This article of mine first appeared in MoneyControl in Aug 2017
Since there are multiple check-lists floating around the Internet on buying an apartment in India, this piece will cover some of the essential points out of those, and dwell on the more practicable and real ones among those.
First thing first, hire a Lawyer, paying him Rs 5,000 to Rs 10,000 to go through all documents on the land and the property – mostly, you won’t be able to understand those completely by yourself – Title Deed, Land Use, Approvals from Municipal Corporation, Occupational Certificate, 7-12 paper (Maharashtra). In case of resale, this will cover receipts of Property Tax paid and Loan Release document from Bank in case of fully paid up loans on the property.
Estimate the Total Cost of Ownership, adding Parking charges, Stamp Duty, Registration charges, new furniture / furnishings that you may have to purchase. These all could contribute themselves to 5-20% of the bare cost of the apartment.
What is the final usable area of the apartment, especially in case of apartments under construction? Most of the times, the sale would be on super-built up area. You need to be comfortable with the liveable area you will finally get to use.
Estimate total cost of running the home? This will include Maintenance charges, Property Tax, increased commuting charges as compared to your present place. Please ensure that this fits in your monthly Budget.
Check whether most of the other occupants in the building are like-minded and in the similar age group. If the residents are not like-minded, conflicts emerge eventually over how to maintain the building, adjusting on parking spaces, whether pet animals are allowed in the elevator. I would avoid staying in buildings with a mix of 1BHK, 2BHK, 3BHK apartments – different budgets and income levels of occupants – will cause grief in the long run.
If you are buying the apartment as an investment, think through the profile of your typical tenant and whether the location of your apartment is good enough for such a tenant. If it is a commuting couple, is the apartment close to the railway station? Is there a parking space? Will they require two parking slots?
Speak with the building watchman or the watchman of the neighbouring building in case your building is under construction to find out the situation of water supply, electricity supply, availability of domestic help, level of security & safety, neighbourhood grocery stores, deliveries from restaurants, exercise gyms, day care centres, hospitals and schools, depending on your life situation, and your need.
Think through if some neighbouring small building or bungalow has the potential to be converted into a taller building and will it block your view in the coming 2-3 years? Ask around from the security guard of such buildings if there is some discussion going on for redevelopment.
Find out whether the Home Loan you are thinking about is the cheapest loan? Explore rates for woman co-ownership or senior citizen, if applicable. Customer service in private sector banks and public sector banks is not too different in Home Loans since our interaction is minimal on an ongoing basis. Hence, fish for the best rate.
Discuss with the seller upfront on cash component if any. These things spring up at the last moment, and most of us do not have access to large amounts of cash.
If you are buying the apartment as an investment, please ensure that it fits in into your overall asset allocation, and that you have a balanced mix between equities, debt instruments and real estate. I would recommend a 40:20:40 mix between the three for investors below 50 years of age. Also, calculate your annual returns from the real estate as a combination of 2-3% rental income plus expected capital appreciation less maintenance charges.
Find the average range of prices in the neighbourhood by asking around. One should speak to people in 2-3 neighbouring buildings to get an idea. There could be a range of 5-10% difference even within neighbouring buildings, depending on quality of construction, exact configuration of apartment, etc..
If you are buying an under-construction apartment, then visit buildings delivered already by the same Builder to check out on quality of his construction, assuming that that would be the minimum quality he would deliver here. You can ask occupants of that older building whether the Building was developed on time, whether the Developers handed over the building to the Society amiably, etc..
So all in all, buying an apartment is possibly the biggest decision you would take, ranking after your marriage and your having a child. You have a responsibility towards yourself and towards your family for doing all the above due diligence before buying your apartment, so as to ensure that “What you thought is what you got”!