Buying a property is a significant transaction involving a large amount of money. Any carelessness in this matter can lead to substantial losses. Even if the buyer is cautious, if the seller cheats, the buyer ends up bearing the loss. In this context, AP RERA has provided clear guidelines on the precautions to take while purchasing real estate or a house. Let’s take a look at what they are.
1) Verify the property owner: First, find out whose name the property is registered under. Obtain the Encumbrance Certificate (EC) from the Registrar’s office. To get the EC, you need to know the survey number, village name, and names of neighbouring property owners. The cost for an EC is around Rs 300. The EC will show who last sold and bought the property along with relevant documents. If the property has been mortgaged with a bank, those details will also be included.
2) Check original sale deed: Before buying, verify the photo of the owner in the original sale deed. Ensure that all linked documents match the transactions recorded in the EC.
3) Ensure proper agreement terms: Under no circumstances should the purchase agreement have a registration deadline of less than 3 months. Even if you have the funds ready, don’t agree to a shorter period. Do not pay more than 5–10% of the total purchase price in advance. If the agreement is cancelled due to irregularities, it can be difficult to recover your money, even if the fault lies with the seller.
4) Deal directly with the actual owner: Under no circumstances should you rely solely on brokers. Brokers may give excuses like the owner is busy or living in another country. Ensure you speak to the actual owner, at least via a video call. Ask the owner to show some form of ID proof. Verify that the photo, name, and address on the ID match the owner’s details on the property documents.
5) Verify the exact property location: Check that the property shown to you for sale matches exactly with what is mentioned in the documents. Independently verify that the address, survey number, and house number all match. Some sellers may try to mislead buyers by showing a better area while the actual property is elsewhere. Make sure the property you intend to buy corresponds exactly to the documents.
6) Measure the land with experts: Have professionals measure the property. Ensure that the dimensions mentioned in the documents match the actual measurements on the ground. During measurement, make sure the neighbouring property owners are present. This will prevent boundary disputes after registration.
Documents Required for Property Purchase:
Original Sale Deed: Check the original deed, stamp on the original papers, signatures, and attached photographs.
Link Documents: At least three generations of link documents (ownership chain) should be verified.
Inheritance Proof (if applicable): If the sellers inherited the property instead of buying it themselves, obtain their inheritance documents (family tree certificate), will, or, if the will is not registered, the names and addresses of other heirs. Ensure their signatures as witnesses are obtained.
Court Stamps or Marks: If the first page of any document contains a court stamp or seal, it indicates there may be a legal case on the property
5. EC (Encumbrance Certificate):
6. Mother Deed Certificate
7. RTC (Record of Rights, Tenancy, and Crops)
8. Survey sketch
9. Layout approval
10. Katta certificate
11. DC Conversion certificate (Conversion from agricultural land to non-agricultural land)
12. Property Tax Certificate
13. Avoid government-allotted SC/ST lands: Do not purchase lands allotted free of cost by the government to SC/ST beneficiaries. If purchased, ownership may revert to the original government beneficiaries, and registration may not be possible.
14. Avoid government-allotted lands for economically weaker sections: Similarly, lands given free by the government to poor families should not be bought.
15. Be wary of dishonest neighbours/brokers: Some neighbors may pretend to cooperate while secretly sharing all your discussions with brokers and collecting commissions. Be cautious with such individuals.
16. Do not share copies of your property documents with anyone under any circumstances. Keeping them with others increases the risk of misuse or complications.
17. If there’s already a building on the land, make sure the building plan is approved by the authorities.
18. Obtain an Encumbrance Certificate (EC) the day before signing the agreement and again the day before registration. Some sellers may sell the property to others while simultaneously entering into an agreement with you. Checking the EC ensures there are no overlapping claims or disputes.
19. Verify if there are any electric lines, underground drainage systems, or if the land is listed for public acquisition by the government. This should be checked with the relevant authorities.
Loan-Related Frauds to Watch Out For
1. Under no circumstances should you take a loan from a bank referred by a broker or the property owner. The risk of fraud is significantly higher.
2. Banks will only sanction loans if you have all the documents and certificates mentioned earlier. Without them, the loan will not be approved.
3. Banks typically provide 70% to 80% of the property value as a loan. However, this is calculated based on the value declared in the registration documents, not the market value. Make sure your registration value aligns with the loan amount you need.
4. If you inflate the registration value to get a higher loan, registration charges will increase, the seller will have to pay tax on the higher amount, and you will also need to show adequate income sources.
5. Banks charge a processing fee for loans, usually around Rs 10,000 or 1.5% of the loan amount. Loan insurance is mandatory, and some banks may charge more than 5% for insurance. Often, they get borrowers to sign documents without clearly explaining the insurance costs. Always ask and verify the exact charges.
6. It is not necessary to register the property in the bank’s name in all cases. Instead, you can create a loan agreement on a revenue stamp worth 0.3% of the property value. Discuss all details with the banker and, if needed, consult a lawyer or CA. Avoid signing any documents just because the banker asks for a quick loan approval, as it could be costly.
7. When taking a bank loan for property purchase, the bank agent will come to the Registrar’s office during registration, hand the payment check to the seller, and take the original property documents. Before handing over the originals, make sure to keep copies of all documents for yourself.
8. Completing a bank loan process takes at least 20 days. Even if bankers or brokers say it will be done within a week, do not shorten the registration timeline. Do not rely solely on verbal assurances from the bank when signing the agreement. Post-agreement, the payment may not be made on time due to various reasons. Keep this in mind when preparing the agreement.
9. If you take a personal loan from a bank, the processing fee is higher and the interest rate is higher. Insurance is optional, and you must clearly state in advance if you do not want insurance.