SMART SOCHO: Points to ponder, before buying property

Few buyers think beyond their immediate needs when buying property, when it could be far more profitable to first mull over the long-term consequences and then arrive at an educated decision, writes Rajesh Kulkarni.

Buying property is one decision that has huge implications on not just our finances but our future as well. In a buyer's market like the one we have today, it often becomes difficult to make a choice between two projects, more so where there is little to choose from in terms of their location, area, pricing and the amenities on offer.

Understandably most buyers tend to go with the project that meets their customized needs the most or sometimes with the developer who is ready to offer a better deal. While this approach is sensible, it's always better to think from a long-term perspective especially in the case of capital intensive purchases like buying a home.

Resale Potential:
For example, for a buyer on a limited budget, what matters is securing a roof over his head and not so much the availability of social infrastructure in the area where the flat is located.  On paper this may sound like a logical approach given the high property rates which have made it next to impossible for a salaried individual to buy a home. What the buyer doesn't notice at the time of inking such a transaction is its impact on the potential resale value of the property say five years down the line, when he may feel the need to move into a bigger home.

As most realty experts will agree, the absence or inadequate social infrastructure in the vicinity of a home like shopping malls, educational institutions, healthcare facilities, FEC's, banks and supermarkets has a serious and adverse impact on the resale value of the property and in some cases may cause an inordinate delay in securing interested buyers.  

Rental Prospects:
For the fortunate few who don't have to dispose their existing home to buy a new one, the rental prospects of the property come into play. However this is often not as easy as it may sound. The rental potential of a property is dictated primarily by its location, connectivity and proximity to commercial hubs in the vicinity.

It's a known fact that residential areas located close to IT or commercial hubs command a huge premium among office goers looking for a home close to their workplace. Here again larger, more spacious configurations like 2BHKs and above tend to score more than compact 1BHks and studio apartments.

Buying a flat in a project by a reputed developer is also a huge plus because tenants prefer renting homes in projects by known developers that are sought after for their quality assurance, brand value and amenities among other attributes.

Eye on the Future:
Buying property in an under-developed location is often frowned upon by a majority of buyers, but a smart buyer always looks at its hidden potential. This could be in terms of a large infrastructure project announced in that area like an international airport, SEZ, CBD, IT Park or even a new expressway.

The next thing you know, that 2BHK apartment you picked up at a throwaway price is now a virtual goldmine. Here again it makes sense to opt for a larger configuration since the quantum of future profits would be directly proportionate to the area of the property.

In other words a buyer can always choose to save a few lakhs by buying a smaller 500 sq ft, 1BHK flat for say INR 3,000 psf and then selling it for INR 15,000 when the rates shoot up, to book a profit, but a smart buyer won't mind paying a few lakhs more initially for a larger 800 sq. ft, 2BHK knowing that when the rates hit INR 15,000 psf, he would have made a substantial profit.

Tips for Buyers:

• Get the title, ownership details of the seller and original title documents verified by a lawyer.
• Verify that the seller has the right to sell the property and it is not under any litigation.
• The property title is clear and free from all encumbrances.
• Confirm municipal approval if the property / project is under-construction.
• Make sure that the agreement of sale has all the terms and conditions duly mentioned.
• Demand a receipt for all payments made to the seller.
• Ensure that the sale deed is duly registered with the Office of the Sub-Registrar, post payment of the applicable stamp duty and registration fees.
• The buyer is always indemnified against any loss arising from a defect in the property title.
• Ensure possession of the original title deeds and physical handover of the property at the time of concluding the sale deed.
• Make sure that the seller has no claim, right, interest in the aid property once the sale transaction is concluded.