Market

A C K N O W L E D G E M E N T S

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