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IS YOUR REAL ESTATE INVESTMENT SAFE ? Part 1

Investing in an under Construction Project ??? Be informed – Reduce Risk

Real estate purchase, especially an under construction project, is fraught with risks. Investors are requested to evaluate the project on various parameters before committing their life savings in a once in a lifetime purchase. In India, the crux of the problem is mushrooming of fly by night developers, opaque purchase processes, lackadaisical enforcement of rules and regulations, and lack of proper transactional support to buyer due to almost ZERO availability of quality Real Estate advisors/brokers. There is no rating agency for brokers, though RERA has now made it mandatory for real estate agents to register with the Authority. Abroad, the real estate broker has to obtain a license, a process for which is rigorous, and every time he has to renew the license he proves his knowledge of laws governing Real Estate Transaction, by clearing mandatory Government exams.

It is thus mandatory for us to be more informed and aware of the various dimensions of the transaction, thus making us confident and sure of our investment decision.

The five major dimensions of an under construction projects are the:
  • 1. Project,
  • 2. Developer
  • 3. Product i.e., the apartment or a Dwelling Unit,
  • 4. Real estate Agent/broker.
  • 5. Documentation

To begin with, I propose to pen down Few Most Important Aspects under each dimension that an investor should keep in mind to make his investment more safe and stress-free. This is first of a series of articles.

Let us discuss the first dimension – The Project
  • 1. Must be RERA registered.
  • 2. Land Status – encumbrance free?? If the promoter is not the owner of the land, then details of copies of the consent of landowners, OR the collaboration/joint development agreements with the owners.
  • 3. Location details of the project, with clear demarcation of the land dedicated for the project.
  • 4. Is the project registered under the State Apartment and Property Regulation Act??
  • 5. Status of all mandatory approvals and Commencement Certificate. CLU obtained from Requisite authorities??
  • 6. Sanctioned plan, layout plan and specifications duly sanctioned by the competent authority.
  • 7. Is the promoter executing a registered conveyance deed of the property including the conveyance deed of the undivided proportionate title of the common areas?
  • 8. Financial Closure – Very Important. How he proposed to fund the project. Is it entirely sales inflows dependent?
  • 9. Any litigation – on the project/land?
  • 10. Completion timelines.

Documentation – The buyer should insist on going through the allotment letter, the conveyance deed, agreement for sale he needs to sign with the developer.

Development works – development and proposed facilities like fire fighting, drinking water, emergency evacuation, use of renewable energy etc. Etc.

In my next article, I shall list out the some of the most important aspects that a buyer should evaluate the w.r.t the developer/promoter of the project.

Col. CVS Sehgal is a Real Estate Coach and a regular blogger #Cvs_speaks.

Contact on cvs@greenberet.in and WhatsApp (97791-10555)