It’s the thick of the festive season, the time of the year when discounts are available for almost any service or product. Property is no different. In spite of the rising interest rate scenario, when an individual who has been saving for
years in anticipation of buying a home comes across a good deal, he or she will not put off the decision! This is especially true if one has more than enough down payment in hand, which helps in saving quite a bit on the total interest cost.
But before you get excited by the offers and jump in, here's a check list of things you should know.
The budget
Don’t get taken in by the glossy advertising and rush to buy an apartment that you may not be able to afford. You need to have a clear idea of your overall budget and the amount of loan you can afford. The banks may sanction a loan based on your income but it's your responsibility to scrutinise your monthly expenditure and see if you can afford repaying what the bank will sanction.
As a general rule, the EMI for all the loans you have taken and going to take should not exceed 40 per cent of your income. This is over and above the amount you have kept aside for any emergency purposes, which should be 3-6 months gross income. Hence, if your income is `1 Lakh per month, your combined EMI for all the loans you have taken should not exceed `40,000 per month. Some banks enforce this, but the responsibility lies with you.
Bank loan
The interest rate varies from bank to bank and with non-banking finance companies also offering competitive rates, you have a lot more choices. In this context, you should also check other costs such as processing fee, documentation fee, and any prepayment penalty associated with the home loan. At the same time, it would be better if you do some research on the best loan option. Home loan is a huge amount and hence even a difference of 0.5 per cent can make a big difference in pay-outs. You should also get the maximum tax benefit from your home loan. See if you can make your spouse co-applicant and avail the tax benefits. You will simply double the tax benefits if there are two co-applicants.
Builder’s track record
Check the name of the builder and do your research on how the builder has delivered in the past. Check internet discussion groups and forums for views on the builder. Talk to people who are living in apartments built by the same builder. This is very important as you are going to make the biggest investment of your life. There are websites such as India Property Review (www.indianpropertyreview.com [1]), which rates building and housing societies. They also publish research reports on housing societies.
Since you have to take a long term view of the investment, the property should be stable enough to last 50 to 60 years, so that if you want to sell it, you should be able to do it without much hassle. This is where buying from a reputed builder becomes more important.
At the same time, see if you can link your loan disbursal based on construction instead of time. This will put pressure in builders to build the home faster.
Legal and documentation
One cannot emphasis this enough. You need to get a lawyer examine the title and associated documents before you buy the house. You should get everything in writing from the builder. The sale deed should be duly signed by both the buyer and the seller.
You should also ensure that lay out plan, building plan, number of floors, and ownership documents are in order. Local zoning laws and certification such as commencement certificate, occupation certificate are also important.
Apart from these documents, you have to make sure to get the encumbrance certificates from the sub-registrar. The encumbrance certificate tells you the record of last 30 years.
All taxes should have been paid on the property. You should get this from municipality and from the owner too as he or she will have the receipt of the taxes paid.
Last but not the least, the no-objection certificates (NOC) from water and electricity boards have to be obtained.
Location
The most important factor for deciding on a real estate investment is the location of the property. You should not mind paying a little extra for getting a better locality.
The most important aspect of the location is future prospects of big projects such as malls, IT Park, company, SEZ, airport, railway lines, or any other commercial space. Apart from this, you also have to consider the following:
n Availability of civic amenities such as power, water, roads
n General environment
n Proximity to main road, markets, schools, hospitals etc.
n Not only will it make your stay comfortable, this will also increase the property's value.
n Possibility of renting out
Keeping these factors in mind will make your home buying experience that much more simple and help you in getting the best value for your money.
(The writer is the CEO of bankbazaar.com)
Links:
[1] http://www.indianpropertyreview.com