* THE TIMES OF INDIA, NEW DELHIWEDNESDAY, JULY 24, 20136 TIMES CITY | HOME RUN

AREA OF FLATThe buyer should check the area

of the apartment as usually the area marketed and sold is the super built-up area which is then used to work out the

cost of the apartment. The developer charges for the built-up area, which includes the area

enclosed by the walls and the area occupied by the walls, while the actual usable area is the

carpet area which is the area within the walls

Purusharth Aradhak | TNN

Noida/Ghaziabad: The failure of Noida, Greater Noida and Ghazia-bad authorities to ensure transpar-ency in property deals allows fly-by-night operators and even estab-lished developers to get away with many malpractices. Cases of projects being abandoned midway and buyers being fleeced on the pre-text of cost escalation are common.

Police say they receive at least one complaint of property related fraud every day. But cases are sel-dom registered as black money and influential people, including politi-cians, are often involved. This year, around 200 cases of property fraud have been registered in Noida and Greater Noida, with NRIs being the target most of the time.

Recently, a large real estate firm opened bookings for flats in Noida Extension which are not incorpo-rated in the sanctioned layout plan and have not been approved by the Greater Noida Authority. When buyers complained, their booking amounts were seized.

After the NCR Planning Board ap-proved the Greater Noida Master Plan 2021 last August, homebuyers in No-ida Extension were hit by a clause in their contracts. “The flats were booked without levying service tax on the booking amount (10% of the total price). While the Noida Exten-sion row lingered on, the government decided to charge service tax on book-ings. The developers then cancelled many bookings claiming buyers had paid less than 10% of the price in 2010. We realized they had deducted the service tax from the booking amount,” said Abhishek Kumar of Noida Extension Buyers Association.

In some cases, buyers are lured

to raise funds for a project, which is then sold to another developer, who refuses to honour the booking unless more money is paid. “I booked a flat in March 2011. Things were going well, but suddenly the developer sold the plot to another. Now, the new developer is asking for Rs 16 lakh,” said Ravi Shankar Trivedi, a buyer.

In one case, a developer pro-posed a housing project without the approval of Noida Authority and got his layout plan ‘sanc-tioned’ by the gram samiti. “Near-ly 200 flats were booked and now he has hired bouncers to keep us away from his office,” said Sharat Singh, another buyer.

Some developers are even sell-ing plots on the riverbed for farm-houses. Surprisingly, these proper-ties are registered and get power connections. “There’s no provision to stop the registration of such il-legal property,” said assistant in-spector general of stamp and reg-istration department AK Singh, adding that the Centre needs to amend the registration act.

Ayaskant Das | TNN

Noida: The National Capital Region’s growth at the cost of villages has made available land for affordable housing but it has also laid a legal minefield with villagers increasingly going to court on the terms of compensation and the legality of land ac-quisition, sometimes years after the proc-ess is completed. This trend has made home buying a fraught affair in the suburbs, as exemplified by the Noida Extension crisis that started two years ago.

Thousands of middle-income families bought into the Noida Extension dream. People locked up their life’s savings and mortgaged their future freedom to banks believing they were getting a gilt-edged deal as the government itself had played a role in land acquisition. But in 2011, the Alla-habad High Court cancelled land acquisi-tion in a couple of villages, leaving buyers in a bind.

With the booking agreements loaded in favour of developers, homebuyers found it difficult to cash out. “The exit terms entitle

the developer to retain 10% of the total price of the house. We had to sign these agreements because we needed affordable houses and all developers had similar terms,” said Binu Nair, a homebuyer.

Other disturbing details also emerged. Until the crisis erupted, the buyers did not know the project land was leasehold prop-erty. “We realized there were several goof-ups in the acquisition process which led to the crisis,” said Ajay Shetty, a homebuyer.

Two years on, most homebuyers have remained invested in the projects hoping to see them completed after the cases are settled. They have entered into new agree-ments with developers that allow more time for delivery and possession of flats.

“The irony of the entire episode is that the state government is yet to take any step to prevent a repeat of the Noida Extension crisis. Despite our persistent efforts and appeals, the government has not opened any window or facility to help homebuyers know the status of mandatory clearances of projects,” said Devender Kumar, anoth-er homebuyer.

How to buy a flat and not lose sleep

Scams thrive on lax laws Farmers a new variable in suburban realty deals

It’s the biggest investment of your life and usually requires immense sacrifices. But staking your savings and signing on for a bank loan do not guarantee that your dream home will materialize. As a homebuyer, you need to run many checks on the property you are eyeing. Here’s how...

Prabhakar Sinha | TNN

Most middle class peo-ple in the country dream of owning a house. Also, invest-ing money in real estate is always re-

warding. But since the government is yet to prepare an ownership registry of all the properties in the country, in many cases, the title of a property is not clear. Besides, as there is no clear land acquisi-tion policy, a real estate project can run into trouble and the dream sour quickly. Besides, multiple agencies are required to give approvals before a project can take off and be completed. Unless buyers are diligent and ensure that the prop-erty they are purchasing has no encum-brances, they can easily land in trouble.

In order to help homebuyers take the necessary precautions before entering into a deal to buy a house, TOI is taking you through the various approvals and measures that a buyer should look for.

CHECKING CREDENTIALSShweta Jain, executive director of Cush-man and Wakefield, says that quite often projects face hurdles in obtaining legal approvals from all the authorities. This not only leads to delay in implementa-tion, but also, sometimes, can force the developer to scrap the project which can

cause a huge loss to the buyer. Before finding out whether a builder

has secured all the approvals to start construction, you must check the owner-ship of the land on which the project is to be developed. For this, you can ask the developer to show the allotment letter of the land, if it has been purchased from a government agency.

If the land has been acquired from farmers, check the title paper which mentions the owner. This will also help you determine whether the title of the property is clear or not. The next step should be to find out whether the devel-oper has secured all the approvals or not.

The major set of approvals that must be obtained by a builder are building plans and floor plans, structural safety certificates, no-objection certificates from the civic authorities, environment clearances, urban land ceiling certifi-cates, commencement certificates and title deed. They will also have to secure an NOC from the water authority to use water for construction.

WRITTEN AGREEMENTYou must insist on a written agreement with the developer. It should clearly men-tion the specifications of the apartment and all the terms and conditions, includ-

ing payment plan, time of delivery and quantum of penalty if any party defaults — construction deadline in the case of the developer and payment schedule in case of the buyer. This will also take care of hidden costs, if any.

COMPLETED PROJECT

If one is buying a house in a completed project, the buyer should physically check the occupation certificate, fire safety equipment and mechanism, water and electricity connections and prop-erty tax receipts for the project.

This is very important as the coun-try does not yet have a real estate regulator and well-laid-out guidelines for the sector.

The occupation certificate from a government authority, in particular, is very important. It signifies that the building is complete and fit for living; and, that, it has not only got all the approvals in place but also that it has adhered to all the norms and building bylaws.

In NCR, purchasing a property is even more risky if one does it through power of attorney – in this, the title of the property remains with the original allottee but the rights to its use and all

other benefits vest with the last buyer, who can also transfer the property rights to a new buyer. Even the share certificate of a property in a society continues in the name of the original allottee.

In this situation, it is difficult to find out who is the last owner. This leads to fraud many a times, and a person who is in possession of the property can claim to be the owner of the property with false documents and even sell it off. This is one reason why banks refuse to give a loan to a buyer who is buying a property from a person who owns it through power of attorney. Therefore, it is advisable to buy freehold property from the legal owner alone and get it registered in your name.

USING BANK FOR CHECKINGIf you are planning to buy a flat, the best course of action is to buy it through a bank loan. A senior official of HDFC Ltd says that since the bank accepts the apartment – which is yet to be construct-ed in a new project – as collateral when they give a home loan, they do all the checks, including that of the credentials of the builder, to ensure that the market value of the collateral does not diminish.

So, even if you have adequate money, take a small loan from a bank so that it too is involved in the whole process. Later, if you want, you can prepay the loan as this does not attract any penalty.

When buying a property, no amount of scrutiny is enough. It always pays to be cautious. We tell you how to figure out the value and track record of a devel-oper and get the best deal when you have made your choice.

Background check of the devel-oper: This will help assess the execu-tion capability of the developer on time-liness and quality. It will also help to compare the project with that of the developers’ competitors. The financial soundness of the builder should also be studied as it will indicate his capability to execute and complete the project in absence of external borrowings. The developer should have a traceable track record which is a good reference point for new launches and under-construc-tion projects. The number of projects delivered by the builder and the time taken for delivery should be considered.

It is also important to be aware of the developers’involvement in any legal feud in the past so one can judiciously make the buying decision.

Fundability of the project and financial institution affiliations: If the flat has to be mortgaged, it is always helpful to identify lenders and finan-ciers for the project. This ensures au-thenticity of the titles and approvals as these would have been investigated with greater diligence.

Specifications: The buyer should monitor structural and finishing speci-fications which are spelt out when the project is launched and marketed. How-ever, one should supervise the progress through frequent visits to the site and ensure the specifications, as shown in the sample flats, are adhered to. In case of any difference, one can write a formal complaint to the developer and also ap-

proach the consumer court.Price of the apartment: The total

price of the apartment is a factor of the basic selling price (BSP) and the cost incurred for external and internal de-velopment, power back-up, preferential location charges, club membership,

maintenance and parking. The costs that are not generally accounted for by the buyer are stamp duty and registra-tion charges and maintenance cost per square foot. Most builders may also take the society maintenance charges for up to two years in advance. Typically, the developer markets the projects on BSP and mentions additional costs sepa-rately. In certain projects, pricing may vary depending on the amenities and specifications. Brokers may offer dis-counts and pay back commissions to the buyer. The buyer should compare the prevailing rates and values with those of similar projects in the area or com-parable locations.

Mode of payment: Although there are a number of payment modes offered by developers for under-construction or newly-launched projects, most preva-lent are down payment, construction-

linked and flexi-payment plans. Down payment plan requires the buyer to pay around 10-15% of the cost as booking amount, around 80-90% within 45-60 days of booking and the remaining at the time of possession. This plan is the most economical as the developer offers huge discounts but the risks are higher if there is delay in completion. The construction-linked plan has a rela-tively lower risk although it may the most expensive. In this plan, the buyer pays 10% of the total cost of the apart-ment or a specific amount for booking and the rest is paid at various construc-tion milestones. The flexi plan is a com-bination of the earlier two plans where-by one is required to pay around 30-40% at the time of booking and a similar amount is pegged to construction mile-stones with the rest to be paid at the time of possession.

IT PAYS TO BE

CAUTIOUS

Hurdles in obtaining legal approvals can not only delay implementation but also, sometimes, force a developer to scrap the project

SHWETA JAINExecutive director | Cushman&Wakefi eld

The occupation certifi cate from a government authority is very important as it signifi es that the building is complete and fi t for living; and that it has not only got all the approvals but also has adhered to the norms

CHECKLIST

CERTIFICATE FROM SOCIETY | One should check the share certifi cate issued by a society. This establishes the identity of the seller. The share needs to be transferred in your name as the purchaser. This certifi cate forms a part of your ownership deed. NOC FROM SOCIETY | Check NOC issued by the society in case of a resale. This NOC states there are no dues payable by the seller to the society and that the seller has complied with the conditions laid down by the society. OWNERSHIP TITLES FOR GROUP HOUSING COOPERATIVES | It is essential to have the shares or the ownership documents allotted or transferred to ascertain the legal rights.

If you are buying the property directly from a builder, you should check the title papers showing who the owner is. This will tell you whether the title is clear or the property is under litigation, whether the land is freehold or leasehold, whether the seller has the authority to develop and sell the property, and if the property is free of encumbrances. A clear title can be ensured when there’s a conveyance deed in favour of the seller. CHECKING BY BANK | For those availing a loan, the bank normally appoints its own lawyer to check the title deeds. Or, you hire a lawyer and ask for originals, don’t accept photocopies.

Another important document is the completion certifi cate issued by the municipal authorities. It shows whether a building complies with the rules in respect of height and distance

from road, besides other things, and whether it is built according to the

approved plan. You should also check the occupation certifi cate. It certifi es that water, sewage and electrical connections are in place.

Another document that needs to be checked is the purchase agreement between the developer and the authority or the agency from which the developer has bought the land. It ensures the seller (developer) is entitled to sell the property, states if there is a mortgage on the property, and shows if the mortgage money has been paid off. DEVELOPMENT AGREEMENT | If the property has been developed jointly by the owner and a builder, scrutinize the joint development agreement, which mentions the terms of development of the property.

Often a project faces delays in getting legal approvals from a number of authorities. Non-compliance may result in scrapping of the project and reduction in market value. The approvals to be obtained are building plans and fl oor plan approvals, structural safety certifi cate, no-objection certifi cate from the civic authority, environment clearances, urban land ceiling certifi cate, commencement certifi cate and title deed. Upon possession, the buyer should physically check the occupation certifi cate, fi re safety equipment and mechanisms, water and electricity connections and property tax receipts.

� Check with people living in a developer’s earlier projects about the quality of work

� Prefer projects which are about to be completed

� Check project’s legality—land title, status of layout plan and other NOCs

� Check difference between super area and carpet area of fl at

� In the name of super area, developer adds proportionate area of common facilities to each fl at. This ‘load’ can range from 15% to 45%

� Go for construction-linked plan because you have to pay according to the pace of construction

� For loan, avoid banks suggested by developer

� Seek service of bank lawyer who can provide you the valuation and legal status of property for a nominal fee, usually Rs 3,500-4,000

The risk of clear titles and documentation is signifi cantly less if the property is purchased from the urban development authorities. However, if the fl at is to be purchased from a private developer or colonizer, one should seek legal assistance to check documents related to land ownership, licences and approvals, allotment letter, sanctioned plans etc.

TITLES AND DOCUMENTATION2

CERTIFICATES3

TITLE PAPERS4

MUNICIPAL CLEARANCES5

LIST OF APPROVALS7

For DelhiPerpetual lease deed | Conveyance

deed | Sale deed in case of resale

properties | Mutation paid | Last paid house tax

receipt | Last paid electricity and water bills |

Completion certifi cate | Sanctioned plans

For Noida/Greater NoidaAllotment letter from Noida Authority (in

case of a plot or fl at built by authority) |

Registered perpetual lease deed | Proof of

payment of lease rental, one-time or yearly | Transfer memorandum and registered transfer

deed in case of resale property | NOC from

Jal Department | Share certifi cate and NOC from society (where applicable as some old sectors or group housings have been allotted

to societies) | Completion certifi cate for houses

with sanctioned building plans | Mutation letter in name of current owner

For GurgaonAllotment letter/builder-buyer agreement in

case of DLF or HUDA properties | Registered sale deed in name of current owner with all

originals from previous owners | Sanctionedbuilding plans and completion certifi cate

in case of independent houses | Mutation

letter from DLF or HUDA | Proof of up-to-date payments of power and water and house tax

charges | NOC from RWA or maintenance offi ce in case of group housing

DOCUMENTS1

PURCHASE AGREEMENT6

DESIGN AND LAYOUT

Buyer should fi nd out about contractor, architect and structural engineer in

order to assess quality of work as this is critical if fl at is for

own use. Cross-ventilation and ample sunlight should be

ensured.

This agreement has all the clauses, terms, conditions and legal implications for the buyer and developer should there be a default on either side. Important points are interest, penalty and default charges for a buyer and clauses of refund of payment in case the project is not completed or is scrapped. Also, the penalty in case of structural defects and delay in construction should be included. The agreement should also include a clause to transfer the undivided and common land to the society and owners which will ensure no further development or construction by the developer after the project is completed and handed over. The agreement should be registered.

BUYER-SELLER AGREEMENT