BEFORE PURCHASING A FLAT FROM A

BUILDER

Things to checkThings to check

Dr Manas R Mishra

BUILDER MOTO :: ONLY PROFIT Many builders promise a lot; but after

booking and agreement, they tend to extort money at all steps in the form of

Hiding some amenities from agreement document and later denying that facility.

Using sub-standard construction materials.(this requires constant monitoring at the construction site)

Asking for payment of installment before completion of agreed terms.

Asking Falsely high registration charges and service charges.

Registering flat/ property for a lower price than actually sold to the buyer.

Delaying possession of flat.Hiked Lawyer fees.Asking for any other fees/ charges other

than those mentioned in this presentation.

BEFORE APPROACHING A BUILDER Check for available properties in the same

location on sites like magicbricks, 99acres, maakan.com, indiaproperty.com etc

Talk on contact numbers and register on available websites.

Check for Bank loans available for the project, reputed banks generally do a good checkup of documents before lending loans.

Contact any known customer from the same builder

Sort list properties that match your requirement for ground survey

GROUND SURVEY Visit sufficient sites before confirming your

choice and price negotiation. See the extent of work completed at the time;

this will give estimate of time of possession. Approximately it takes more than 1 year after completion of the highest floor roof; for the brick work, tilling etc.

Choose your floor, check other projects around the site; also Valuation of flat increases with increase in no. of floors (higher the floor is , more is its valuation i.e more tax )

Direction and face of balcony Vaastu compliance

Check for distance from Main road School Hospital IT parks/ job prospects Railway station/ Airport Try to find out if any major government

project upcoming near the location. Other housing projects nearby.

Ask for Non-encumbrance certificate from sub registrar office and land documents atleast for past 15 years to check for any litigations.

AT TIME OF AGREEMENT After negotiation of price; builders are in a

hurry to get the agreement signed. they may do it the same day or give a date and insist of quickly completing the simple procedure.

Buyer should insist on getting an email copy of entire agreement document atleast 2-3 days prior to the day of signing. (builder will surely resist this)

Read agreement email carefully, ask for professional advocate help if required; compare with previous agreement of any other flat if purchased earlier.

Compare with project brochure and promises of builder on amenities and interiors to be exactly reflected in the agreement. Eg. Builder and project brochure may say interior painting and tiling at time of agreement and deny or ask for additional charges later for the same. Builder will later quote the agreement and deny the promised facility.

On day of agreement read every line before signing it finally

PAYMENT INSTALLMENT TERMS Before agreement negotiate for best

suitable payment terms available and try to keep as much possible payment after completion.

Before paying of installments check that actual ground work has completed. It is a general tendency of builders to ask for installments about 2-3 months before completion.

AT REGISTRATION Insist on getting an email copy of entire

Registration document prior to day of registration and read carefully.

Check exact amount on sale deed/ registration. Builders tend to register the property for less than actual; to reduce stamp duty and service tax; while they charge erroneously high charges on actual from the buyer; And extort some more money in this way.

Builders ask for about 10% of total amount as registration and service charges.( 5% for stamp paper+2% as deposit+3% as service charges)

ACTUAL CHARGES AS ON TODAY (31JAN 14) AS PER REGULATIONS Stamp paper – 5% of total cost of flat Stamp duty/registration fees - 2 % of

total cost of flat Service tax calculation: Service tax is

charged on cost of built-up and amenities if any. Cost of land is excluded. Service tax is calculated at 12.36% of 25% of the cost of built-up (i.e. 3.09% of total cost of flat excluding cost of land).

SERVICE TAX @ 12.36%Servive Tax Nil if < 20 Lakhs.

Apart from cost of land (excluded). In a construction of multistory apartment, the

building material is also free of service tax. So the overall rate of abetment for

construction of a building is 75%. That is the reason why service tax @12.36% is charged

only on 25% of built-up cost.

Builders ask for service tax, including cost of land (i.e. entire cost of flat) which is a

significant amount falsely higher than the actual tax to be paid (tax theft by builder is

another factor, difficult to control).

LAWYERS FEES All builders have their specific Lawyers.

And they tend to extort some more money during registration using persuasive skills of lawyers.

Negotiate on lawyer fees with builder prior going for registration. As while in court with the lawyer it becomes too awkward for negotiation and buyers becomes a prey to the lawyers tricks and end up paying unnecessarily.

BEST OF LUCK

There may be some other tricks with the builder to extort more money from the buyer, so be aware!!!

Now a days almost every information is available on net and forums. Always check and confirm, whenever in doubt.

All the Best…!!!