POINTS TO PONDER BEFORE ENTERING INTO A PROPERTY TRANSACTION

Herebelow are some important points to consider before entering into a property transaction. Some points may vary or differ depending on laws of Local bodies and State.

Types of Transactions

·         Under Construction – Outright Purchase/Ready Possession

·         Apartments from Developer

·         Bungalow/Townhouse from Developer

·         Outright Purchase from non developer

·         Lease

·         Leave and License

Under Construction

•       Riskier

•      Don't get feel of home

•       Less Expensive

•      Payment in Installments

Ready Possession

•       Safer

•       What you see is what you get

•      More Expensive

•      Payment in one go

Under-Construction Properties

·         Select your target market

·         Map the Market

·         Do a Comparative Market Analysis

·         Select your developers with care

·         Title of the property

·         Study the project meticulously

·         Project Permissions

·         Reputation of Developer

Factors to be considered for calculation of value

?  Area of Apartment

?  Base Rate

?  Floor Rise

?  Efficiency of / Loading on the chargeable area of the property.

?  Parking Cost

?  Society Membership

?  Club Membership

?  Advance Maintenance

?  Stamp Duty

?  Registration

?  VAT

?  Service Tax

?  Transfer Fees

?  Brokerage

On Booking

?  Token Amount

Before Registration

?  All Dues other than Payment by Bank

On Possession

?  Membership, Maintenance etc

?  Transfer Fees

Token Money

?  Commitment to the Transaction

?  Agreement to Price, Payment and other terms of transaction

?  Payment of Token Money

?  Depends on value – for e.g. Fifty Thousand to Five Lakhs.

?  Balance to be given over a period agreed upon

Allotment Letter

?  Allotment Letter given when registration in the near future not possible or desirable

?  Eg. CC not obtained

?  Pre-Launch Investment

?  Investor does not want to spend money on stamp-duty

?  Contains terms of agreement

?  Gives details of Amount paid and pending

?  Mentions Free Transfers if applicable

Process for Mortgage Loans

·         Scrutiny of both Property and Client financials by bank/lending institution

·         Strongly recommended to have pre-approval of the loan in place before making any down payment or token advance.

·         Maximum Purchase Value is ascertained

·         Need to close before the approval expires

·         Faster Transaction

·         Most developers have tied up with banks for speedy disbursal

·         On Approval of any project, an APF no. is available, use that as reference for that property

·         Ensure that bank approval letter is available before registration

·         All Dues other than bank loan to be paid to  seller

·         Register the property

·         Hand over the original documents to the bank

·         Bank should disburse the directly payment to the Seller/Developer

Agreement for Sale vs Sale Agreement

  • Agreement for sale is when there are future clauses to be incorporated
  • If any of the conditions are not met, the sale may become void or invalid.
  • Under Construction properties involve agreement for Sale
  • Sale agreement is when all conditions are already met

Registration

  • Title of property is conveyed to the buyer only on registration the Registrar's Office
  • Agreement for Sale has to be registered with the Sub-registrar of Assurances within whose jurisdiction the property is located
  •  Registration should be completed within stipulated period from the date of execution of the Agreement for Sale
  • The present registration fee is 1% of the market value of the property or the consideration subject to a  maximum limit of Rs. 30,000/-

Stamp Duty

  • Stamp Duty is payable on the higher of the  market value of the property or on consideration paid under the agreement
  •  Document has to be adjudicated before stamping
  • The rate of stamp duty payable is 5%
  •  The stamp duty has to be paid before signing or executing the document

Due Diligence

•      Preliminary check for the title of the property should include

•      Original Registered Chain of Documents

•      Name on Original Share Certificate of Society

•      Name of all people on agreement should agree to the sale

•      Either they should be present

•      Or there should be registered Power of Attorney in favour of the person present

•      If the property is Mortgaged, an NOC from the Bank is required

•      Requisite form needs to be filed with Society

•      Always insist on Lawyer's report

•      Title Search

•      Public Notice

•      Title Certificate

Possession

•      For Under-Construction Flats

•      Getting O.C. By BMC for Under Construction properties

•      Checking of all Amenities

•      Clearance of all Dues

•      Handing over of premises by seller.

•      For Resale Flats

•      Taking of Indemnity Bond from Seller

•      Paying Transfer Fees to Society

•      Getting Name added on Share Certificate of Society

Maintenance

•      Occupation Certificate is obtained after all commitments of the developer have been met

•      Builder responsible for maintenance after getting O.C. for 18 months.

•      Includes Cleaning, Security, Electrical Charges, Property Tax, Routine Repairs, etc.

•      Maintenance is collected from Buyers

•      On formation of Society, maintenance is handed over to the Society

Society Formation

•      Initiation by builder to form Society.

•      Opening of Bank Accounts

•      Transfer of Unspent Money

•      Committee Formation

•      Conveyance in favour of society by Builder.

Where there is land involved:

•      Calculation of value may be as

•      Cost of Land + Construction Cost

•      Cost of Bungalow/Town House

Treatment of Common Areas

•      Housing Society

•      Common Areas belong to a society

•      Share Certificate for flat is the ownership of the buyer

•      Condominium

•      Housing Society can be formed only if there are atleast 10 members

•      Common Areas are shared equally among all Condominium owners

•      Bungalows

•      Land allotted to buyer, his property, common areas same as above

Lease

•      Lease is defined under Transfer of Property Act 1882

•      Lease is a transfer of a right to enjoy a property, made for a certain time or in perpetuity, in consideration of a price

•      Transfer of interest

•      Permitted to sublet or assign interest

•      Exclusive Possession

Lease Deed

It is a form of contract through which one conveys real estate equipments or facilities for a specified term and for specified rent

Salient features of Lease Deed:

•      The parties are termed as Lessor and Lessee in place of Vendor and Purchaser respectively

•      Lease Period varies generally from 30 years to 999 years, or any period beyond 5 years, or so agreed.

•      On the expiry of the lease period, the lease is required to be renewed as per the renewal terms if the same are provided in the original lease deed

•      Attracts Stamp Duty and Registration

Lease Procedure

•      Investigation of Title of Property

•      Inspection of Documents

•      Execution of proper Documents

•      Payment of Stamp Duty and registration of Document

Specific Rights of Development / Construction

?  Ownership of land always remains & vests with the lessor alone

?  Public bodies such as Municipal Corporation, Port Trust, CIDCO, MHADA, MIDC etc. offer their lands on this basis

?  Land is offered for a lease period of 60 to 99 years.

?  Lessee is permitted to construct premises on the said land for specific users permitted, on the terms & conditions recorded in the lease deed.

Leave and License

?  License defined under Indian Easement Act and the Maharashtra Rent Control Act

?  Juridical possession of the property is with the licensor

?  No transfer of interest

?  Licensee cannot "sublicense" or assign its rights

?  Constructive Possession – Having the keys

?  Constructive possession of the property  with the licensee

?  Licensee has a mere right to use and occupy the property for a temporary period

?  Personal Facility given and does not amount to any interest in the property

?  Necessary to register and pay stamp duty

Recovery of Occupation :

?  On expiry of license in default, Licensor can apply to the Court for eviction

?  Such licensee liable to pay damages at double the rate of the license fee

?  Arrangement of license in writing shall be conclusive evidence of the fact stated therein.

?  For Companies with paid up capital of 1 Cr, it is easier for the Licensor to evict the Licensee

 

 

 

 

 

 

 

 

 

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