Buying Apartment in Bangalore

“Imagine, living in the heart of the IT corridor, in a community that offers you everything and more. Imagine living in close proximity to some of the best educational institutions, entertainment centres and malls. Too good to be true? Well, that’s exactly what XYZ offers you“!!!!!!!!!!!!!!

Is this the 10,000th time you are seeing such an ad on the newspaper. Is your dream home just around the corner as the ad says! Or you are still in doubt if the process of buying a home is that simple as advertised?

Everyone in India, atleast in the cities, dream of owning a house. Be it flat or apartment or plot, the process is long and tedious. So are people’s efforts for realizing their dreams. Often, the only time you feel happy about building/buying a house is when u r dreaming!!!!! From then, till you buy one or construct one or get cheated in the process, the effort is gigantic and there is a sinking feeling that government has done very little to ensure credibility of real estate business.

This post documents some of the efforts/issues/process of buying a new flat in Bangalore. If you are buying plot or buying second hand flat or buying a yet to be built flat there will be some modifications in the procedures but still this post will act as a good starting point.
The process.
a) Search for appropriate location and visit various flats of builders – big and small.
b) Check with your budget if things are working out and your requirements/dreams met.
c) Try to compromise on dreams and conflicting requirements.
d) Finalise on the flat or the builder
e) Buy

Sounds simple!!!!!!! But, more often than not, the implementational procedures, the rights and wrongs are so difficult that it becomes impractical to implement the simple procedure above.

Hence my efforts in documenting the procedure and technicalities involved. The post is not an encyclopedia of all real estate terms, but atleast it will give the basics of how real estate works and helps you save time while you are learn by trial and error!

Technical terms

First get introduced to whats Encumberance certificate, khata, tax paid receipts, Sale agreement, Sale deed and a list of words used in real estate.

a) Encumberance certificate:- This document is issued by the sub registrar office in the same locality. This basically tells if the land/plot/flat is mortgaged for some loan, that is, if a loan has been bought on this property.
b) Khata certificate:- There will be a computerized document with the sub registrar office which basically talks about the owner of the plot/land in case flat is yet to be built, or the flat itself, if you are purchasing second hand. In case of first purchase of the flat, get the khata certificate for the land the builder has bought. I am not sure about the exact nature of this document but just that its a registered computerized information available with the government about the plot. If khata has not been purchased, it can be done if the property is not in dispute and all other documents (like tax paid receipts, sale deeds etc) are in proper order.
More information about khata here

c) Tax paid receipts for the property:- Once you have liked the flat and the budget suits you, some documents need to be verified. First among them is to get the latest tax paid receipts (issued by BBMP). Collect xeroxes of the latest tax paid receipts from the builder

• For the land he has constructed on
• For the flat if its more than an year old.

Remember that sub registrar office deals with Registration, Khata etc. BBMP office is only for tax payment. Usually BBMP will look at Saledeed, Khata and will issue the receipts of Tax in your name. It can be in previous owner or builder's name, but better to change it to your name once you have bought the property.
To know the details of property tax, go to http://www.bbmp.gov.in and follow the correct links. You need to enter 2008-2009 tax receipt number and you can verify the details about whose name the tax is being paid for the property, how much amount has been paid, which year and so on.
d) Legal heirs document:- Again I am not 100% clear on this. But there are documents which tell whose name the property is in, from whom did they buy, who are the legal heirs of the builder, previous owner of the land from whom builder purchased etc.

So first step before you book a flat and go for the sale agreement is that, you ask for
- Encumberance certificate for the plot and the flat
- BBMP approval certificate for the building
- Khata certificate for the land and the flat
- Latest tax paid receipts for the plot and the flat
- Legal Heir Documents and the previous Sale Deeds etc
Just ask for xeroxes of all land documents with the builder.

Go to a real estate lawyer (Find a reputed lawyer on your own)
Ensure that the papers are in proper order.

If the lawyer wants any more documents, ask for it, get it and finally the lawyer will give a legal opinion certificate. Once you have it, it means that there are minimal chances for cheating.

e) Sale agreement – (Optional - This has very limited legal value and is only between buyer and seller) First agreement to be signed on stamp paper between the buyer (you!) and the builder. The information it will give is: booking advance you are giving to the builder, which apartment you will be buying, what is the total area (like super built up, built up and carpet area), whats the final amount you will pay the builder & by when you should give the final amount.
Catch:
1) If you are paying in black (explained later), then either the agreement will mention a lower value or no agreement will exist. In that case, only trust on builder can help!!!!!!!!!
2) Many builders will not give the sale agreement immediately. Yet again, either just dont take that flat or trust the builder!!!!!!!!!!!!!!!!!
3) Booking advance will mostly be non-refundable. So be very careful. Take your time. Ask for a draft first, verify it and then only proceed. Once the booking advance is paid, you cannot do anything if things go wrong. Remember the sale agreement will mention it as non-refundable. So even a case in court will not help.
4) Ensure that the sale agreement mentions that the amount to be given by the buyer includes VAT, service tax, common amenities charges, car parking etc. ONLY the registration cost will not get mentioned in the sale agreement. Apart from it, all other costs have to be mentioned. Thumb rule is that the total amount you incur = Total amount to the builder in sale agreement + registration charges to be given as DD to the sub registrar of that locality.

f) Sale deed: This document is the almost the final document that basically states that you are the owner of the apartment. It should be certified by the sub registrar of that area. It basically states for what amount you are buying the apartment, its address. Its a conformation that the government is aware that the property is in your name and in its records is registered in your name. For the registration, you need to shell out quite a good percentage of total amount of your flat (say 7.85% of the total amount you are paying the builder for the flat).
Catch:
1) The government fixes guideline values so that you dont undervalue your property. So the rates may be like Rs. 2000/sqft for jp nagar etc. This means you cannot register the property at less than Rs. 2000/sqft and you have to shell out Rs. 157/sqft for the registration itself (payable by you, the buyer of property).
2) What you pay to the builder may be more than the guideline value. This is called market price. Now say you are actually buying the flat for Rs. 3500/sqft, then this is the market value
3) In Bangalore, its very common to see that buyers buy at market price but register at government guideline value. That is, you buy the apartment for Rs. 3500/sqft but registered amount in the sale deed shows Rs. 2000/sqft which is the government guideline value. Is it legal ——- I frankly dont know, but its common practice.

g) Super built up, built up and carpet area:-
Super builtup area is the area which includes carpet area + walls + common area (lift etc).
Builtup area includes carpet area + walls (generally 85% of super built up area)
Carpet Area is the exact area that lies between the walls (generally 90% of builtup area)
Car parking is seperate and is generally not included with the superbuiltup area.
E.g : Super built up for 3 bhk flat can be 1700sqft
Built up for the 3 bhk flat can be 1445 sqft (85% of super builtup)

h) Black Vs White money:-
This is also very common, certainly illegal practice in real estate in many cities in india including bangalore. My guess is that 90% of the real estate dealings deal with black money (very sorry state of affair, but remember the poor politicians should somehow earn crores of money before the next elections, what is the easier way than money in black).
Basically black money means money not being part of any receipt to avoid payment of tax.
So suppose if your flat costs Rs. 50 lakhs, and you are showing only the guideline value in the sale deed, say 16 lakhs. Then there are good chances that you will pay Rs. 34 lakhs as black (i.e without a receipt, or without mentioning in sale deed). This money is unaccounted as far government is concerned (i.e no tax will be paid on the rest of the amount, it is the builder’s black money).
So while enquiring about rates and before finalising your sale agreement and giving the booking amount, clearly ask if the deal is black/white. If white, aal izz well.. If black, your risk.

Details while asking for the price:
There are lot of ways to deceive people about the actual cost that will be finally borne by the buyer.
Generally the per square foot cost which the builder says should include all charges i.e service tax, VAT, common amenities cost etc. Just confirm that the rate he tells covers all this (This will clearly be specified in the sale agreement). The only other cost you have to pay is the registration charges to be given as DD to sub registrar of the locality.

Bribes:
Indian systems dont work without a bribe (as of jan 19 2010). Some amount will go as bribe in the sub registrar office, for getting khata etc etc. Ask the builder about this and ensure that it is not beyond reach.

Hope you have understood some technicalities involved in real estate business.
Summary is:
1) Get the xeroxes of tax paid receipts, encumbarence certificate, khata and related land documents, get it verified by lawyer and go ahead only if he gives a legal opinion that is favourable.
2) Get the draft of sale agreement and the sale deed and get it verified by lawyer.
3) Then give the booking amount and take the sale agreement from builder on stamp paper.
4) Give the final amount within the date mentioned in sale agreement.
5) Get the sale deed registered from the sub registrar in the locality.
6) Get the khata for the property.

Thats it.

Hope you are enlightened a little more about purchasing a dream home.

In my next post i will write about getting a home loan and the practicalities/difficulties involved.

All the best……!!!!!!!!!!!!

Useful links
BBMP online site
99 acres
magicbricks
rediff emi calculator
This site is good in calculating for a given loan amount, rate of interest, and tenure,
what is the total amount (principal + interest), yearly breakup, EMI payable per month, principal and interest part in the EMI.
How to buy apartments in bangalore

2017 updates

Buying a site is also very similar to buying a apartment. Here is the process:

• First get the documents xerox from the brokers/owners. Some brokers refuse to share documents unless sale agreement is done. DO NOT ACCEPT THIS. Politely inform - Legal compliance is very important as this is your life time investment. NO DOCUMENTS, NO MORE PROGRESS. Do not buy into any arguments here. Brokers/Owners give a lot of reasons about tying the documents xerox with advance payment OR sale agreement. Some brokers/owners insist on final price before sharing documents. AGAIN - As a buyer, you can discuss approximate prices, but DO NOT COMMIT to prices. This step is explained in detail in the later section.
• Verify the documents yourself and from a lawyer (steps below). If lawyer or you need more documents, ask for it, this is the time.
• Start Bank loan process.
• Discuss with the broker/owner whats the advance amount (typically not more than 1% to 10% of the total amount), sale agreement terms and conditions like by when the final amount will be paid and whats the final amount? Also, before sale agreement is made insist on SEEING the original documents (may be by going to the bank where the documents are, if necessary).
• Get the Sale Agreement done.
• Bank loan process may ask for more documents if necessary.
• Get the bank loan sanctioned.
• Get the Sale deed done by registering at the sub register office on the agreed date by paying the owner the necessary cheques/demand drafts/cash.
• Apply for Khata
• Apply for change of name in Property tax receipt.

2017 updates - Documents

• Sale deed.
• A khata for the property
• Property tax paid receipts
• Encumberence certificate for the past 15 years.

FAQs on where you can get stuck

• If its single owner, then its one document, but typically over a period of last 20 years, more than one owner may have changed hands. So multiple sale deeds are present. Since its changed multiple owners in the past 20 years, then all sale deeds are needed. Check Each of the sale deed if the buyer in each case is the seller in the next sale deed and also check the amount and date. Typical scenario of a problem is when buyer in one sale deed is no more and his family has executed the next sale deed, then it must be thoroughly checked.
• If the broker is not agreeing to a meeting with owner, typical its a concern. This happens if owners know that there are legal risks, hence they will avoid meeting the buyer. This is a very difficult thing to predict as owners can be abroad, OR they may not have time OR they may be too big a builders with several such properties. Still it makes sense to visit the owner face to face or have a telephonic conversation.
• Executing through power of attorney. This is a common scenario, but power of attorney document should be studied in detail as to who will sign on the sale deed and his name is there clearly in the power of attorney document.
• The Broker/Owner says no to ANY document you request. Lets say lawyer OR you yourself ask for a no objection certificate from all the family members where its a inheritence property. Broker/Owner says not possible. Do not proceed in such cases or proceed with great caution. I have seen cases where broker says he has LENT money to the Seller and so he will finalize the final prices etc. He also said he had a non registered sale agreement with the seller. He refused to show the sale agreement saying he does not want to disclose the price at which negotiations have happened. Absolute NO NO to proceed as broker/owner is hiding information.
• Try to go with all white money. If the money you are paying owner is say 50 lakhs, let sale deed show 50 lakhs. You can pay the stamp duty and registering at say 7% rather than going for white and black money. Even after de monetization, where the government claims elimination of black money, nothing has changed on ground. Brokers and Owners freely ask for Cash/Cheque for a percentage of amount of the total amount which will not get covered in sale deed. So much for eliminating corruption. I have written another blog where I explain why Real estate, Politics are all controlled by bankers and hence do not expect things to change. Honesty is never the best policy in real estate.
• If any of the documents are unclear, do not hesitate to consult lawyer, take your time before the sale agreement/advance payment has to done. The brokers/owners are very good in misleading the buyer to pay advance etc. Do not worry about others buying property, market prices rising etc which are reasons given by broker/owners. Say you need 100% legal verification after which you can proceed.