What to keep in mind when buying a house

With the housing market in India moving towards a revival, consumers have begun to re-look at fulfilling their dream of owning a home. The government’s thrust on affordable housing is also expected to be a much needed catalyst towards reviving the demand for housing in the country. In principle, after identifying the property to purchase, and the cost of the same, most first-time home-buyers would need to avail a home loan to buy the property. For those embarking on this journey, there are a few key things to keep in mind.

The first and foremost thing is to be aware of the costs associated with buying a house. For most home-buyers, after the initial investment on down payment etc, they would need to apply for a home loan.

Ideally, a home loan should be applied for only after having taken into account all the associated costs for the same. Primary costs include cost of the property as per the size, floor rise charges (if applicable), charges for car parking spaces, club house membership fees, corpus fund chart, service tax & VAT, Undivided Share of Land (UDS) Registration charges (guideline value) and initial maintenance charges.

Add to that, there are other supplementary charges like electricity and sewage treatment plant (STP) charges, legal charges, pre-payment charges or payment penalties. In case the property identified by you has not been valued by the bank you are using for the home loan application, there are valuation fees that would be levied by the bank.

The next step is to apply for the home loan. It is advised to approach a reputed bank/financial institution offering competitive interest rates to apply for a loan. An individual’s credit score plays a significant part in the bank’s decision to consider a home loan application. This is typically assessed by the bank as per its internal credit score criteria for various home buyer segments. Any bank providing home loan facilities requires applicants to have some key documents. These include acceptable proof of identity and residence, bank account statements for the past six months of all applicants, personal assets and liabilities statement and of course a duly completed loan application form.

While applying for a home loan, borrowers additionally need to have clarity on aspects such as lock-in clauses, exit penalties, and processing fees, apart from the interest rate on the home loan sought. Processing fees are an area for which banks can generally be negotiated with. Ideally, a home loan should be applied for only after having taken into account all associated costs of purchasing property.

Once a home-buyer has a sense of all the costs associated with purchasing the property, he/she needs to understand the rules of the bank/NBFC’s (Non-Banking Financial Company) with regards to disbursement. Most NBFC’s and banks, whether in the public or private sector, typically require you to gather the funds towards making a 20 percent down-payment, while a home loan for the remaining 80 percent is provided to you.

There is a fair amount of documentation required when purchasing a home both individually and related to the property being purchased. In order to ensure that a home buyer is looking at a property from a reputed developer, some scrutiny of relevant papers is necessary.

Some of the key documents, pertaining to the property being purchased that must be reviewed and collected are legal right of the holder of the land in government records (freehold), title deed of the land (the original document needs be verified), property tax receipt and bills (particularly the latest receipts), encumbrance certificate (for a maximum of 30 years) and survey sketch of property, land records, chitta copy, adangal copy, patta, etc., as applicable.

A home buyer must conduct a thorough check on the property that he/she is looking to buy. Whether it is a new project or a re-sale, it is very important to carry out a home inspection to ascertain the actual physical condition of the project and/or property. It is necessary to understand the quality of construction, and your window of opportunity to spot related issues, such as leakages, damages and other discrepancies.

Sometimes, a home buyer may want to make modifications to the existing structure. This can either be done in collaboration with the developer for an under-construction property (for an extra cost), or can be done by the home-buyer after purchasing the house.

It is always advisable to also conduct a thorough due diligence on the background and profile of the developer including delivery track record, quality of construction etc. One should also consider retaining the services of a lawyer to help with the understanding legalities and with processing of certain documents pertaining to the purchase of a house.