It is no secret that when it comes to investment, Indians have a soft spot for real estate and they will mostly invest in house rather than in a commercial property. Most people want to stay in their own homes, even if it is small. They feel a sense of security living in their own home. Hence, it is crucial that one should have a proper check done before buying any property as a huge chunk of one’s savings is involved in real estate. Given below are 10 things you should check if you are buying any property.
1. Verify title deed
As a first step, the buyer should undertake due diligence, to ascertain the existence of the title with the seller, the nature of the title and its marketability and the ability of the seller to convey clear and marketable title, free from encumbrance.
2. Approvals from Local Body
Every developer at the start of the construction has to get the approval from local planning authorities. The developer has to submit the required documents for the sanctioned plan approval. So, when you hunt for a residential apartment, do check if the developer agrees to present the sanctioned plan, if not then the construction is termed as illegal. It is important to make sure that the entire layout has been approved by the development corporation and the local body of the city.
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3. TDS applicability
It was introduced to collect tax at the source from where an individual’s income is generated. From 1 June 2013, when a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller under Section 194-IA of the Income Tax Act
The buyer has to deduct TDS at 1% of the total sale consideration. The rate is 0.75% for transaction carried out from 14th May 2020 to 31st March 2021.
After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS.
4. Verify the Sale Deed/Agreement
- A Sale Deed is the core legal document that acts as proof of sale and transfer of ownership of the property from the seller to the buyer.
- A Sale Deed has to be mandatorily registered. It is important that before the Sale Deed is executed one should execute the sale agreement and should check for compliance of various terms and conditions as agreed upon between the buyer and the seller.
- Before executing the Sale Deed, the buyer should check whether the property has a clear title. He/she should also confirm if the property is subject to any encumbrance charges.
- A seller should settle all the statutory payments such as property tax, cess, water charges, society charges, electricity charges, maintenance charges etc., (subject to the agreement) before executing the Sale Deed.
5. Compliance under the Real Estate (Regulation and Development) Act, 2016 (RERA)
- The RERA mandates that developers should register their projects with the authority constituted under the Act.
6. Know all home loan tax benefits
7. Encumbrance Certificate
- It is also important to verify that the land is free from all legal dues. An encumbrance refers to any charge created on any asset, more often used in the context of real estate.
- An Encumbrance Certificate or EC is a certificate of assurance that the property in question is free from any legal or monetary liability such as a mortgage or an uncleared loan.
8. Latest tax receipts paid
- Receipts for property tax bills ensure that taxes for the property are paid up-to-date to the government/municipality.
9. Verify all the required NOC’s
10. Know Tax Benefits for Jointly Owned Property
- One of the important things to note is that if the property is held jointly, individuals can receive additional tax benefits for the same cost.