How To Buy A House

How to buy a house

Choosing a Builder

There are currently multiple builders and many projects in the Indian market. Besides the well-known builders there are many small builders too who have entered the market.

Some handy tips to choose a reliable builder

> Check the background and reputation of the builder. Visit the projects that have been completed and talk to owners. Try to get as much information as you possibly can regarding prices, mode of payment, amenities, terms of agreement, delivery schedules, quality of construction etc

> Examine the prices carefully. See whether there are any discrepancies between the quoted price in the brochure and the actual price. Also read the fine print for amenities and terms like built up space, super built up space, carpet area, all of which may prove to quite confusing.

> Make sure that the builder has a sanctioned plan with all requisite government approvals.

> Check whether the firm has an international quality certification like ISO 9000 or is rated by companies like CRISIL and ICRA.

Budgeting

You would first need to decide on your budget and the budget would depend on the amount of funds you have access to. The budget would also depend on the number of persons that will stay in the house and the space required per person. Most houses or flats today are sold on the basis of Built Up Area that is the area between the walls and including the thickness of the inner and outer walls. Most projects today talk in terms of Super Built Up Area, which includes common spaces like stairwell, passages, and corridors.

Documentation

In addition to the documents mentioned earlier pertaining to land, you would also need to check

- The Development Agreement with the landowner if the builder is not the owner of the property

- Commencement Certificate, which is issued by the local municipality to begin construction

- Completion Certificate given to the builder by the authorities when the building is complete and fit for occupation

- If purchasing a flat or house that is in the initial stages of construction, you would have to get an allotment letter from the developer. After this the developer would give you the agreement with the stamp duty having been paid by the purchaser.

Choosing the Right Home Loan

Home loans in India are offered by banks that include both private sector and government sector organisations. The following guidelines are useful:

> Calculate how much you can afford. This can be done by looking at your income, expenses, your credit standing, your down payment and the interest rate on the loan. Do visit as many loan counselors you can to get a clear idea on interest rates and monthly repayment schedules.

> Talk to several banks that offer loans and compare rates. Make sure that you negotiate to get the deal you want or which is most suitable to you.

> The finance institutions usually finance upto 80 percent of the loan amount. Keep that in mind while deciding.

> There is always a processing fee that has to be paid on the loan, which varies from bank to bank. In some cases, you may need to pay a Prepayment penalty or a Commitment fees all of which would influence your repayment.

> Loans usually offer a floating or fixed interest rate. A fixed interest rate is always higher than the floating interest rate by at least 1.5 percent. If you opt for a floating interest rate, the chances are that the rate would rise depending on the Prime Lending Rate (PLR) fixed by banks.

Overall, though it is a better bet to go in for a floating interest rate, that is pegged not to the PLR of the bank but to an independently decided rate like the Mumbai Inter Bank Offer Rate, as banks very rarely reduce their PLR even if overall interest rates come down.

You could also go in for a hybrid loan where some part is fixed and the other floating. Generally, if your loan is for a short duration it is better to go in for a floating rate. Also even if the interest rates rise, banks prefer to increase the repayment tenure than increase the floating rate, and therefore your monthly payment would not be affected.

> Even if you can afford the amount, go in for a home loan as they have tax benefits and also act as savings instruments.