Buying property - procedures

BUYING PROPERTY Before buying property, it is advisable to appoint a solicitor to inspect the original title documents of the property being purchased. If the title is not clear, the number of complications arising in future may be numerous. For eg., no bank would provide a loan against a property not having a clear title, it may be difficult to transfer share certificate of the society in your name, selling of property will not be simple, etc. The following is a check list of documents that you should verify before buying a property -
Documents pertaining to Land
Documents pertaining to Project/Building
Documents pertaining to Premises
Documents pertaining to Flats
Stamp Duty and Registration
Documents Pertaining to Land :
1. Conveyance Deed or Sale Deed - This is a deed document by which the title of property is conveyed by the seller to the purchaser. Conveyance is the act of transferring ownership of the property from a seller to the buyer. This document will help you ascertain whether the property which you are buying is on land belonging to the society/ builder/development authority in which the property is located.
2. 7/12 Extract - This is a document issued by Tehsildar or the concerned land authorities giving details such as the survey numbers, area, date from which current owner is registered as owner.
3. Index II - This is a document issued by the office of the Sub-Registrar of Assurances. It mainly mentions the names of the sellers & purchasers of a property for which the document is registered.
4. Search Report & Title Certificate - Title Certificate is issued by an advocate after conducting a search on the title of the property, which is intended to be purchased. The title certificate would state if the property is unencumbered and has a clear marketable title. This search report and title certificate can be obtained from one's own advocate or if the search has already been conducted by the current owner then one can have his/her advocate inspect these reports to ascertain the title of the property. This search on the title of the property is taken for a period of the last 30 years. It is mandatory for the developer to annex a copy of these reports in the "Agreement for Sale" with the intended purchaser of the flat. These documents would state whether the title to the property is clear, marketable and free from encumbrance. In other words, it would state whether or not there is any existing mortgage, litigation, condition or claim, which is likely to affect the title of the buyer adversely.
5. Non Agriculture Permission - If the land under consideration is agricultural and if one intends to develop the said land for residential/commercial/industrial use, then such agricultural land has to be converted to non-agricultural land and an Non Agriculture Order has to be obtained from the Collector of the District where the property is located. Along with this, one needs to take the latest receipts evidencing the payment of Non Agriculture Tax. In cases where the conversion from agricultural use to non-agriculture use is not done within the stipulated period then, there should be an order from the concerned authority extending the period.
TopDocuments pertaining to Project/Building
1. Development Agreement - This is an agreement entered into by the builder with the landowner. It contains details regarding the terms and conditions on which the landowner has permitted development of his property. This is where the landowner engages a third party (i.e. the developer) to develop and build on their plot of land. This agreement is generally accompanied by a Power of Attorney in favour of the developer.
2. Approved Building Plan - The building plan made by the developer needs to be approved by the Municipal Corporation or the concerned authority. The approved building plans need to be checked necessarily.
3. Commencement Certificate - This certificate is given by the Municipal Corporation permitting the developer to begin construction. This is done once the plans have been approved.
4. Completion/Occupation Certificate - This Certificate is given by the concerned authorities to the developer once the said building is complete in all respects and fit for occupation.
TopDocument pertaining to the PremisesUnder the Maharashtra Ownership Flats Act, 1963 a promoter who intends to construct a building of flats has to enter into a written Agreement for Sale with each of the persons who are to take or have taken such flats. It is also provided that the agreement should contain the particulars and also annex to such agreement the prescribed documents or the copies thereof. In case of a building, which is yet to be constructed, the agreement has to contain the particulars regarding the liability of the promoter to construct it according to the plans and specifications approved by the local authority. The other particulars which the agreement should contain are possession date, price to be paid by the purchaser and the intervals at which the installments for the full payment are to be made specifying stage of construction, the precise nature of the body to be constituted of the persons who would take the flats, details regarding the common areas and facilities specifying the percentage of undivided interest in the common areas and facilities appertaining to the apartment agreed to be sold, a statement of the use for which the apartment is intended. The Act also specifies that copies of the title certificate issued (as specified earlier in this manual) and a copy of the approved plans and specification a list of fixtures and amenities including provisions for lifts to be provided/provided for the flat to be sold should be attached to the agreement. A promoter, while he is in possession, and where he collects from persons who have taken over flats or are to take over flats, sums for payment of out goings even thereafter, has to pay all out goings until he transfers the property. The out goings would include ground rent, municipal and other local taxes, taxes on income, water charges, electricity charges, revenue assessment and interest on any mortgage or other encumbrances, if any. One should also ensure that the area of the apartment has been mentioned in the agreement. It is also mandatory for the developer/promoter to convey the land in favour of the society/association of flat owners/condominium/company within a period of 4 months of completion of the project. In the sale agreement there should be a declaration/representation by the promoter/seller that he has not encumbered the property in any manner whatsoever and entered into any other agreement to sell/lease/license with any other party. It needs to be specified whether the property is vacant or in possession of any other party other than the seller.
TopDocuments pertaining to a Flats1. For premises being purchased in a registered co-operative society - When one sets out to purchase a flat in a registered co-operative society the documents that need to be checked initially are The share certificate issued by that society in favour of the owner. This would ensure that the owner is recognized by the society.Previous chain of original conveyance/sale deeds. If the deed has been lodged for registration, then one should ask for the certified true copies of such conveyance, sale deeds, etc along with the original receipt of the Sub-Registrar where the document has been lodged for registration. c. Original stamped receipts for payments made to the previous sellers.
2. For premises being purchased in society which has not been registered - In this case the following documents would be required to be checked Previous chain of agreements with past owners in original with original receipt of registration(if any)/original letter of allotment issued to the first owner by the development authority. In case the latest agreement is pending registration the original receipt issued by the sub-registrar acknowledging the pending registration needs to be taken along with a certified true copy of that agreement. Original stamped receipts of payments issued to the previous and present owners by the builder/development authority/society. Transfer permission from the respective authority i.e. development authority/society. Copy of approved plan & occupation certificate issued by competent authority (like the Municipal Corporation) Stamp Duty and RegistrationPayments of Stamp duty followed by the registration of the agreement are two important acts when one enters into an agreement with a developer/seller. Both, the developer/seller and the purchaser need to be present at the Sub-Registrars office for registering the agreement.1. Stamp Duty - Stamp duty is a State subject and hence would vary from state to state. The stamp duty in many states is paid as per the True market value as assessed by the Stamp Office. When an agreement is to be stamped, it needs to be unsigned and undated and after the Stamp Office affixes stamps on the agreement, one may execute the agreement. The Stamp Duty payable in various states could be ascertained from the Stamp Duty Calculator provided.Click Here To know more about Stamp Duty.
2. Registration of an Agreement - The agreement should be registered with the Sub-Registrar of assurances under the provisions of the Indian Registration Act. Stamp duty should be paid prior to the Registration.
Click Here To know more about Registration.
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Home Loan - repayment clause

January 23, 2009
Sameer Tiwari, a Pune based mechanical engineer, thought he had made a "prudent decision" by opting for a fixed rate, home loan five years ago from a reputed national bank.
Three years after the date of disbursement, Sameer received a letter, which said it was time for renewal of his loan and that the interest on his fixed home loan had been increased by 0.5 per cent. On checking with the bank, he learned that there was a clause in the agreement that said the fixed rate was only for a period of three years and not for the entire tenure!
This letter brought endless, sleepless nights to Sameer and his family� now, they had to recalculate and replan all their income sources and planned expenses because the "fixed EMIs (Equated Monthly Instalments)" will increase!
What is a loan agreement?
A loan agreement is a 'contract' entered into between the borrower and the lender (banks and financial institutions) that regulates the terms of a loan. The loan agreement comes into picture immediately after the bank appraises your credit and the property that you have identified.
The agreement and the fine prints...
In the euphoria to acquire that dream house, various clauses in the loan agreement are often overlooked. However, these clauses have a significant bearing on areas ranging from interest rates to repayment schedules. Reading home loan agreements is generally viewed as a sheer formality and one always tends to ignore points that the agreement mentions. Moreover, the legal language used in the document often seems more alien than human!
In any case, not reading a loan agreement thoroughly can land you in a soup. Here are some clauses, which should be searched for inside a loan agreement and be clarified with your HFC (Housing Finance Company):
Reset Clause on Fixed Rates: Banks have introduced the reset clause in their fixed rate, home loan agreements so that they can increase interest rates in case the market rates increase in future. This effectively makes fixed rate loans equivalent to floating rate ones. This gives the banks an escape from interest rate surges but is a disadvantage for the borrower who is mostly unaware about such content in their agreement. Typically, the period for such reset clause varies from two to five years depending on the bank or housing finance company you borrow from. So read this clause in your loan agreement carefully.
Force Majeure Clause: There may be certain loopholes in your home loan agreement that allows the bank or home loan company to unfix and raise the fixed interest rate under exceptional circumstances. This will be mentioned under the 'force majeure' clause of your agreement. However, the differentiation between 'exceptional circumstances' and normal circumstances is always a tough task.
For e.g. A cut in banks' prime lending rate is not automatically translating into reduction of all PLR-linked loan rates. The reason being cited is that the bank's margins are under severe stress due to lending rate cuts. They feel interest rates on some existing sub-PLR loans do not even cover their cost of funds and any further fall in those sub-PLR loans will worsen the matter. Therefore, some public sector banks have revised the existing loan contracts in case of select sub-PLR borrowers, by using the 'force majeure' clause, meaning a 'situation beyond control'.
Defining a Fault: A 'fault' for a layman often means a non-payment of an EMI during the loan tenure. However, your bank or HFC may have a different meaning for this term. The home loan agreement of few banks defines fault as a case when the borrower expires, the borrower is divorced (in case of more than a single borrower), or the borrower is/are involved in any civil litigation or criminal offence. Therefore, you must be clear what your lender means by the term 'fault'.
Security cover at times of falling property rates: This clause states that a bank is eligible to demand additional security when property prices fall. Even if you are loyal on your EMI payments, this clause demands a security cover in addition to your loan amount and if a borrower fails to provide such a security then he/ she may be declared a defaulter by the lender.
Floating is Fixed and vice versa: Floating rate as well as fixed rate home loans are linked to the Benchmark Prime Lending Rate of a bank or the HFC from which you take a home loan. Hence, if the BPLR is 13.5 per cent and floating rate home loans are at a discount of 1.5 per cent to the BPLR, then the interest rate on a floating rate home loan is 12 per cent. So whenever the BPLR is raised, then the interest to be paid on the floating rate home loan goes up. The vice versa also holds true.
However, banks and HFCs do not show the same alacrity to reduce the interest rates, which they might have shown when increasing it. When interest rates come down, banks and HFCs offer lower rates to new customers but existing customer continue paying the higher interest rates. Check with the bank or HFC regarding the details about such clauses.
These clauses are overlooked by most home loan borrowers and some of them eventually end up paying interest rates, fees, or hidden charges completely out of the blue. It is imperative that you have a thorough understanding of such clauses with your bank or HFC.
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http://www.rediff.com/money/2009/jan/23perfin-taking-a-home-loan-beware-of-these-facts.htm