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Buying a house? Be careful…

Smita Tripathi

It came as a bolt from the blue for executive Rakesh Mehra. He had decided to mortgage his five-year-old flat for a Rs 10 lakh (Rs 1 million) education loan so that his son could go abroad. Imagine his shock, when the bank told him that the entire apartment block in which he lived had already been mortgaged by the builder.

Mehra isn't the first person to discover that buying property in India is a tricky affair. Until a decade ago it didn't matter that much because people usually bought from a developer or as part of a cooperative. But, as middle-class Indians become more prosperous they are trading up and, more often than not, buying readymade apartments which have had previous owners. Suddenly they are discovering that there are many manmade traps into which the property buyer can fall.

Considering that buying a house is likely to be one of the biggest financial investments that most people make in their lifetimes, extra care needs to be taken to ensure that they aren't taken for a ride. We offer a few tips.

The first thing to be certain about is the title deed. Ensure that the title is in your name. Also, it is crucial to ensure that the person selling has a clear title to the property. A title deed can be written in simple language stating that the property has been sold to you for a consideration and that you are now the rightful owner of the property.

However, title deeds can contain a lot of legal jargon and it is best to hire a lawyer to look through it. Most importantly, any sale of property worth more than Rs 100 must be registered. The registrar's office allows you to conduct a title search and this ensures that there aren't any other claims on the property. Never skip the title search.

Buying property becomes more complicated if it is being done through a power of attorney. In Delhi, for instance, most Delhi Development Authority flats were sold with a condition that 50 per cent of the difference between the first purchase price and the sale price had to be given back to the government. To get around that, power of attorney sales became common in the city.

But power of attorney sales need to be approached extremely carefully. The sale is conducted through an irrevocable power of attorney. That must be accompanied by a will which names the buyer as the person who will inherit the property.

That seems simple enough. But it gets more complicated if the property is sold several times. Each person selling the property must also hand over a power of attorney, along with the will of the original owner as well as his own.

So if you end up purchasing a property that has several power of attorneys, you will also receive a large number of wills. Says Sanjay Verma, executive director, Cushman & Wakefield: "It is advisable to shy away from a long chain of power of attorneys. The heirs of any of the previous owners can challenge the wills, creating problems for the present owner."

On the other hand, if it's only the first or the second power of attorney, then you can track the trail to ensure that there will be no complications in future. However, it's best to consult a lawyer. Also, you must insist on seeing a copy of the original title deed.

If you are buying property from a builder or a developer ensure that the builder has entered into proper development agreements and that he has the authority to sell. Also, check if he has title and possession, including the right to transfer the property.

Also, before buying any property you must look carefully at the sanction plans. The sanctioned building plan must adhere to the building by-laws. Basically it is important to ensure that no extra construction has taken place. Consult the municipal authorities directly and confirm this.

If you are buying the property on a Rs per sq ft basis, get an independent surveyor to measure the property. Often, the property is smaller than what's shown on paper. Surveyors are certified by the government and issue a certificate that can be used when selling the property.

Also, determine the efficiency of the house. The efficiency is the ratio between the useable area and the super built area. In India when you purchase property on a Rs per sq ft basis, you pay for the super built area and not the useable area. For instance, a house with too many pillars will have less useable area.

It is also important to make sure that electricity, water bills and property tax have been paid. You should ask the owner for receipts of all the bills paid. In case he is unable to produce the bills, check with the municipal authorities.

When buying a house from a second seller, ensure that the vendor has taken a no objection certificate for selling the property from the society and also check that the house does not have tenants.

Check if the transfer of property requires approval from the statutory land development or planning authority, or from a competent authority constituted under the Urban Land Ceiling and Regulation Act and the Income-Tax Act. If so, their approvals are obtained.

Now that you're armed with so many checks and cross-checks to checkmate any potential cheats, go ahead and invest in your home away from home.

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