Striking a property deal without a real estate consultant is difficult. But the real estate consultant's responsibility doesn't just stop at getting the keys on time and introducing the owner and the buyer. Due to the unorganized nature of the real estate sector, the responsibilities of a real estate consultant are unclear. However, a professional real estate consultant will handle a transaction from start to finish to ensure that you move into an undisputed, clean house smoothly. Heres a broad idea about the services you can expect from a real estate consultant.
Finding a house
This, of course, is his primary job. But the more efficient real estate consultant understands your needs. This saves time and energy in the house hunt process. If your real estate consultant knows your budget and preference for finer details, such as ground floor flat or proximity to a park, your choices may get limited, but the chances that you would like something would increase.
So, choose a real estate consultant who asks questions, listens to you, and does a thorough requirement analysis rather than push you into deal that you don't really want.
Inspection
Insist on visiting the actual property. Don't settle for something which has the same dimensions and directions the one on sale has. After all, the look-feel of every house is distinct. Carry a checklist and clarify all issues.
Finding a lawyer
Once you select a property, the next step is formation of a sale deed. This usually needs a lawyer. Hiring a separate lawyer could be an extra burden on your pocket, apart from being an added hassle. Your real estate consultant may arrange for a lawyer from his network which could be helpful in saving time. These legal services are charged separately.
Broking disputes
Real estate consultants can also help sell a disputed property. They usually bring the parties in the dispute together and try and arrange an out-of-court settlement. The commission in such deals is slightly higher than a normal deal.
Doing the paperwork
Apart from the formation of the sale deed, a real estate consultant will also help you do other paperwork, such a registration of the house, getting old electricity and water bills in order and even getting a loan.
If an under-construction project, you may need help in submission of payments to the builder and the lender, if your house is on loan. Real estate consultants even keep buyers updated about the status of a particular project. This increases buyer confidence.
Maintaining the property
Real estate consultant may also undertake repair of the property such as fixing broken walls, painting, electrical insulation, plumbing and tiles. Real estate consultants usually charge the seller of the property for these services. Also, they are supposed to maintain the premises of the property.
For non-residents:
If you do not live in the city where you own a property, you can appoint a consultant as a caretaker to maintain the property.
If you want it to give on rent, your consultant may simply charge you for the service and help you find a tenant and keeping an eye on the house in general. If a known dealer becomes the caretaker of the house, your property is not being misused.
Giving updates
If you want to find out the prevalent rates in a particular location, real estate consultants are one of the best sources.
If you continue to remain in touch with your consultant after the transaction, he can give you an update about the premium your property commands in the market. So after six months of your deal, the dealer should be in a position to tell you its market value. A good real estate consultant not only helps you in transaction management, but also gives research-based studies on your property. Similarly, your real estate consultant may appraise you whether it is the right time to buy/sell a property in keeping with the market trend.
Finding a real estate consultant
The market is full of fly-by-night operators. So before you heed the recommendations of a real estate consultant, run a check on his reliability. If you are finding one through a property portal, look for one with more number of listings. Prefer real estate consultants with a registered office, employees and established reputation.
To minimize the risk of fraud, ensure that all agreements between your consultant and you are in writing.
The housing sector is known for loopholes and 'suspect' schemes. Buyers are easily cheated by fly-by-night operators who forge documentation and falsify ownership. Usually the buyer realizes this too late; then too much time and effort is spent in obtaining compensation through legal recourse. Thus it is prudent for a buyer to ask questions and safeguard his interests before entering into any property transaction.
Broad checklist that can be used as reference by a buyer to get the documentation work right.
| Sr.No. | Documents | Group/housing societies | Independent housing | Floors in independent housing |
| 1 | Title documents – These help check the legal validity of title deeds previously executed with respect to the property | Documents showing how land was originally allotted to the group housing society | Complete chain of title documents showing change in ownership evidenced by original title deeds | Complete chain of original title documents showing change in ownership |
| 2 | Sanctioned building plans/layout plans |  |
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| 3 | Occupation/completion certificate | |
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| 4 | Land use documents | Specified under buyer's agreement | |
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| 5 | Electricity, water, gas connections payments | |
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| 6 | Society bye-laws | |
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| 7 | Environmental clearance | |
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| 8 | Construction specification (applicable for properties under construction ) | |
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| 9 | Inventory (if applicable) | |
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| 10 | Property tax receipts and utility payments | |
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The importance of thorough title investigation for obtaining a clear title of the property cannot be stressed enough. Verifying a property’s chain of title at the appropriate office (sub-registrar, development authority, municipal corporation) serves as a safeguard against fraud, misrepresentation or defects in the title.
Title deeds of ownership: To protect oneself from litigation arising from possible defects in the title of the property, the first document a buyer should check is the seller’s title to the property and legal validity of title deeds previously executed with respect to the property. A buyer should check all registered documents by which the seller acquired the property.
Putting a price tag on a property you are planning to buy or sell is the biggest challenge.
Here are a few options:-
1. OFFICIAL SOURCES
A vital source of information on the pricing is the office of registrar under the local development authority. The registrar office maintains a record of all the properties and its last sale value recorded at the time of registration of the property.
You can visit the registrar office and ask for the value that was mentioned at the time of registration. The process may take some time, but it’s worth the effort. Once you know the exact value of a property when it was last transacted and registered, you would bargain accordingly.
If your property falls in one of the localities that is covered by National Housing Bank’s property index, it will give you rough idea about the price appreciation in the area.
2. INFORMATION ON THE GROUND
There are all sorts of brokers in the market, but when it comes to ground reality, they are the best sources. To make sure you get true picture, visit as many brokers as you can in your area. Brokers will also give you an idea about the recent transactions of similar benchmark. Based on the estimates given by the brokers, you can reach an average price that you think is reasonable.
3. THE PRICE PUSHERS
In demand: The basic demand-supply rules always affect prices. So, an area for which the demand is high may be more expensive than another which is not finding any takers. Look at the recent transactions in your area and how much time it took their owners to sell these. Once you list your own property with a broker or housing portal, the number of calls you get for it would give you an idea whether it is in demand.
Location, infrastructure and connectivity: Accessibility, the quality of construction, design, local infrastructure and amenities are some of the factors that impact a property value. So, if there’s a market or a park close by, it will be a value-add. Accessibility of public transport, healthcare facilities and schools are other infrastructural requirements you should mention when listing your property for sale. It is important to consider these factors even when buying.
Income tax implications when acquiring a house property
Where immovable property is concerned, it is crucial for owners to be aware of tax exemptions and deductions for effective investment planning. The Income Tax Act, 1962 (ITA), specifies five different heads under which the income tax liability of an individual is calculated in a given assessment year. These heads are namely (i) salaries, (ii) profits and gains of business or profession, (iii) capital gains, (iv) income from house property and 9v) income from other sources.
Sections 22 to 27 of the ITA prescribe how income from house property is to be computed.
It is important to note that it is the ‘annual value’ of the property that is taxed, and not the property per se. Annual value refers to the inherent capacity of the property to yield income. It is the sum which the property might be reasonably be expected to fetch, if rented. However, it is not necessary for the property to be actually rented for the purpose of calculating its annual value. Municipal value of the property, cost of its construction and rent of similar properties in the same locality can be good indicators that help determine the value. Further, if the property is located in a territory subject to the Rent Control Act (RCA), its annual value cannot exceed the rental amount fixed under RCA, unless it has been let out for an amount greater than the prescribed rent.
Such housing property should consist of any building or land belonging to the property. The term ‘building’ encompasses a residential house (both leased and self occupied), office building, flats, factory building, godowns, etc.
Following are a few pointers you should take note of when ascertaining income from house property:
Deemed ownership:
Ownership and deemed ownership of an immovable property are two distinct concepts. Whereas true and rightful owners hold the valid property, the concept of deemed ownership in ITA was introduced to cover taxpayers who enjoy the usage of property, but do not own them as such. In situations where a person qualifies as the deemed owner of a house property, he is liable to pay income tax on it
Deductions allowed as a percentage of the annual value of property and interest paid on fund borrowed for acquisition/construction should be computed in consultation with a tax consultant.
Keeping in mind income tax legalities and exemptions available, investors can accordingly plan for a ‘Zero’ or minimum tax liability before acquiring or constructing a new house property. After all, minimizing tax liabilities can go a long way in enhancing returns on investments in immovable property.
The problem in real estate is of an increasing discrepancy in the 'loading' factor, which basically means how much extra charge has the builder loaded the customer with besides that for the carpet area offered.
There is no standardized means of measuring the value of common spaces and the extra cost it implies to the end user. Moreover, there is no mechanism in place to determine how much cost the developer has incurred in terms of construction material and manpower.
Another problem is that the developer adds facilities (read common spaces) that the law does not require him to just to get the right ambience for his project.
Practically, there is really no way out as of now except to know what you are buying. The best you can do is to be aware about what you are paying for and what you will actually get. The buyer should ask upfront what the exact carpet area is and what is he going to pay for. The best way to do it is to check the floor plan so that he can add up the exact area to assess the price he will pay per sq. ft.
If you find it difficult to understand the hidden costs, another way is to take the help of a professional. The efficiency ratio can be calculated to by a professional real estate consultant or a local property broker.
The super-built up area will soon be a thing of the past, with the state government now appointing a special committee to implement carpet area norms in real estate deals.
The committee will ensure that all real estate deals are compliant with the state governments housing policy diktat that makes the mentioning of the carpet area mandatory for every real estate transaction. "Concepts like built-up and super built-up have no uniformity and as a result, the terms have been grossly misinterpreted and misused by developers to fudge the actual area of a property," says a senior official attached to the state Housing Department, adding that the insistence on carpet area will leave no scope for any ambiguity, and the consumers will get the area that they are paying for. Not only has the state government executed the new law in favour of the consumer, but the newly appointed committee will now also act as regulator for the housing sector in the state, to ensure compliance by the fraternity.
Despite repeated earlier campaigns by real estate experts and builders associations to make the disclosure of carpet area mandatory in the past, little has been done to prevent some developers form maximizing their profits through the super built-up route. Some developers fudge details and bump the carpet area up by as much as 60 percent and actually get away with it. There is absolutely no logic to justify this.
Small sale builders who are under pressure to charge a lower per square foot rate than reputed builders, who have projects in the same area, are the ones most likely to make up for the difference by fudging the area of the flat. While it is too late for some buyers to point at the discrepancy between the quoted super built-up area and the actual built-up area mentioned in the agreement for sale, others remain ignorant throughout the deal with builders mentioning only the exaggerated super built-up area even in the agreement. The quoted area and the actual area is often a bone of contention between the builder and the purchaser.
Section 4 of the Maharashtra Ownership Flat Act (MOFA) stipulates that it is mandatory for a flat’s carpet area to be mentioned in an agreement. If the purchaser insists on the carpet area, the developer has little scope of inflating the area under the vague interpretation of built-up area; But only a handful of builders are currently abiding by this rule. Practically every developer in the market is currently quoting the built-up area of the property during the marketing stage, with only the percentage of loading being the variable factor. The new housing policy and the regulatory committed is set to change all this and bring a sea change in the way real estate is sold and bought in the market. The government intervention on the carpet-area issue comes as the latest effort to bring in an element of transparency in property transactions.
Defect liability period clause
The defect liability period is that within which the builder is mandated to repair the defects in an apartment or the premises even after possession. In case of a builder project, every sale purchase agreement should have this clause. This period ranges from one to three years after possession.
WHAT KIND OF DEFECTS ARE COVERED?
WHAT SHOULD YOU DO?
Ensure that this clause is included in the Sale agreement in case of builder project purchases. Remember that if the clause is not mentioned in the purchase agreement, you can’t do much about the defects after possession.
Look out for construction defects before signing the papers. If you find defects, you can take the possession of your apartment "under protest" and ask your developer to sign the documents. To certify that you have taken possession with the knowledge that there are defects, take a receipt of this possession letter with the builder’s official signature and full details of company executives party to the sale agreement.
If other occupants in the same project find such defects in their apartments, you can form a group and approach the builder to repair these defects. In case the builder refuses to carry out the repair work, you can approach the court and file a case under non-execution of service.
Letter of intent
A letter of intent (LoI) is the first draft, containing property details, prepared by the seller. It is a precursor to the final deed and is used at the negotiation stage with the prospective buyers. In case of a housing society being developed by a private developer, the approval for construction and sale from the local development authority, in general, is considered as the LoI.
CONTENTS
An LoI should have the
WHAT PURPOSE DOES IT SERVE?
LoI is a non-binding offer letter to sell a property. It is a primary offer indicating the seller's intention to sell his property. Based on this, a buyer can offer the owner to purchase the property. While selling your property, you can seek help of a lawyer to draft the same. LoI is needed so that the two parties can negotiate on the sale price and other terms before the final deed is drafted. It should also mention the time frame within which the buyer should be ready with the payment and other necessary documents. If the buyer fails to do so within the stipulated time, the seller can look for another buyer. However, since it is a non-binding informal agreement, the buyer need not pay any penalty.
LEGAL STANDING
LoI does not have any legal binding and cannot be used as evidence in a court of law. So, the seller or the buyer can back out at any time from the deal till it is at the stage of LoI.After the terms and conditions mentioned in the LoI are fulfilled, the buyer and the seller proceed to draft and sign the legally binding final deed. However, the terms and conditions mentioned in the final deed remain the same as in the LoI.
Residential buildings that have been constructed before 1960 in Maharashtra are called cessed properties since the government collects cess from the residents or the tenants of these buildings. There is no such cess applicable on old buildings in other states.
In 2008, the Supreme Court allowed redevelopment of all the cessed and old properties in Maharashtra. Since land is a state subject, any old residential building is converted into a new one after necessary approvals from the local development authority.
Let us examine some scenarios:-
OWNING A CESSED PROPERTY
If you continue to live in the property in its present condition, you will have to continue paying cess to the government. The other option is to redevelop the property. In other words, get rid of the present structure and build a new one on that land. However, to do so, you will need to get a demolition certificate and a new architectural plan approved from the local development authority of your city. For the new redeveloped property, you won't have to pay cess and will switch to the property tax system instead.
The other option is to sell the property to a developer, who is interested in developing multi-storey buildings on such land. Usually, such deals fetch a good amount to the owner. If you negotiate with the developer properly, you may even get one unit of apartment in the building the developer redevelops. If you choose to settle down somewhere else, the developer may finance that decision too.
TENANT IN A CESSED PROPERTY
Tenants residing in a cessed property for about 30 years or more have a right in the property. Before redeveloping a colony or a building, a developer needs to obtain the consent of the tenants who have tenancy rights under the Rent Control Act.
However, the exact amount of share would depend on the settlement deal with the owner. If you have been living in such a property for at least 50 years as a tenant, you can even own one of the apartments in the new redeveloped building as part of the negotiations.
RESIDENT OF AN OLD HOUSING SOCIETY
In this case, the entire residents' welfare association can jointly decide to sell the property in the open market or giving development rights to a builder. The new builder will build extra floors as per the new plan and provide spacious floors to each member of the society, in keeping with the agreement with the developer. If you don't want to continue living at the same place, you can ask for compensation instead.
For the period of construction or transition, developers also agree to pay compensation to owners as well as tenants.
A sale, or transfer of a property, is complete only on execution of a Sale Deed by the seller in favor of the buyer. However, in some cases, a buyer may need extra time to arrange sufficient funds to purchase a property, or to conduct due diligence of the property before buying it to ensure that the seller is the rightful owner of the property and that the property is free from any kind of legal encumbrances, disputes, etc.
In such cases, a buyer and seller generally thinks it fit to execute an Agreement to Sell (ATS) as a precursor to executing a Sale Deed. As the name suggests, an ATS is a contract between a seller and buyer comprising terms, conditions and obligations upon fulfillment of which, sale and purchase of a property by way of a Sale Deed will take place in the near future.
Adequate stamping and subsequent registration, wherever required, grants legal documents the status of being admissible in evidence in the courts. Cases where the courts have received an instrument that is not duly stamped or registered as evidence are few and far between. The problem lies in people unwittingly mistaking documents that do not require compulsory registration, to also mean not requiring compulsory stamping. Our Stamp Acts propound that it is mandatory for certain legal documents, such as conveyances in the nature of, part performance, to be adequately registered. The rates of stamp duty levied on such documents vary in accordance with the rates specified in the relevant State's Stamp Act.
Unless the ATS specifies otherwise, it is a buyer's obligation to pay stamp duty applicable on the ATS. However, both buyer and seller can decide to bear such costs in a proportion that is mutually agreeable. Not registering a document that otherwise requires compulsory registration makes it inadmissible in evidence in the courts of law. Further, in case of an ATS, parties to the contract can pay stamp duty of any amount, up to a maximum of stamp rate and corresponding charges applicable on the transaction. Parties should take note that the amount of stamp duty paid on ATS gets credited in stamp duty payable on the Sale Deed. Thus, the total stamp duty paid on Sale Deed and ATS together is same as what is payable on Sale Deed.
Generally there are two kinds of ATS
ATS with possession:
In case possession of the property has been granted at the time of execution of the ATS, the agreement should be registered. In case the seller refuses to fulfill his obligations as per the ATS and makes an attempt to evict the buyer from the property, possession of which was granted earlier at the time of ATS, a buyer can defend his possession and restrict the seller from forceful eviction from the possession of property by virtue of Section 53A of TPA. Simply put, a seller shall not be able to unreasonably evict the buyer from the property or interfere with the buyer's possession of the property. Since handing over the possession of a property simultaneous to execution of an ATS amounts to the creation of buyer's interest in the property, buyers should always get the ATS registered. Further, where an ATS has been executed but later the seller refuses to execute Sale Deed for the property in favor of the buyer, then the buyer can get the Sale Deed executed in his favor through enforcement of the terms of the ATS by way of specific performance as per applicable laws.
ATS without possession:
In case an ATS has been executed without grant of possession of property to the buyer to the effect that the sale of the property will be made in favor of the buyer at a future date, the ATS may or may not be registered by the parties. In the event the seller defaults in performing his obligations as under ATS, the buyer can get his rights and terms of ATS specifically enforced through the procedure applicable to specific performance of contracts, irrespective of the fact that ATS (without possession) has not been registered.
To summarize, the parties must make sure that an ATS creating buyer's interest in the seller's property has been, adequately stamped and duly registered (wherever required) with the competent authorities as per applicable laws.
© 2017 DimensionsEstate. All Rights Reserved | By MHI