This article is a part of blog series : Step by Step Guide to Build Your Dream Home. We suggest you to read the complete guide for full information or if you just want to read any other specific topic click the link (will update as we publish the blogs in near future) below from index
- Pre-construction Phase or Initial Phase
- Buying a Plot
- Hiring an Architect
- Involving a Contractor
- During Construction Phase
- text to add here
- text to add here
- text to add here
- text to add here
- After Construction Phase
- text to add here
- text to add here
- text to add here
Step by Step Process of Buying a Plot
Overview of this Blog
- UNDERSTANDING TYPES OF LAND
- UNDERSTANDING TYPES OF SELLERS
- SEARCHING FOR A LAND.
- VERIFYING THE SELECTED LAND
- MAKING NEGOTIATIONS
- FINALIZING THE DEAL AND PAPERWORK INVOLVE
In any land buying process, there are three individual entities involved. First – Buyer, second – Seller, Third – Land. Therefore as a Buyer, it is very crucial in land buying process to understand the other two entities. Therefore we first discuss the types of lands, and types of sellers.
UNDERSTANDING TYPES OF LAND
From construction point of view, there are two types of land.
Agricultural land
Agricultural land is commonly defined as the part of the land area that is under permanent pastures, crops or arable, that means there in no construction allowed on agricultural land.
Non Agricultural land
Any developed or barren land can be used for construction purpose.
However if you want to do any type of construction on agricultural land you first need to convert it into non agricultural land by a process known as Change in Land use.
Learning : Before buying a land – always verify that it comes under non-agricultural use or its conversion (change in land use) process is completed. verification can easily be done by checking conversion certificates and other documents submitted by land owner during CLU process.
Also let’s look at some advantages and risk involved in buying a land.
Advantages.
- Return of investment Is good.
- Flexibility of building the whole space according to your requirements.
- Possession time is very low in compare to flats. Builder generally takes 1 or more year to give possession in case of flat.
- Generally no maintenance or society fees involved in case of buying a land.
Risk involved.
- One of the biggest risks of buying a plot is title risk like – seller is genuine owner of the property or not? Whether the property has any encumbrances such as loan etc.?
- Land Use Risk: is construction allowed on the property or not?
- Change in physical measurement and mentioned area of plot on documents.
- Encroachment on site by neighbors or any other party.
- Liquidity risk: you cannot sell land easily as compare to flats.
UNDERSTANDING TYPES OF SELLERS
Broadly there are 3 types of land sellers,
- Government bodies: City/State Development Authorities.
- Private Developers.
- Individual Owners.
Government bodies: City/State development authorities.
If you are buying a land from Government Authority then there is no need to worry or no risk involved as the process of Land acquiring > land use conversion > site development is done by Gov. Authorities itself.
Private Developers.
- There is moderate to high risk involve while buying a land from private developer.
- Always buy from trusted and reputed developers.
- Check their past delivered projects to verify the trust-ability of developer.
- Verify with zonal plans / master plan to verify land use.
- Ensure proper site development like sewage lines, electricity and water connection, entry road development etc. before buying.
Individual Owners.
- There is moderate to high risk involve while buying a land from individual owner.
- Always verify if the seller is actual owner of property or not.
- Check conversion certificates to verify land use.
- Check chain of title (discussed in detail later).
As up-to now, You understand the other two entities involved. Let’s move to the very basic step of “searching” for a land to buy.
Learning : To minimize the risk while purchasing a land from any seller always ensure on 3 basic things 1. Proper Land acquiring/ ownership of seller 2.Land use conversion 3.Proper site development
SEARCHING FOR A LAND.
This is the most important part and most time consuming as well. A good research will always useful in getting a god deal while buying a plot.You need to focus on two things while searching for a land.
- Property Wise Research.
- Investment Wise Research
Property Wise Research.
Ensure these 4 points
Good Connectivity To The Amenities.
A good connectivity to amenities is very important to make your living comfortable. Considering the fact that there are people of different age group in a family, a good connectivity to school, colleges, hospitals, banks, commercial complexes, large Green Park & recreational areas is a mandatory thing.
Good Transportation & Last Mile Connectivity.
With rapid changing lifestyle and working culture, most of us travel on daily basis or quiet often. Therefore always buy a property that have a good connectivity to transportation hub like metro stations, railway stations, airports and also have good last mile connectivity. Also prefer areas which has a wide road / or usually have less traffic to reach your daily commute areas such as office.
Good and Safe Locality or Society.
Always inspect about your locality before buying a land. It is better for you and your family that the society you choose is free from any illegal or uncivil activity. Always prefers a society or colony which is good in terms of security at any point of time in a day.
Basic Facilities in Your Area.
A comfortable living does not only comes from a beautiful home, make sure to check for these basic facilities
- Electricity (no or less power cuts)
- Water supply (a good and proper supply for clean water )
- Hygiene: ensure Proper sewage / drainage, no water clogging in the streets, no open garbage / waste collection points.
Investment Wise Research
research on these 2 points
Research your affordability
Investing in property/plot is one of the costliest investments in anyone’s life. A minimum investment in any property can start from few lakhs and can goes in crores. Hence, before starting the search of property, it is very important to research your affordability first.
Affordability means: Your savings + max. Amount of Loan you can take.
Your saving can be in a form of asset, savings in bank etc. and maximum loan eligibility is primarily dependent on your income and repayment capacity. There are also some other factors that will determine your property loan eligibility: Your age, financial position, credit history, credit score, other financial liabilities etc.
Tip : Also keep extra charges in mind while buying property that usually comes around 7-10% of total amount.
- Stamp Duty (6%).
- Registration (0.5%).
- Brokerage (0.5%).
- Advocate Fees (0.1%).
- Home Loan Processing Fees (0.1%).
- Tax Deducted At Source (TDS-1%).
- Society Administration Charges (1%).
Research future benefits.
Always research on future development plans of the locality in which you are planning to buy land. You can get this information from master plans, zonal plans, and property searching sites. If there is good future developments proposed for an area it is probably good for investment and give good appreciation. Also watch out for new developments that could hurt the price of properties.
VERIFYING THE SELECTED LAND
So, the searching part is over, and you finally decide to buy a particular land, but hold on, don’t be hurry. There are 2 things to keep in mind while doing the whole purchasing Process.
- Physical verification of the site.
- Documents verification
Physical verification of the site.
Before buying any land, physical verification on these five points is a must.
- Physically Measure and verify plot dimensions with dimensions mentioned on property paper.
- Check for any encroachment by the neighbor (ex: extended boundary lines) or any other type of encroachment by any other third party.
- Check the build-ability (clean site where construction is possible) of the plot.
- You can also check site as per Vastu if you are concern.
- Check for any immovable features on site like electric poles/underground pipes or any other thing.
Documents verification
As we discussed above, while discussing types of sellers and risk involve. Buying from Gov. or private developers does not need so much verification Therefore here we only discuss if you are buying a property from individual seller.
Making mistakes during the document verification process can cause a great deal of trouble to the land buyer. Therefore it is advisable to examine the property documents with great caution. Also do not hesitate to take legal advice from a professional if you are unclear about anything or in doubt. A good caution during documents verification can ensure that the investment bring peace of mind and a sense of security.Verify these below noted documents for a smooth deal.
Review Mother Deed / Chain of Title
It is one of the most important documents in property transfer. It also acts as a proof of ownership of the seller. As property generally transfer from one person to another by various modes like Sale, Gift, partition, inheritance or will. This is the document that traces the origin of property as well as all other relevant conveyance deeds. Properly verify the sequence of ownership in chronological order; it should be continuous and unbroken, in case of any missing link check by referring the records at registering offices/revenue records. The flow should be traced up to the present owner. It is also an important document for applying of home loan
Seller Identity Verification
Verifying the seller identity by checking
- Residence status and nationality of the seller,
- Whether any other consent from government authorities are required for the sale.
- Identification of all owners, in case of properties held jointly.
- Verify the constitution documents of the entity if seller is selling property as a company, trust, partnership firm, society, etc. to confirm its ability to own and transfer the property.
- Orders from the competent court, permitting sale of the property and appointing a guardian, where the property is held by a minor or person of unsound mind.
Verify Land Conversion and Land Use as Per Master / Zonal Plans
Before buying any land for construction make sure to check its conversion documents from agricultural to non agricultural use. Also refer land use plan in master plan and zonal plans of the state/city to verify the defined land use of the property like: residential, industrial etc.
for example, this is how a Land Use Plan looks (image from from Master Plan of Delhi 2021). Land use plan shows the defined land use of all the areas in a city.
and to find the detailed land use of the specific area (area in which you want to buy a land) refer Zonal Development Plans. we are using zone E – zonal development plan of Delhi as an example. You can refer your state / city zonal land use plan.
Encumbrance
This document can be procured from the sub-registrar’s office. It declares that the land is free of any unpaid dues. By way of caution, the buyer may also issue public notice in newspapers, prior to completing the transaction, calling for claims from interested third parties, if any.
Tax Payment Status
Ask your seller for tax payment receipts to ensure that taxes are properly paid to the government up to date. And the buyer must verify with the municipal authorities that the seller has not defaulted on payment of property taxes.
Learning : verification might seems a lengthy process. But verifying all above mentioned things with great caution is very crucial. Don’t hesitate to take help of a lawyer/ legal advice if required to avoid any risk of fraud.
MAKING NEGOTIATIONS
Do extensive research on market rates of locality and find out the prices of similar properties in that area. This will give you an idea of fair rate for the property. Also inquire from others about the period for which the property has been on sale, if it is remained unsold from the long time, then there are good chances of maximum negotiations.as the seller will be keen on striking a deal.
FINALIZING THE DEAL AND PAPERWORK INVOLVE
Once you do all the negotiations and ready to buy the land. Get these documents to ensure your ownership over the property.
Agreement of Sale
A sale agreement is a memorandum of agreement in which the terms and condition of a prospective contract of sale is written along with the proposed consideration and details of payment. This is the base document for preparing sale deed (discuss in next point). It enables the process of sale to happen smoothly by describing the steps in detail. This helps in creating a better understanding between the parties and their individual roles in the sale.
It contains matters like
- Detailed description of the property
- Payment details including earnest money
- Delivery of original documents on payment
- Drafting of sale deed and registration of the same if titles found good
- Method of delivery of property
- Refund of earnest money in case of improper titles
- Remedies for non-completion of sale on part of vendor including specific performance and bearing of expense of proceedings
- Forfeiture of earnest money, if purchaser fails to complete the sale
- Action if the property is affected by notice from government authorities.
- Production of tax related certificates
- Schedule description of the property
- Memo of consideration for earnest money received
- All other matters incidental to the proposed Sale
learning : An Agreement to sell thus shows the willingness of the parties to sell/buy a property in question and culminates in creation of the actual sale deed. It cannot be called a Sale Deed because it does not create any rights on the property for the buyer.
Sale Deed
This is the most important and legal document that proof the transfer of ownership from one seller to buyer. You need to register the sale deed in the Sub- Registrar’s Office of the area where the property is located.
Clauses involve in a sale deed
- Parties Involved in the Sale Deed
- Description of the Property
- The Sale Consideration – the price at which the land is being transferred
- The clause regarding Payment method
- Advance payment
- ‘Transfer of Title’ clause
- Delivery of the Deed and Possession of the property – with date
- Indemnity Clause and the Encumbrance clause
- Liability in case of a default
- Witnesses and Registration
- Dispute Resolution
Mutation
It is basically updating property ownership records in municipal body to fix property tax payment liabilities. Mutation of the property shows that property is transferred from one person to another and it is crucial if you plan to sell the land in future. Mutation also required when ownership of the property transfer to heir after the owner death.
Phew! we understand that the whole land buying process is so complex. But this needs to be deal with great caution. We promise the next steps – Hiring and working with an architect is like a piece of cake. read next step of this blog series : Hiring an Architect.
We hope you find this article helpful. We would love to hear your thoughts or any other point you think we need to mention in comment section. You can also subscribe us to get blogs straight to your inbox & do connect to us through our social handles (links mentioned in sidebar).
thanks for reading!