Ask 10 people residing in Delhi with property what could have been done differently and at least 9 of them will have a story to tell. Bad broker, missing paper, unexpected bills. Most of these mistakes are avoidable if you know what the mistakes are.
(Numbers are approximate and regulations change; please do your own research before making any payments.)
1. Falling in love with the flat before papers are even signed
It happens when the best of us see a flat and everything seems ideal, the light is good, the family likes the location, and they can imagine the furniture, when suddenly it is realized that nobody saw a paper!
Emotion clouds our judgement and makes one a bad bargainer and buyer. Always look at the flat like you are an outsider, then fall in love. You can always make plans for your furniture once you’ve seen the papers.
2. Skipping the independent lawyer
Many buyers assume that the broker will take care of the papers or that the seller has hired a ‘trusted advocate’ to look at the sale deed, the chain of ownership, any outstanding loans on the property, court cases, and whether it is freehold or leasehold, but you should get a lawyer to look at all these. Many properties in Delhi have old disputes among the heirs that you may not want to inherit, which may cost you a few lakhs to settle. The cost of a good lawyer (depending on the complexity) can be a few thousand to a few lakhs, but it is worth it compared to the risk.
3. Skipping the unauthorised check
Some colonies have extra floors or rooms that are not approved. This means that the civic body can stop you from getting a home loan, or force you to pay back the loan, especially if the flats were completed after the purchase. You will also have to pay some hefty fine or compensation to the civic body in such cases. Always ask for the sanctioned plan and compare it against what you see, and check the occupancy or completion certificate (for new projects). If the seller gets defensive, it’s usually a red flag.
4. Budgeting only considering the property price
People often forget to budget for extra expenses such as stamp duty (roughly 6% for men and 4% for women, plus approx 1% of registration), brokerage, lawyer and processing fees, loan charges, society transfer fees, interiors and moving. Together these extra expenses can push your total expenditure up by 10 to 15 percent. On a 1 crore flat, this is an extra 10 to 15 lakhs! Always keep aside some cash for these expenses and make sure not to touch your personal emergency fund.
5. Taking a big loan
Banks may approve a large amount, but that doesn’t necessarily mean you should take that amount. A thumb rule is to make sure the EMI is not more than 40 percent of your income, otherwise, a small mishap such as layoff can put you in a bad position. Remember that most home loans have floating rates. This means if the rate rises, your EMI or repayment period will also rise unless you have opted for a fixed rate (which is comparatively expensive). Always calculate with the current rate plus at least 1% to ensure you can manage the EMI.
6. Skipping the comparison of loan offers
Sometimes people assume that their salary bank will give the best deal, but it doesn’t always work out that way. Compare at least 3 different lenders and consider their interest rate, processing fee, prepayment and other charges before choosing a loan. Even a 0.25% difference between two lenders can add up to lakhs over a 20 year period.
7. Forgetting the circle rate
Stamp duty is paid on the higher of the agreement value and the circle rate. If you expect a lower stamp duty due to a lower agreement value, you may be surprised at the counter. Always check the circle rate of the area before finalizing your budget.
8. Paying cash under the table
Some sellers encourage you to pay some part of the amount in cash to save tax. It is a good deal for the seller, but if there is a dispute, you will have nothing to say for yourself. It can also cause problems with your income tax department and bank. Always pay digitally and keep your receipts. Boring but necessary.
9. Trusting verbal promises
“Parking is included.” “The society will clear the dues.” “The builder will finish by December.” If it is not in the agreement, it’s a promise that can be broken. Always get everything, including the fixtures, parking, possession date and liabilities, in the agreement. Once you have paid the amount, the promises made verbally will cease to exist.
10. Buying an under-construction property without checking the builder
Projects often get delayed and sometimes never launch. During this waiting period, you may be paying rent and EMI together, which is expensive. Always check if the project is registered with RERA, and if possible visit a project that the builder has delivered and speak to the residents about their experience. Ask them if everything was delivered on time or not. Their experiences will matter more than what the broker says.
11. Skipping the area check
Even if the flat seems nice, always visit the area on a weekday in the evening to check traffic, water supply, power cuts and any other nuisance. Walk to the nearest metro station and time yourself. Google Maps and other apps can lie about distance and time.
12. Not thinking about resale
Even if you plan to stay in the property forever, things change. Think about whether the property will be easy to sell or not. Metro access, clean papers, a good society and a good road connect all matter. A cheap flat with messy papers may be a nightmare to sell in the future.
13. Rushing due to pressure
“Another buyer is coming tomorrow.” “Price goes up next week.” Brokers often use this ploy to persuade you to make a quick decision. Many times it is true, but often it is not. A good property will always be available even after you spend some more days considering the deal. Never rush when you feel pressured to take a decision immediately.
The bottom line is that most mistakes happen due to us rushing and putting blind faith in people. Always take your time and do your own research, and keep some extra cash for emergencies. After all, a house is probably the most expensive purchase of your life, and a few extra days of caution will prevent you from losing sleep for years.
This is general information and should not be considered as legal or financial advice. Please consult a lawyer and a financial advisor before making any purchases.