Buying the first home is a dream and for cracking the right deal, from deciding the location to doing the paperwork, numerous aspects have to be considered to ensure a hassle-free home purchase. In India, many first-time homebuyers rely on home loans to buy their dream home. As home loans span over 20-30 years, they are counted as a long-term liability that involves investing a significant share of an individual’s income.
With the majority of first-home buyers in India belong to an age group of 30-40 years, which is one of the most crucial years in terms of both personal and professional growth, it becomes even more important to make an informed decision.
Before you take the plunge, it is crucial to lay down a pragmatic and achievable plan. Make sure you understand how the real estate market works and conduct a comprehensive research to find answers to what to buy, where to buy and how to buy.
What to Buy: A New Home or a Resale Unit?
New Home
Taking a call between buying a new house and a resale unit is tough. Generally, the choice between the two is primarily based on the buyer’s lifestyle, preferences, and affordability. Since most of the new residential projects across the major cities in India are established in the peripheral locations, the cost of acquisition may be lower.
Advantages of buying a new house:
Greater flexibility vis-à-vis home loan and finance.
Better resale prospects.
Easy documentation.
Improved amenities (as these homes are newly constructed, they incorporate latest interior designs and sustainable developments that offer various benefits, such as lower utility bills).
Factors to watch out for:
Goods and Services Tax (GST): If you are buying an under-construction property, you are liable to pay a GST. However, this may vary as per the unit cost. A housing unit pegged within INR 45 lakh attracts 1% GST and a unit priced above INR 45 lakh draws 5% percent GST.
Real Estate Regulatory Authority (RERA) details: It is vital to lay hands on the RERA details of the builder and the project. Visit the RERA website of the State in which you plan to buy a property, and find out if the builder and the project in question are registered with RERA.
Investing in a RERA-registered project would safeguard you in the case of inordinate project delays or any other builder defaults. You may filter out RERA-registered properties on property sites to ensure you are selecting the right projects.
Resale Home
If you plan to buy a resale unit, you must consider if the property has been used before or is it a fresh unit. Also, the older the property, the lower are the chances of availing home loans. For instance, housing finance companies do not offer loans to properties more than 50-years-old. In case, you buy a 35-year-old property; then the home loan tenure can only be for 15 years.
Advantages of resale of a home:
The biggest plus of resale properties in India is that they do not attract GST. Thus, you can save a substantial amount of money here.
Factors to watch out for:
Buying a resale unit comes with a lot of legal compliance requirements. For instance, you must check the title deed of the seller in the case of a resale unit. Precisely, the title deed is a legal document that establishes an individual’s rightful ownership over a property.
You must obtain a no objection certificate (NOC) from banks to ensure that the property is mortgage-free.
The process of obtaining NOCs and cross-checking other documents, such as title clearance, allotment letter, occupancy certificate and encumbrance certificate may take a little longer and could be a taxing job.
Resale properties also include transfer of memorandum (TM) charges in places where land is leasehold.
Where to Buy: Location
Once you have made up your mind about what to buy, it is time to decide where to buy, i.e. the location. You can change almost everything in your home once purchased, but cannot alter its location. Thus, thoroughly examine the property and its site. From the surroundings to the neighbourhood, to the connectivity options and other social elements of daily importance, everything matters and should be easily accessible from the property.
One of the important things to figure out is whether the land is freehold or leasehold. The former provides complete ownership rights of the property. Leasehold land, on the other hand, could be competitively priced but you would only get partial ownership of the land, in most cases for 99 years.
Get an idea about the amenities and facilities in a particular project and area, you can use the ratings and review services available at leading property sites.
The ratings and reviews are posted by the people who have an experience of living in a project or an area. Overall, from connectivity to construction quality, society management facilities, property type, amenities available, greenery and other positives and negatives, you can gather the complete information about a particular locale and the project.
How to Buy
Property price
Being a prospective homebuyer, undertaking thorough market research and analyzing the price trends of a property are crucial steps. Keeping a close tab will provide you insights about how the market moves and is it worth paying a price that your seller quotes or should you strike a negotiation.
The ‘property rates’ not only help you get the per square feet (psf.) unit rate in the specific area but also provides information pertaining to investment prospects in a locale. You could study the historical capital appreciation or depreciation quarter-on-quarter, and make inferences about future potential based on more inputs from market sources.
‘Price trends’ on the other hand; furnish the graphic representation of the property values over the years and help in determining the potential investment returns expected from a property.
Ascertain the paying capability
Identifying your ‘affordability’ is also a crucial criterion when buying a home. Home loan service providers allow you to access the home loan deals of some of the reputed financial institutions across India. From the current rate of interest to a processing fee and the loan tenure, you can view complete details or request for additional information over the mail.
It is recommended to check your loan eligibility and gauge the approximate loan amount that you may borrow with the current income and the amount that you have to repay to the bank over the selected tenure.
The ‘EMI calculator’ is another excellent feature that determines the monthly outgo with an explicit categorization of the principal and the interest amount.
Documentation
Real estate investment is a huge undertaking, hence verifying all the documents is crucial to ensure that the property does not have any legal adversities attached. These include:
RERA certificate
Systematic registered agreement (for sale between previous parties)
Interest and penalties levied on a buyer
Approvals and sanctions obtained by the builder
Approved project layout
Title deed (especially required in the case of a resale purchase)
Loans or mortgages (if any)
No objection certificate (NOC)
Funding source (joint venture, partnership or equity funding)
Refund clauses in case the project does not get completed
7/12 Extraction and Village Form No. 6
Architect certificate Clearance Certificate
Building or structure plan
Commencement certificate
Completion certificate
Occupation certificate
Proof of payment of stamp duty and registration
Development agreement
Draft conveyance deed
Once you have narrowed down a couple of choices, you could use the below provided checklist, which will help you compare different properties and choose the best among all options. The prime factors that you must compare while analyzing properties are their location, price, rooms, size, amenities, RERA certifications, annual cost, facilities around, connectivity options and exteriors of the society.
