Article Contributed by Advocate Sharvari P. Shinde
High Court, Mumbai.
AN OVERVIEW ON FLAT PURCHASES (INDIA).
STEP ONE:- A BACKGROUND CHECK
High Court, Mumbai.
AN OVERVIEW ON FLAT PURCHASES (INDIA).
Purchasing property of your own can be a tedious task. The consistently appreciating property rates, the complexities of laws and the tedious procedures can certainly put someone off the idea of purchasing a flat or an apartment of their own. In this article I am Adv. Sharvari Shinde will try to simplify the process or at-least attempt to decipher the complexities involved. Given below is a step to step guide which you may refer while purchasing a flat.
STEP ONE:- A BACKGROUND CHECK
The golden rule here is 'never blindly rely on what the builder/ his sales representative represents. It is the right of the buyer to have a complete information about the property he/she is going to purchase. A thorough background check of the property is a must before finalising the purchase of the flat. The following pointers are to be remembered while conducting the background check:
(a) Title of the Property:-
By this we mean, the history of the land on which the buildings is constructed or being constructed. The buyer has to ascertain who was the previous owner, has the previous owner lawfully transferred the property to the builder/ developer and does any other person have any right on the property which will affect the buyers right to the flat. For this the buyer can ask the builder for an inspection of all the documents of the property. While conducting the inspection, the buyer should arrange the documents chronologically and check if each and every document is registered. Do not rush this step and do not afraid to ask questions. The builder should know the history of the property and he should give you an inspection of all registered original documents. The following documents have to be checked:
(i) Deed of Conveyance :-
A document recording that the land has been lawfully transferred to the builder. It must be registered.
(ii) NOC of the previous owners :-
The previous owners giving their 'no objection' to any construction activity conducted by the builder.
(iii) Property Card or 7/12 Extract :-
This is a record of the government which shows who is the present (lawful) owner of the property and it also shows the history of the land, its previous owners, the modes of sale etc. It is an essential document and must be checked by the buyer.
(iv) Title Certificate of a Solicitor :-
It is a certificate issued by a solicitor which says that the builders is the lawful owner of the land and the land is free of all encumbrances (encumbrance = burdens/obstructions/inconveniences).
STEP TWO: APPROVALS:
Once the buyer is satisfied that the background of the property is clear, the buyer should ensure that the builder has all the approvals of the municipal corporation to construct on the property. Once again it is the right of the buyer to demand an inspection of all original certificates/ approvals obtained by the builder. These approvals can have really confusing names, so they are explained as below:
(a) Approved Plans:
Once the builders architect draws the structure of the building (including the flat) the same have to be approved by the local municipal corporation. The corporation will ensure that the foundation of the building is strong, the construction is environmentally safe, has the builder abided with all the safety standards prescribed etc. Once the corporation is satisfied that the building plans are viable, the same are approved by stamping the same. The builder has to construct exactly as per the plans and any deviation from the same has to be approved.
(b) IOD (Intimation of disapproval):
In short this is a 'green signal' for builders for the corporation. An IOD presents a list of approvals which the builder has to obtain after which he can start constructing the building. An IOD is accompanied with the approved building plans. The builder has to obtain all the approvals as mentioned in the IOD in order to start construction of the building. Sometimes IOD is only for a part of the building and sometime it is for the entire structure.
The buyer here has to ensure that the all the permissions as mentioned in the IOD are obtained and the builder has obtained the entire IOD or not. It is always advisable to purchase a flat only after the IOD for the particular floor of the building is obtained by the builder.
(c) CC (Commencement Certificate) :
What follows an IOD is a CC. after the builder obtains all the permissions, and NOC's as mentioned in the IOD, he applies to the corporation to get a certificate stating that he can commence construction on site. This certificate called the CC. usually a part CC is granted initially which is only for the plinth of the project i.e. for the basement or ground floor of the project, after which it is extended floor wise.
(d) OC (Occupation Certificate):
Once the building is constructed, the corporation inspects it and certifies that the same is fit to be occupied and connected to all the utilities like electricity connection, water connection etc.
(e) Completion Certificate:
This is the final certificate given by the corporation after inspection which shows that the entire building is completed, and the flats are ready with all utilities.
The safest phase to purchase a flat is when the commencement certificate is obtained for the flat which the buyer wants or when the OC or the completion certificate is obtained.
STEP THREE: THE COST FACTOR
The cost of your flat will depend on the area of your flat and the common area which you will use. The area of your flat will be described either in the following terms.
Built-up-area:-
The area of the flat including the thickness of the wall.
Saleable Area:-
The area of the flat minus the area occupied by the walls. It is the area which you will actually use.
The common area of the floor:
It is the spaces which all the occupants of a single floor will share i.e. staircase area, lift and lobby space. While fixing the cost for this common area, flats with a higher salable area, contribute in a higher proportion towards the common area on the floor.
The common area of the building:
These areas are equally enjoyed by all occupants and hence all the purchasers pay equally for these areas. These areas include your main lobby space, electricity room, pump room etc.
The super built-up area:
It is the total of built up area + common area on the floor + common area of the building.
The parking space:
Generally every flat is allotted with at least one free parking space. If the buyer needs more than one space for parking, he can purchase the same from the builder.
The cost of the flat will be based on the super build up area of the flat and if the buyer is interested in purchasing additional parking space, the same will be added to the cost of flat.
STEP FOUR: THE TAX FACTOR
As per the current taxation laws, the buyer has to pay the stamp duty on the purchase of the flat which varies anywhere between 6% to 12% of the flat cost and he also has to pay the stamp duty for the flat, which will be decided by the current stamp duty rules. These charges will increase the sale price of the flat but it is always advisable to pay them and get the sale registered in order to avoid any misuse by the builder.
STEP FIVE: THE PURCHASE
This is the final stage of the flat purchase where the buyer and builder will sign agreements for purchase of the flat. The agreements are usually called "Agreement for sale" or a " Sale Deed". The builder will present to the buyer a standard format agreement which he has prepared for all the buyers, but the buyer can change the clauses if he finds them too restrictive or if he is not happy with them. It is always important to include the entire price of the flat (including the tax liabilities), the proper area and description of the flat, the description of the common areas and parking spaces enjoyed and the date on which the buyer will be given the occupation of the flat by the builder. Once the buyer is satisfied with all the clauses of the agreement, the same can be signed and registered, in the office of the registrar of Assurances which is located at various locations in district.
The signing of the agreement and its registration completes the flat sale process.
STEP SIX: THE POSSESSION LETTER
The Possession Letter is given by the builder to buyer after completing all the formalities of execution and registration of agreements/documents w.r.t. sale of flat to the buyer. The letter consist, the flat is ready for possession with all utilities and it is conveyed to the buyer.
It is indeed a long drawn process to purchase a flat, however, with enough patience and awareness about the procedures, it can be ensured that the buyer will be able to purchase his/her dream home/house without major glitches.
By
ADVOCATE SHARVARI SHINDE
(a) Title of the Property:-
By this we mean, the history of the land on which the buildings is constructed or being constructed. The buyer has to ascertain who was the previous owner, has the previous owner lawfully transferred the property to the builder/ developer and does any other person have any right on the property which will affect the buyers right to the flat. For this the buyer can ask the builder for an inspection of all the documents of the property. While conducting the inspection, the buyer should arrange the documents chronologically and check if each and every document is registered. Do not rush this step and do not afraid to ask questions. The builder should know the history of the property and he should give you an inspection of all registered original documents. The following documents have to be checked:
(i) Deed of Conveyance :-
A document recording that the land has been lawfully transferred to the builder. It must be registered.
(ii) NOC of the previous owners :-
The previous owners giving their 'no objection' to any construction activity conducted by the builder.
(iii) Property Card or 7/12 Extract :-
This is a record of the government which shows who is the present (lawful) owner of the property and it also shows the history of the land, its previous owners, the modes of sale etc. It is an essential document and must be checked by the buyer.
(iv) Title Certificate of a Solicitor :-
It is a certificate issued by a solicitor which says that the builders is the lawful owner of the land and the land is free of all encumbrances (encumbrance = burdens/obstructions/inconveniences).
STEP TWO: APPROVALS:
Once the buyer is satisfied that the background of the property is clear, the buyer should ensure that the builder has all the approvals of the municipal corporation to construct on the property. Once again it is the right of the buyer to demand an inspection of all original certificates/ approvals obtained by the builder. These approvals can have really confusing names, so they are explained as below:
(a) Approved Plans:
Once the builders architect draws the structure of the building (including the flat) the same have to be approved by the local municipal corporation. The corporation will ensure that the foundation of the building is strong, the construction is environmentally safe, has the builder abided with all the safety standards prescribed etc. Once the corporation is satisfied that the building plans are viable, the same are approved by stamping the same. The builder has to construct exactly as per the plans and any deviation from the same has to be approved.
(b) IOD (Intimation of disapproval):
In short this is a 'green signal' for builders for the corporation. An IOD presents a list of approvals which the builder has to obtain after which he can start constructing the building. An IOD is accompanied with the approved building plans. The builder has to obtain all the approvals as mentioned in the IOD in order to start construction of the building. Sometimes IOD is only for a part of the building and sometime it is for the entire structure.
The buyer here has to ensure that the all the permissions as mentioned in the IOD are obtained and the builder has obtained the entire IOD or not. It is always advisable to purchase a flat only after the IOD for the particular floor of the building is obtained by the builder.
(c) CC (Commencement Certificate) :
What follows an IOD is a CC. after the builder obtains all the permissions, and NOC's as mentioned in the IOD, he applies to the corporation to get a certificate stating that he can commence construction on site. This certificate called the CC. usually a part CC is granted initially which is only for the plinth of the project i.e. for the basement or ground floor of the project, after which it is extended floor wise.
(d) OC (Occupation Certificate):
Once the building is constructed, the corporation inspects it and certifies that the same is fit to be occupied and connected to all the utilities like electricity connection, water connection etc.
(e) Completion Certificate:
This is the final certificate given by the corporation after inspection which shows that the entire building is completed, and the flats are ready with all utilities.
The safest phase to purchase a flat is when the commencement certificate is obtained for the flat which the buyer wants or when the OC or the completion certificate is obtained.
STEP THREE: THE COST FACTOR
The cost of your flat will depend on the area of your flat and the common area which you will use. The area of your flat will be described either in the following terms.
Built-up-area:-
The area of the flat including the thickness of the wall.
Saleable Area:-
The area of the flat minus the area occupied by the walls. It is the area which you will actually use.
The common area of the floor:
It is the spaces which all the occupants of a single floor will share i.e. staircase area, lift and lobby space. While fixing the cost for this common area, flats with a higher salable area, contribute in a higher proportion towards the common area on the floor.
The common area of the building:
These areas are equally enjoyed by all occupants and hence all the purchasers pay equally for these areas. These areas include your main lobby space, electricity room, pump room etc.
The super built-up area:
It is the total of built up area + common area on the floor + common area of the building.
The parking space:
Generally every flat is allotted with at least one free parking space. If the buyer needs more than one space for parking, he can purchase the same from the builder.
The cost of the flat will be based on the super build up area of the flat and if the buyer is interested in purchasing additional parking space, the same will be added to the cost of flat.
STEP FOUR: THE TAX FACTOR
As per the current taxation laws, the buyer has to pay the stamp duty on the purchase of the flat which varies anywhere between 6% to 12% of the flat cost and he also has to pay the stamp duty for the flat, which will be decided by the current stamp duty rules. These charges will increase the sale price of the flat but it is always advisable to pay them and get the sale registered in order to avoid any misuse by the builder.
STEP FIVE: THE PURCHASE
This is the final stage of the flat purchase where the buyer and builder will sign agreements for purchase of the flat. The agreements are usually called "Agreement for sale" or a " Sale Deed". The builder will present to the buyer a standard format agreement which he has prepared for all the buyers, but the buyer can change the clauses if he finds them too restrictive or if he is not happy with them. It is always important to include the entire price of the flat (including the tax liabilities), the proper area and description of the flat, the description of the common areas and parking spaces enjoyed and the date on which the buyer will be given the occupation of the flat by the builder. Once the buyer is satisfied with all the clauses of the agreement, the same can be signed and registered, in the office of the registrar of Assurances which is located at various locations in district.
The signing of the agreement and its registration completes the flat sale process.
STEP SIX: THE POSSESSION LETTER
The Possession Letter is given by the builder to buyer after completing all the formalities of execution and registration of agreements/documents w.r.t. sale of flat to the buyer. The letter consist, the flat is ready for possession with all utilities and it is conveyed to the buyer.
It is indeed a long drawn process to purchase a flat, however, with enough patience and awareness about the procedures, it can be ensured that the buyer will be able to purchase his/her dream home/house without major glitches.
By
ADVOCATE SHARVARI SHINDE
