For a middle class person, buying own home is probably the biggest investment one makes throughout his lifetime. Its usually bought with a lot of enthusiasm, after a long wait and with hopes of everlasting memories. But this big investment comes with equally big risk if necessary precautions aren’t taken to keep those risks at bay. Hereby we list some very common real estate traps you should know before taking on any real estate deal:
1. Area that you are buying
Today, most builders sell flats on the basis of super-built up area. Spaces, such as balconies, terraces, voids and open parking lots, are not included in the FSI calculation because these cannot be monetized by law. However, in many cases, once the layout has been approved, developers convert these into habitable spaces and then charge buyers based on the total area of the apartment plus its share of common spaces which is called Super-built up. The biggest concern here for a first-time buyer is calculating the super-built up area or his share of common spaces. This is difficult and usually practically impossible for a buyer without professional help and he has to approve what the builder is claiming his flat’s super built up area to be.
2. Clearance certificates
Before declaring the project to be ready for occupation / possession, builders are supposed to clearance certificates from local authorities for power, water, and sewage connections. For this the builder needs to pay “External Development Charges (EDC)”. These charges are clearly mentioned in the agreement and are distributed among buyers in proportionate area of their flat. Builders get this collected from flat buyers but at times fail to pay it to local authorities. In such cases, EDC penalty is levied which is again passed on to the buyers, which you should be aware of. But buyers rarely read the fine print, and are ignorant of these facts. After paying the EDC, the local authorities check the project if its completed as per approved plan and issue a certificate to that effect. But the process doesn’t end there. The builder needs to make sure that adequate fire safety equipments, fire exits, safe electrical wiring etc is done to make the project hazard-free. After this the authorities issue the occupancy certificate only after which builders can offer flats for possession. But this certificate is at times neglected by builders and they open the project for possession without it. Buyers do not notice this in the haste of possession of the new flat. Projects not having occupancy certificates usually face great difficulty in obtaining home loans and during re-sale of the flat in the future.
3. Paying for parking space separately
Parking space within a building, as per Supreme Court verdict, cannot be sold separately. These are common spaces, which have to be handed over to the society for management. However, many builders now include the cost of parking space in the quoted price and mention it in the sale deed. But in most cases, home buyers have to pay extra for parking, that too in cash and without proper documentation. If parking space has not been included in the sale deed, be rest assured, its illegal for a builder to demand charges for parking space from you.
4. Pre-EMI sharing schemes
Most home buyers usually get home loans approved and disbursed according to the stage of development of the project. The loan gets disbursed but the buyer need not pay any EMI till the project is completed. He only needs to pay the interest on the amount disbursed. Most times builder’s share this interest portion upto certain period like 12 months, 24 months. Bargain with the builder to pay the full interest until the project is completed. This will not only relieve you from paying undue interest but would also pressurize the builder to complete the project on time or at the earliest.
5. Illuminating Modern-flats
To lure buyers, builders usually show sample flats to buyers which are decorated with modern furniture, having the best wall texture and many home décor equipments. After buying and at time of actual possession, the buyer finds that the equipment may not be the same as in model flat, many may be missing or may be smaller. It’s a wise idea to carry a pen, paper and measuring tape with you to note down all the amenities that are installed in the property. Then, cross-check with the builder whether the exact things will be provided to you or not.
6. Buy-back schemes
In times of doom, Builders offer buyers the scheme of buy-back of flat at certain price in the future. This is to ensure the buyers that the price of the flat would only rise in the future. The future buy-back price is mentioned in the agreement and is a certain percentage higher than the buying price. This is a good option, but you should not trust every builder that offers these schemes. Builders may not keep their promise and leave the buyer in a helpless condition unless everything they promised is documented. This situation is all the more fruitless if the market rate for the property goes down and that’s when you are willing to sell or when the lock-in has ended.
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The author is Director, Bonanza Portfolio Limited