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Home buying process - Critical steps you must follow

Buying a house can be an overwhelming experience, both financially and emotionally. To help you through the process, here we share with you a step-by-step guide to buying a house.

1. Identify the location/property: The first step for you to take when buying a property is to narrow down a location or set of areas that you are interested in. When doing so, maintain a checklist with you things you like or dislike about certain areas/neighbourhoods. You will also want to evaluate which properties meet your needs in terms of property features like the layout, number of bedrooms, size of the kitchen etc.
   
   

   If you need a loan, understand whether lenders are active in the neighbourhoods that you are considering. Not all lenders lend in all areas. Especially risky are areas that might be under dispute or are unauthorised. Similarly, when buying from a developer understand whether lenders have approved the development or not, if you need a home loan to buy this property.



2. Legal due diligence on the property: There are two types of properties you can buy, something that is pre-existing, or that is being newly constructed. In either case, you must be sure that the seller owns the property and has the right to sell the property to you, and that later on you will not get into any confusion about ownership rights.
   • Pre-existing property: When you buy a pre-existing property, you need to firstly transact with the seller, agree on the terms and conditions, verify documents, and finally get loan approval if you need a loan.
   
   
   • Under-construction property: When buying an under construction property confirm that the development is legal and that sanction plans have been approved. Otherwise, you might end up paying money for something that is illegal.
   
   


3. Understand your payment plan: Depending upon the builder and the type of property you are buying, you need to be aware of the payment plans that you will be asked to sign up for. If you are buying a pre-existing property, chances are that you will be expected to pay a lump sum for it today, rather than spread the payments across a future time period.
   
   

   If you are buying an under-construction property, you might have some flexibility regarding the type of payment plan. Typical plans are of 3 types:

   • Construction linked: You pay based on the progress of the construction of the property. Can be safest because you pay for progress rather than uselessly be out of pocket to fund a developer even when the property is delayed.
   
   
   • Time linked: You pay according to a set timetable, whether the construction is on time or not. Risk can be that you are contractually bound to pay your instalments, even though the property is making no progress.
   
   
   • Down payment: You pay for the property up front, but then are exposed to the risk of delays and whether the property will get completed at all or not.
   
   

   The common feature in all payment plans will be that you will have to pay an initial amount (could be up to 10%) as down payment.



4. Apply for loan approval: If you need a loan for your purchase, then it is advisable to simultaneously start the application process with potential lenders, along with the above steps. This can give you some insight on the size of the loan that you will be eligible for and the terms on which you will get such a loan. Don't delay this process as often your deal can fall through if you do not have adequate funding in place for your purchase. The lender will require certain documents from you regarding your income and tax status, as well as some property related documents. You can also get a pre-approval for a loan in case you have not selected a property as yet, but want to save time later when you have narrowed down a property. Please also understand how the lender will disburse your loan, in a lump sum or according to the payment plan you sign up for.


5. Allotment letter: Once you have applied for a booking in an under construction property, the developer will allot you a flat. You will receive an allotment letter from the builder. This allotment letter includes the details (like flat number, area, price) of the flat that has been allotted to you, the payment details, any extra charges levied to you amenities such as car parking, club membership, and maintenance charges to be levied at time of possession and occupancy. If you have a preference for a certain floor or view, then you must request this from the builder at the time of the initial application with the builder. Once the allotment letter is given to you, your flexibility to change your unit might be limited.


6. Sale agreement: If you are buying a pre-existing property then the seller will sign a sale agreement with you after you have agreed on the terms of the sale with the seller.
   
   

   If you are getting an under-construction property, then after you have booked the apartment, over the coming months the developer will sign a sale agreement with you. This is a contract which signifies that the property has been sold to you and also highlights the details of your unit. Please cross check that all the details that were promised to you, especially the price, square footage, delivery date and penalties for late delivery and payment plans (penalty for late payment) are what you had agreed upon with the developer.



7. Possession and Registration: The final step in the buying process is the possession of the property being transferred to you and your responsibility to get it registered in your name. Possession is the physical transfer of the property, but is not sufficient to establish legal transfer of ownership. For this you will have to get the property registered in your name in the local municipal records, with the seller documenting that the property is being transferred to you. At the time of registration you will also have to pay a stamp duty which is a government tax levied on property transactions.

Most people who buy a house find the process can be a strain, but hopefully at the end of it all you can finally have a place that you can call home sweet home!

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