6 Things To Consider While Choosing Your Home

Oct 01, 2016 6:15 IST 383 views

In the last series of IIFL Home Loans blogs, we discussed the most thought provoking question,"Whether Home Loan is a wise decision or not"? We discussed in depth about "Opportunity Cost","TaxBenefits", "Rent Vs EMI" and "Home Loan Insurance". So we can conclude from the discussion that owning a house is a better option than living in a rented house in the long run

Now as we have made the decision of buying a home, let us guide you through the 6 things that we all should keep in our mind while we are going to our dream home.

1. Location 

The location is the primary aspect to take into consideration while buying our dream home, keeping in mind what our family member’s interests/necessities are. We can have the following checklist to take the final decision on the location –

  • Near Railway Station/Bus Stand
  • Near Airport
  • Close to Market/Mall
  • Close to Hospital/Nursing Homes
  • Close to Police Station, School & College
  • Near Relative's Homes

These are the basic requirements to determine our location. Again, depending on our present life-cycle and years ahead, all of us have our own set of preferences for amenities like following things –

  • Children's play area within the compound
  • Elevators
  • Swimming Pool/Club House
  • Tennis Court
  • Car Parking
  • Provision for gas pipeline, CCTV cameras, intercom and door video phone
  • Round the clock water supply with water softening plant

2. State of Property

Whether we should go for under construction, ready to move in, resale or self-construction houses? Let’s discuss and find out-

State of property can be segregated into:

  • Under Construction
  • Ready to move in
  • Resale
  • Self Construction

Under construction property can be purchased from builders in two ways - direct allotment and endorsement transfer.

Under Direct Allotment ownership of property is being transferred from the builder to the purchaser at one go. Whereas, under Endorsement Transfer, the second buyer purchases the property from the first buyer. 

Let’s take an example - there is an agreement between the builder and the purchaser for any under construction property. After some time in the under construction phase, the property is legally transferred from the first buyer to the second buyer. So, now the second buyer becomes the owner of the property. Endorsement clauses are added in the sale agreement as legal evidence for the transfer of the property.

Example of Endorsement Agreement (Exhibit 10.1)

Ready to move in - means the property is ready for possession. We can move in immediately, arrange and change the things as per our convenience.

UNDER CONSTRUCTIONREADY TO MOVE IN
AdvantagesAdvantages
Monetary Saving - While choosing an under construction property the valuation is a bit lesser than at the time of possession thus, one has to pay a lesser amount if a purchase is made during the construction phase.
Part Payment Facility - The entire amount is not transferred at one go but is linked to the development phase of the property.
Time-Saving - One can move in immediately and does not have to wait for a long period of time.
Exact Idea - One can see what he/she exactly getting from the builder.
Disadvantage
The risk of Delay - There is a risk of delay in an under construction property. The project may get completed after the promised deadlines by the builder. This makes one pay both the EMI and the rent for the extended period.
Disadvantage
Limits of Modification - For Ready-made properties, there is the very little scope of getting things changed as per purchaser's desire.

Resale House - In this case, the ownership of the property is being transferred from one owner to another and thus one can make a decision based on the kind of deal he/she is getting.

Self Construction - We do self-construction on our own land under our own management. Composite home loans for this can be availed easily. This includes both the construction cost and the cost of the plot. If one has enough time and passion for doing so, he/she can opt for self-construction.

3. Building Condition

Before taking possession of the new home, we must ensure to visit the house and check the following things:

  • Cracks and leakages in the beams, pilasters and columns
  • Whether grills and windows are secure or not 
  • Flooring type
  • Cross ventilation
  • Gas connection
  • Water/electricity/plumbing
  • Balconies, open areas and terraces - optimum and secure for children and not

4. Home Size

There is a distinction between carpet, built up and super built up areas. Let us understand in brief -

Carpet is the actual net usable area, whereas Built Up area includes carpet plus walls, ducts, half of the terrace and open balconies. Super built-up area includes everything - carpet plus common facilities. It is necessary to ensure what we get and what we have been quoted as the size of our property by the builder.

5. Loan Documents

The significance of loan documents cannot be overemphasized. Though the requirements vary from place to place but some of the common critical home loan documents are mentioned below for your convenience -
Click here to know about your loan documents.

6a. Property Documents (For Builder Properties)

6b. Property Documents (For Self Construction)

Additionally, we need to ensure the builders/sellers must have the following documents to ensure safety and security: 

  • Building Approval Plan (Sanction Map)
  • Commencement Certificate
  • Encumbrance Certificate
  • Completion Certificate
  • Proper Sale Deed

Building Approval Plan means the issue of permission by the municipality, local development council or planning authority for construction of the buildings, according to defined rules and regulations.

Sanction MAP is the architectural design, required at the time of construction and approved by the Municipal or concerned Govt. authority.

Commencement Certificate is used for under construction property. The importance of this certificate can be realized from the fact that without this, the buyer can face penalties or an eviction notice. And sometimes, what would be worse than the court orders for the demolition of the building. In order to confirm the building is in line with the approved plans, Municipal Corporations issues a Completion Certificate for completed projects.

Sale Deed is executed at the time of deal finalization and considered as an indispensable document for both the buyer and the seller.

Encumbrance Certificate, issued on Form No 15 and Form No 16, implies that the property is free from the monetary and legal dues. Form 15 Encumbrance is issued if the sale, mortgage or other deeds of the property are registered with the sub-registrar. The same should be recorded in Book I. So far, Form No 16 is concerned; encumbrance certificate is issued when the given property is free from all the liabilities for the specified period of time. It also implies no transaction has taken place for that period.

Home Buying is not a decision to be taken lightly. We have to do in-depth research and put extra efforts to make a smart financial decision. Again, we must have proper knowledge of property paper and loan documents to avoid any hassle. Surely, the above-discussed parameters would be helpful for us and make our dream home come true.

7. Key Terminologies

  • *The agreement entered between transferee (buyer) and transferor (seller) for the purchase or sale of the property is called Builder Buyer Agreement (BBA).
  • *The detailed outline for repayment of the amount borrowed is Repayment Schedule. For example - In January 2016 a plan was agreed with both parties' mutual consent for repayment of the loan in installments by Dec 2016.

Possession or Occupancy Certificate is issued when the premise becomes ready for residence.

  • For Resale Property, you require Sale Deed. This is executed at the time of deal finalization and considered an indispensable document for both the buyer and the seller.
  • Agreement of sale includes the terms and conditions of the sale of the property by the seller (transferor) to the buyer (transferee). The agreement includes vital information like total amount and future date of full payment
  • General Power of Attorney means a person is authorized by the principal/grantor/donor to do some general acts legally on his behalf. In this context we need to comprehend here we are talking about the general subject matter only, not any specific one.
  • The house which we want to buy should be designed as per the Sanctioned Map, approved by the concerned authorities.

 

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