We all, at some stage in our working lives must make a decision about buying immovable property, either for our own use or as an investment vehicle. The magnitude of impact of such a decision on our personal and financial lives makes it amongst the most important decisions that we make. Before committing large amounts of your hard-earned capital, it is important to be well informed about the various factors, issues and processes involved in buying a property, so that you can avoid the pitfalls. Concrete Real Estate Analytics provides some key tips that will facilitate your decision-making process and help you choose the property that is right for you.
- Purpose. At the outset, one should be clear of the very basic purpose of buying an immovable property. Is it for end use or is it an investment? Is it for residential or commercial purposes?
- Type of Property. Next it is necessary to identify what type of property will best suit your purpose? For example, if your purpose is residential end use, then what requirements must it meet in terms of family size or family culture etc, does it need to be an Apartment, Independent Villa, Duplex or a Penthouse. Does it need to be 2 BHK, 3 BHK or a 5 BHK. If the purpose say is commercial end use, then what requirements does it need to meet, does it have to be an office or retail space of a minimum size, does it have to be on the ground floor or in a particular area of town etc. If it is an investment vehicle, then does a plot of land meet your needs for capital appreciation. Correctly identifying the type of property best suited for your purpose is therefore a very important step in the process of homing onto the right property.
- Budget. The next big factor is your budget. It will bring clarity to whether you can afford the type of property that you decided upon earlier or do you need to compromise some of your requirements. Your budget also dictates the locations and the sizes of the property that you should be looking for. It helps you figure out whether you need to look at the central business districts, other premium areas, the suburbs or maybe even smaller upcoming towns near you. For example, if you identified your need as a 3 BHK Apartment but your budget does not allow you to afford one in the premium areas of your city, then you would need to either compromise on the location and identify a suitable suburb where you can afford it or alternatively compromise on the size by maybe seeking out a 2 ½ BHK.
- Location. This factor must be considered at three different levels, the macro, micro and microscopic levels. At the macro level, it involves identifying your interests in specific Tier I / II/ III areas or in a rural area. This decision is impacted by the three factors discussed earlier. Once you have homed onto a specific macro level location you need to start considering the micro markets in that location and further at a microscopic level the specific projects available there. So, a macro level decision could be to buy in Gurgaon vis a vis Greater NOIDA, at the micro level you may decide upon New Gurgaon vis a vis the Southern Peripheral Road and finally at the microscopic level you may choose a specific sector in New Gurgaon and between different projects available there.
- Master-plans and Zoning. It is important to study the master-plans and land zoning of your chosen location to understand the overall layout and planned developments. It will also provide you clarity about the infrastructure likely to come up and zoning of various sectors like residential, commercial, mixed land use etc, and help fine tune your projections of likely returns on investment.
- Infrastructure. Both existing and planned infrastructure in your shortlisted areas need to be carefully studied. Once again both macro infrastructure such as airports, metro rail, SEZs, manufacturing and logistic hubs, economic corridors, major roads, highways, sectoral roads, power supply, water supply, sewerage, waste disposal, storm drains and micro infrastructure like schools, hospitals, banks, malls/ shopping areas, internal roads, parking areas etc in proximity need to be considered. Infrastructure is also a major input for deciding the location factor as explained earlier.
- Services. Before shortlisting specific properties, it is necessary to go into the details and compare quality of services being provided, such as power backup, lifts / escalators, firefighting systems, waste disposal, security, car parking, piped gas, community shopping centers, creches, club houses, swimming pools, sports facilities etc. The quality of facility management services has a direct bearing upon the efficiency with which you can use a property. Other important issues that must be considered are energy efficiency, sustainability and environment friendliness of the property as they can have a major impact on the life cycle cost of the property. Both the quality of infrastructure and services available directly affect the quality of life you will enjoy.
- Quality of Construction, Age and Condition of the Property. For new / under construction properties, it is possible to go into some degree of detail of the quality of raw materials being used and the competence in construction. For older properties, it is necessary to look for the obvious signs of disrepair or ill maintenance. Cracks, seepage, civil works, mechanical, electrical, plumbing works, woodwork, paints, cleanliness, hygiene etc all merit close attention. How well has the property aged or would it require additional financial burden for its repairs and upkeep is another factor that needs to be kept in mind.
- Shortlisting of Specific Properties. Based on the above research, it would be possible for you to home onto at least a couple of suitable properties in your chosen location. You must keep your options open to several properties at this stage. As you conduct further diligence, more properties are likely to get excluded / ruled out, based on some criteria or the other. The time factor must also be kept in view to be clear whether a property is ready to move in or how much time is estimated for its completion. Again, your basic purpose of end use or investment will dictate if you can afford to wait for a property to be developed or do you need to buy a ready to move in property.
- Developer / Builder Reputation and Track Record. This is another very important issue to be addressed to ensure that your capital remains safe and generates the returns you wish for. Whether a developer has a track record of high quality of construction and timely deliveries or not, or does he have large hidden costs which are not informed to buyers in a transparent manner or does the developer have a reputation for increasing project costs after launch of a project, are issues that all need to be closely considered. It is always better to go for a reputed developer with a proven track record instead of choosing someone with a dubious reputation who will try and sway you by promoting cheaper substandard options.
- Titles, Ownership Rights, Disputes, Litigation, Encumbrances and Liens. Necessary legal advice must be taken to confirm the rightful ownership of the property and whether any disputes, litigation, encumbrances or liens exist on the property. In addition to the revenue and local urban development authorities, banking institutions are also a good source for such information as they have formal processes and procedures of diligence before providing loans for any property.
- Clearances, Compliance’s and Inspections. Additional effort is required to be put in to check whether shortlisted properties have all the mandatory clearances such as environmental, forest, defense, air authorities etc and meet compliance standards laid down by the local urban development authorities. It is also worthwhile to check if all specified inspections are regularly carried out with respect to security, fire safety, lifts, power supply, water supply, waste disposal etc.
- Outstanding Taxes and Dues. Another issue generally overlooked at the peril of the buyer are outstanding taxes, bills for power usage, maintenance charges etc. If not verified at the time of the sale agreement, they can add an unnecessary financial burden for the buyer.
- Finances. Do you have the capital to out rightly purchase the property or do you need to take a loan for the same? What is the quantum of loan required and over what duration? Which are the financial institutions providing such loans and at what rates of interest, are any tax rebates entitled. What are the registration charges, stamp duties and consultation/ legal fee to be paid? These questions need to be answered. You must be clear of the total expenditure under various heads and what amount of capital you need to plan for. It pays to chalk out a clear financial plan well in advance, so that payments can be made in a timely manner at the cheapest possible cost of capital for you.
- Documentation. Once you have decided upon a specific property, ensure that a proper sales agreement is prepared clearly listing out the covenants for the buyer and the seller. The sales agreement forms the basis of the transaction and hence it needs to be prepared in considerable detail. Consequent to the sale agreement, a sale deed must be executed as per the law of the land and titles registered after paying necessary stamp duties to the revenue authorities. Detailed floor plans and other associated blue prints for the said property must be obtained from the seller. Documentation pertaining to membership to the welfare associations where applicable, also need to be obtained.
- Consultancy and Legal Advice. Considering the host of factors that need to be addressed and verified, it is always better to seek guidance from competent registered professionals operating in the field. They can help you in your due diligence so that the risks associated with such capital-intensive decisions are minimized to the extent possible.
Buying an immovable property requires considerable forethought, time, effort and resources to identify the property that is right for you. As the process, can be complex and is fraught with risk it is best to have a clear plan on how to go about it. The factors that have been highlighted above will help you remain focused on key issues and prevent oversights from occurring. However, to boost your research and diligence capability it is strongly recommended that you rely on a well-qualified and seasoned professional to help you through the process and make your property buying experience a positive and smooth one.
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