Buying a resale property has always proven to be advantageous from choosing a strategic location to acquiring finer properties at better prices. Although a resale apartment may be old, it is a good investment option owing to the low availability or supply of new properties in the area. Therefore, if the owner chooses to redevelop the property, it is likely to fetch him greater appreciation.
Another advantage of buying a resale apartment will be if the buyer makes a one shot payment from his disposable income rather getting into the intricacies of seeking a home loan. However, one should be aware that seeking a home loan for a resale property would mean meeting additional legal and procedural requirements. It is mandatory that one should be aware of the legalities and paperwork before investing in a resale apartment. One can even consider hiring a good realtor to get information on the apt resale property, the details of the seller, and running around for paperwork etc.
What are the important documents required to buy a resale apartment or independent house?
1. Sale Deed: One of the core legal documents that evidences the proof of property sale and transfer of ownership between the seller and the buyer is the Sale Deed. It is important that a Sale Deed should be registered and before it is executed, one should execute a ‘sale agreement’ and should ensure that all the conditions between the seller and the buyer are complied with. Also, before the sale agreement is executed, the buyer should check for a clear title and whether the property has any encumbrance charges on it. However, it is critical that a seller makes all the statutory payments such as water bill, electricity bill, property tax, cess, maintenance charges etc., before executing the Sale Deed.
2. Mother Deed: Also known as the parent document, Mother Deed is the second most important document that traces and evidences the origin/antecedent ownership of the property from the beginning, in case the property has changed various hands. Mother Deed also helps in smooth selling of the property by establishing the current ownership. The document consists of the change of ownership of the property via sale, gift, partition or inheritance. All such changes will be traced from a transfer document through a uniform sequence in a chronological order without breaking the sequence flow. If there is a broken sequence, one should refer to the records from the registering offices, revenue records or the recitals (preamble) in other documents and should update the sequence until the present owner. However, if the original Mother Deed is missing, one should obtain the certified copies from the registering authorities.
3. Encumbrance Certificate (EC): An Encumbrance Certificate denotes the charges in the ownership or liabilities created on a property that is held against a home loan as security. The document consists of all the registered transactions pertaining to the property for a particular period/sought period. This certificate that is sought for a particular period evidences the property purchase/sale, the presence of any transaction or mortgage for that particular period. To obtain an EC, one should submit a copy of the Sale Deed, fill in the Form 22, affix a non-judicial stamp and submit it to the jurisdictional sub-registrar’s office. Crucial details such as complete residential address, property location, property survey number, the sought period, property description, its measurements and boundaries should be mentioned in the Form. Therefore by paying a nominal fee amount on a yearly basis one can obtain an EC between 3-7 working days or more depending on the period sought.
4. Latest tax paid receipt: All the properties that fall under the BBMP attract property tax that has to be mandatorily paid to obtain a Khata in the owner’s name. The latest tax paid receipts are a proof that the property tax is paid up-to-date to the municipality. However, a buyer should ensure to make enquiries with the government/municipal authorities to see whether all the dues are cleared by the seller on the property. Also the buyer should demand for the latest original tax paid receipts and bills and check for the owner’s details, the tax payer’s details and the date of property tax payment on the receipt. In case the seller does not possess the tax receipt, the buyer can obtain one from the municipal body by providing the property survey number. Apart from this, the buyer should also check if other bills such as the electricity bill, water bill and other utility bills are paid up-to-date by the seller.
5. Khata Certificate and Khata Extract: Khata is nothing but a property account of a person. Khata consists of Khata Certificate and Khata Extract. The Khata Certificate is a crucial document needed at the time of registering a new property/transfer of a property. Furthermore the Khata is widely referred to as ‘A’ Khata and ‘B’ Khata (Revenue records extract). An ‘A’ Khata has properties listed under BBMP jurisdiction with legal property construction, whereas a ‘B’ Khata has properties under local jurisdiction with violated property constructions. It is always wise to buy properties with an A Khata as it denotes a legal construction, besides a B Khata can always be converted to an A Khata through various schemes and the payment of a penalty to the municipality. However, a Khata Extract is nothing but obtaining the property details from the assessment registrar and is important at the time of property buying and acquiring trade license.
6. Occupancy Certificate (for a constructed property): An Occupancy Certificate is obtained after the completion of a project construction by a builder. It is given only after the authorities carry out an inspection on the property. The certificate evidences that the project constructed by the builder has met all the given norms. An Occupancy Certificate will be needed at the time of property buying, seeking a home loan, before taking the property possession and for Khata transfer. It basically confirms that the project is ready to be occupied.
7. Building approval plan: Without a building approval plan, a building will be deemed as an illegal construction as per the Karnataka Municipal Corporations (KMC) Act. This plan is sanctioned by the BDA (Bangalore Development Authority) or the BBMP (Bruhat Bengaluru Mahanagara Palike) or the BMRDA (Bangalore Metropolitan Region Development Authority) or the BIAPPA (Bangalore International Airport Area Planning Authority). It is important that the building owner gets the approved plan from the jurisdictional Commissioner/ an officer authorized by such Commissioner. The authorities sanction a building approval plan taking into consideration the zonal classification, road width, floor area ratio (FAR) and plot depth. One can obtain a building approval plan by submitting a set of documents such as the Title Deed, property assessment extract, property PID number, city survey sketch (from the Department of Survey and Settlement and Land Records), up-to-date tax paid receipt, earlier sanctioned plans (if any), property drawings, 2 copies of demand drafts, foundation certificate (if any) and a land use certificate issued by the competent authority (viz., Dy. Commissioner. Furthermore the requisites of acquiring a building plan include hiring a registered architect to draw a plan that meets the applicable bye laws. Making it easier to obtain a building approval plan, the newly invented BBMP software- Automated Building Approval Plan will issue the plan within a period of just 4-5 working days, provided it meets all the requirements.
8. Possession Certificate (PC): A Possession Certificate has to be mandatorily issued by the Builder / Developer to the first owner. A PC confirms proper construction and allows people to take possession of the property. This document is not reissued at the time of resale; however, it is passed on to the successive owner.
One would need two additional documents in case he’s buying a resale independent house.
9. RTC (Record of Tenancy Rights/Certificate) Document: An RTC or a Pahani is a crucial revenue record that consists of the land owner’s details, the soil type, the water rate, assessment, area, liabilities, tenancy details, crops grown on the land, nature of possession of the land and other details. The RTC/ Pahani document is required for an array of purposes such as : to know the authenticity of the property seller, during the completion of the sale transaction at the sub-registrar’s office, to seek a home loan and at the time of civil litigation (if any). A person can acquire a RTC document from the Pahani centre/online from the Tehsildar’s office for a sum of Rs. 15/- to the revenue inspector.
10. Conversion Order/ DC Conversion (agricultural to residential): A Conversion Certificate or a DC (District Commissioner) certificate is acquired to change the property status from an agricultural land use to a non-agricultural land use viz., residential use or industrial use. The Conversion Certificate plays an important role especially in cities with vast areas of agricultural land. It is issued by a competent authority by requesting the department of Town and Country Planning to issue a NOC for the conversion of such a land. In order to get a DC Conversion Certificate, the land owner should submit various documents such as ownership documents, a photo copy of the land survey number, a photo copy of the revenue survey map of the village denoting the location of the land proposed for conversion and any other information required by the authority.
What are the important steps a buyer should take before buying a resale apartment or independent house?
The buyer should ensure that the property has a marketable title
One of the most important aspects of buying a resale property is to ask the seller for a clear marketable property title. Once you have zeroed down on a resale property, ensure that there are no other claimants for the property. Check whether the property has joint ownership and if yes, ensure that all co-owners have authorized the sale. Seeking the property titles along with the original documents will help in knowing if the existing owner has bought the property on resale. In case any of the documents from the chain of titles are not stamped as regulated, the banks might refuse to offer a loan for the purchase of a resale property. One might also have difficulty in seeking a loan if the resale property is older than 10 years.
The buyer should check for the existing loan on the property
The buyer should check if the original property documents have been mortgaged with the bank/financial institutions (‘Banks’). A bank considers a loan only once the existing owner completely repays the loan and has the original documents formally released. Unless the buyer obtains the original documents he/she will not be able to obtain a new loan. On the other hand, the existing owner will not be able to repay the existing mortgage until the buyer seeking the property raises a new loan. The buyer should also be aware of the amount that is to be paid to the society at the time of transfer of ownership, as some societies charge higher rates.
Loan eligibility of the buyer
If you have decided to buy the resale property via loan, you should keep in mind that not all banks approve loans for properties that are older than 10 years. This is because the banks do not want to take risks considering the depreciating property value. Also most banks lend only if the value of the outstanding loan is beneath the value of the property. The buyer should be aware that the cost of the to-be-bought property has a major impact on the loan eligibility, which would mean that the buyer should make a down payment from his/her end as a stake for the continued maintenance of the resale property. For example, if a property is worth 10 lakhs, the buyer will have to pay 5 lakhs as down payment. The down payment will likely be more if the property is older than 20 years.
It is advisable that the buyer seeks technical expertise to evaluate the property before approaching the bank, as the bank would safeguard its interests by evaluating the property at a lower rate considering the depreciating property value in future. This makes the buyer eligible for a lower loan amount irrespective of a higher income, since the bank caps the loan amount around 80 percent of the concluded valuation.
In case of a resale apartment, it is always wiser to buy a ready-to-move in property with all the amenities. Doing this will not just save time that is required for the completion of a new home, but will also save you rental payment on your current property. While buying a resale flat, a buyer can check before hand for all amenities and other requisites. Remember to check whether there are any outstanding dues on the utility bills or maintenance and on the allotment of parking space
Points to remember:
- Buying a resale property is quite advantageous- no project delays, ready-to-move-in property and no service tax/VAT burden.
- Before buying a resale property that is quite old and attracts additional maintenance charges by the society, one should meet the society’s office bearer to know more about it.
- Resale properties are likely to be discounted. They have more flexible payment options.
- For properties aged over 18-20 years, there are possibilities of them being unregistered and registering in the current period will add to the buyer’s burden in terms of stamp duty and arrears.
- A buyer of a resale property should consider the parking space, plumbing, electricals etc.
- A resale property will ostensibly attract expenses for repairs- renovation, labour charges, electrical refurbishment, plumbing, fittings etc. Also acquiring a home loan for a property that is older than 50 years can be quite strenuous.
- A resale property might miss out on the contemporary features, specifications and amenities.