homebuying for millenials

A Millennial’s Guide To Buying A House Despite Soaring property Rates

Working in a different city from your hometown is catching up to millennials and their way of life. They want to be free, explore the options that life has in store and also find a way to acquire some form of stability to both one’s professional and personal life. Many look towards buying a home, a place where they can call their own. But with increasing property rates, buying a new home is a lot of effort and time.

Here are a few ideas on why we think home buying is a notch higher than renting, despite the soaring property rates.

  • Home Ownership comes along with a sense of security and pride.
  • Increasing rentals are a thing of the past.
  • Though you will still be paying off your EMIs on your home loan, you are more stable as you have the ability to calculate expenses in advance.
  • You will be living alone and could also rent out some of your extra space for some extra cash.

With a push in the right direction, you will soon have your own home to just sit back and watch your favorite show on Netflix (or Hotstar). This quick set of frequently asked questions could help you make your next big decision.

FAQ for home buying

But Why Can’t We Just Rent?

Numerous youth today rent homes. This idea makes their lives flexible. Living out of suitcase makes for great Instagram stories. But many fail to realize that as rent prices increase due to an increase in property rates, buying a home looks so much better.  Most of us feel that owning property will be a time-consuming, frustrating and expensive endeavor.

How Old Should I Be When I Buy A House?

Age doesn’t matter when it comes to buying a home. If you have the pieces of your puzzle set in places like your down payment, CIBIL score and a monthly salary, take the plunge into investing in property. We see property rates going up across all major cities in the country, so there isn’t a right time to buy a home, as long as you calculate your payments perfectly.

Where Do I Start?

Start with your down payment. Make a rough account of your savings, and how you will manage to pay off your home loan. Keep a keen eye on the property rates on the locality you wish to invest in. You can start small, set up a period for how much you need to save up and also start looking for homes that fit within your budget.

So why is a down payment so important?

Well, this is the link between your home and you. You reduce your EMIs on home loans when you put in as much as you can on your down payment. The normal amount that developers expect is anywhere between 5% to 20%. If you have any inquiries on how to manage your down payment, you can always ask us.

What About Home Loans?

Home loans are not as tricky as they may seem. You have multiple options but always find one that fits you. Firstly, check with your employer if they have the option of offering you a loan. Then look at your local bank. Check for interest rates, long and short term loans and the other charges when it comes to home loans. Always read the fine print before you sign for your loan. A better credit score will help you get better loan options. So pay off any pending personal or car loans and start afresh with your home loan.

Is That Really It?

There is a whole lot more to figure as you move ahead with buying your home. But once you’ve got these steps on board, you’re on the right track. Other things to think about when investing in property, especially for the first time, is picking a locality and the home you want. Though this may be influenced by the property rates, keep looking. We may want to invest in a luxurious apartment at first, but keep in mind your budget. Take the help of the right professionals. There is no harm in asking for a little help.

Let’s get started!

We suggest making a list of things that need to be done for a smooth ride. We’ve started it off for you. Add your own as you journey through the world of real estate.

  • Ensure the development is approved and entirely legal and whether it is based under the RERA act, the property rates in the area.
  • Ensure that building bye-laws are in place and there are not any outstanding violations on the part of the developer or seller.
  • Get all the no-objection certificates (NOCs) from the water department, electricity department, etc.
  • Know your payment processes. These differ when buying a ready to move in home, an under-construction home or resold apartment.
  • Collect all the paper required for your home loan. For example, the property and income tax-related documents, to help you apply as soon as possible.
  • As soon as you’ve booked your home, make sure to ask for an allotment letter. This includes all details regarding your home, flat number, amenities and outstanding payments.
  • Sign your sale agreement which ensures that the property now belongs to the buyer.
  • Register the sale deed in your local municipal.

So are you still waiting for the day to put in your own home address into Uber? Start now and make that dream come true.

question

Should you buy property with the current market scenario?

Is it a good idea to buy property with the current market situation? The Price of a house is declining, but is it a good investment? We’ve compared the advantages, the disadvantages and the risks for you, to make a smarter decision.

The advantages

Valuing real estate is easy compared to other assets

At first, looking at others such as the stock market, mutual funds, those that generate cash flow, are good investments compared to real estate. To buy property is generally a great investment option and is easier to manage compared to other assets. It can be a good long-term investment. Though that depends on the growth of its value over time.

Attractive and stable income

If you are planning to buy property as an investment and rent it out to tenants, it will generate cash flow over time. Rents go up with inflation and your EMIs for the home loans remain the same. Eventually, you pay off your loan and the cash flow will increase significantly.

The Repo rate

Recent cuts in the repo rate by the Reserve Bank of India by 35 points to 5.45 percent from 5.75 percent will have a great impact on the interest charged by private banks on home loans. With private banks such as the State bank of India already reducing their interest rates on home loans, buying real estate will be more economical.

The disadvantages

Lack of liquidity

To buy property as an investment means a lack of liquidity. Though it may generate cash flow through tenants, it isn’t a liquid asset and won’t be a strong investment if you are in need of capital. We suggest you invest half your fortune into a property and the rest into movable investments.

An unpredictable asset

It is also an unpredictable asset. With home rates falling in the country, one needs to be smart and take into consideration the idea and need for purchasing real estate. Value of the asset depends on location, the type of property, the age of the building, the state of the home, etc. Thus, when you buy property, you are investing in an unpredictable asset whose value may decrease or increase in the near future.

The risks

The present property scene in India

In urban cities, real estate investments are now cheaper compared to a few years ago. The slight dip in the price of homes and offices is the result of a lack of demand, huge inventories, and regulations. These were mapped out by the latest reports by Knight Frank, the real estate research firm.

Chennai faced a decrease in property prices due to the water shortage. There were few new launches while sales in the past one year suffered. This also led to a fall in inventory.

Kolkata looked at low property prices in the past 6-12 months, but it saw no increase in sales or launches.

While cities like Delhi NCR, Bengaluru, Hyderabad and Mumbai have been able to have some balance in price, launches and sales.

Builders are playing it safe because of the RERA act

The RERA Act has definitely changed the property scene in India. The act as a way of protecting buyers from financial and inversely mental trauma, have placed in the hands of the consumer a platform to question the developers regarding issues like date of completion and possession in the past would be left out by the builder.

The Real Estate (Regulation and Development) Act, 2016, passed by the Indian Parliament, seeks to protect the interests of those who buy property. It also looks to boost investments in the real estate sector.

With RERA and the government’s model code, it aims to create a more fair platform between the seller and the buyer, mostly in a primary real estate market. But this has led builders to reduce risks taken on projects and properties.

Before you buy property, you need to answer a few questions

  1. What is your reason for the purchase?
    1. Do I want to live here?
    2. Will I rent this out?
  2. Can I see this as an asset or a liability?
    1. Does this investment put money in my pocket?
    2. Is it worth the risk?
    3. Will I be able to manage maintenance and taxes?

It is crucial that an individual understands all aspects of an investment before. Take time to map out financial requirements like your down payment, housing loans and personal finances. Keep in mind that you are looking for an asset and not a liability.

Your next steps towards buying a property would involve checking your eligibility and arranging for the required funds, for which we have solutions!

We’d be happy to help you with the down payment for your property investment.

buying your first home

Simplify your approach to buying your first home

Buying your first home may seem like a tough task. But with a few simple guidelines and a little help, you can breeze through the process without much stress.

Here are a few tips to consider before or during the journey of buying your first house.

Map out your reasons for the home

As much as the excitement of buying a new home can thrill a person, you need to sit down and wrap your head around the basic questions of buying the home.

Are you looking to stay in the home? / is it just an investment?

This makes it easier to figure out your requirements of the home. This can range from ‘the number of rooms in the house’ to amenities provided. It helps you focus on a property that could be a long term investment. This also helps you pick between a second sale house and one that is under construction.

Check your finances

There are three financial points that influence the house you plan on buying.

First, save up for your down payment. This is the minimum amount needed to be paid at the time of purchase of a home. It ranges from at least 5 percent to 20 percent of the price of the property you are looking at. The more you set aside for down payment, the lower the amount needed to be borrowed through loans and mortgages.

Keep a track of your credit score. This score makes it easier to get approved for a housing loan.

Finally, estimate the total cost of the property purchased. This includes parking charges, stamp duty, registration charges, new furniture / furnishings for the future.

It isn’t just about what you can afford now but also about the future.

Ask the experts

Use skilled professionals to help make the journey easier. You may need to spend slightly more but is useful to understand the different parts that come into buying a new home. There could be unpaid property taxes, understanding the usable area in a home; all these factors can be avoided with the help of professionals.

Real estate agents help understand the different prices in a locality and which locality is best suited for your needs. Invest time in meeting with your local banking agents to help pick out loans that are better suited to your needs. Make sure to run the legal paperwork by a lawyer. This will help protect your interests in the process. But don’t forget to do your homework first.

Explore the neighbourhood

It is crucial to survey the neighbourhood. For working professionals, it is important to understand the commute to work. How close is the nearby train station? Can one walk to work? For a family, the need for a good school in the neighbourhood, a nearby hospital, a supermarket and a cinema are top priority when it comes to the location of the house.

It is also important to find out about the future development of the neighbourhood.

If you are planning on investing in a rental property, look for localities with high-rent or highly populated areas. Choose wisely and your home may be your best investment.

Keep your checklist ready and secure your loan

Once you have checked everything off your list, it is now time to secure the best loan for you. Think about the fact that a short term loan often has a lowered interest rate than a long term one, but a larger EMI. It is ultimately your decision. You have to decide how much time you need to repay your debt, within a given span of time.

The best way to start the process for finding a home loan in India, best suited to your needs, is to check for the lowest home loan interest rate. Look at the additional fees and charges such as the processing fees and prepayment charges. Make sure you pass the eligibility criteria. Check the other offers provided by the lender. These include prepayment facility, customized insurance scheme, online account access, etc and different loan repayment options.

Remember that banks, housing finance companies and other lending institutions calculate home loan eligibility on the basis of various factors like age, income, credit score, property value and work experience.

The next step is applying for the right house insurance. This will protect your property and ultimately makes the process of buying easy.

Keep looking for the best

Always remember to keep looking until you find a home better suited to your needs. At times you may get carried away with fancy furnishing and grand views and landscapes. Remember that these may increase the maintenance of the home. It is important to think minimal, not extravagant.

Keep in mind that the first house you like may not always be the answer to your prayers.

For homes that are under construction, visit ready buildings by the builder for a clear understanding of what you can expect.

Resale sale Value is an important aspect to consider before you plan on investing in a property. Most property buyers focus solely on prime locations or the budget of the property. If you choose the wrong estate or location, it is possible that your future sales price will always be less than the other homes around it.

After you have bought your dream home remember to fill rooms with basic furniture and build up from there. This helps protect finances and keeps you stable with your loans and mortgages.

Conclusion

These simple but important points can help make the process simple and as smooth as possible. Now the question that arises next would involve down payment and your current savings account.

You are probably waiting for the right time when your savings account is ripe with the exact down payment budget you had set for your dream house, but here’s the truth – You might take years until you reach that ‘right time’ and probably end up settling for less.

The good news is, you now have an option where your down payment is taken care of. Don’t believe us? Check out the HomeCapital Program.

home deal closure

Chapter 8: Deal Closure

Legal Due Diligence

Legal due diligence is a process by which you can minimize the legal risks associated with a real estate transaction before you proceed for home deal closure. It forms the most critical aspect of your home buying process as you put your life savings into it. Neglecting anything in this aspect can lead you into unnecessary litigation or property dispute. It might also lead to losing your ownership rights or paying hefty penalties. Real estate transactions are legally sensitive matters. The true value of your real estate transaction or investment is realized only when you take into account the legal risks associated with it.

Homebuyers should not go for home deal closure with the builders/agents without conducting proper legal due diligence on the property of interest. You will need the help of a lawyer or legal expert to perform your due diligence. You should ask your lawyer to create the draft agreement between you and the builder.

HomeCapital has put together a comprehensive checklist of steps necessary to complete your legal due diligence process before the home deal closure. The steps included are as follows:

Chain of Deeds/Title

The first step of your legal due diligence process before you proceed for home deal closure is settling the chain of deeds/title. While purchasing a property, make sure all the historical transfers of the land title are in order and there is no missing link. Your lawyer will conduct searches in the Registrar Office and courts to be sure about the land. You should establish the successive transfer of land ownership since the past 30 years. If you are buying a flat/apartment in a multistorey complex, you can conduct searches to verify that the developer/promoter has clear title of the land on which the structure is built. Ask for the title clearance certificate along with the search report from the builder.

Intimation of Disapproval (IOD)

An IOD is an authorization certificate issued by the local municipal body once the builder has obtained all the required No Objection Certificates (NOCs) separately from various departments and government authorities. The final approval to build is called the Commencement Certificate, which is given only when all the NOCs are obtained and all the IOD conditions met. There are about 40 IOD conditions for the builder to be met. Some of these include the Environment Authority and Airport Authority., If you are buying a unit in an under-construction project, make sure to ask for the copies of the IOD, NOCs and Commencement Certificate to avoid any future problems.

Completion Certificate (CC)

This is a certificate from the local municipal body confirming the completion of the building in accordance with the Building Standards and originally approved plan. You should ask for the CC from the builder once the deadline for the completion as mentioned in Sale Agreement is over.

Occupancy Certificate (OC)

This is the permission to occupy the building for the purpose of living. This certificate is issued by the local municipal body once the developer submits all necessary clearances such as electricity, water, fire and sewerage. You cannot legally occupy your unit for living until and unless the builder has the OC for the same.

Obtaining Possession

Once the building is ready for occupation as notified by the builder, it is your responsibility to check if what you are getting is what was promised during the start of the project before the final home deal closure. There have been instances, where the buyers have felt cheated by the builder as they did not deliver the amenities and features as initially promised or advertised. So, before taking the possession of your home from the builder make sure that you check everything related to your new home be it Project Delivery or Legal Documents.

Any irregularities with the delivery of the project or with the documentation should be flagged with the developer or agent. In case your queries are not resolved by the developer/seller, you can approach your state Real Estate Regulatory Authority (RA) for a timely resolution.

Your checklist before possession is classified into two categories: Project Delivery and Legal Documentation.

Project Delivery

Final Layout

Check if the final delivery is as per the originally planned layout & floor plan mentioned in the project brochure. Measure the dimensions of the rooms, hall, bathrooms, kitchen and balconies among other areas. to see if the actual carpet area is as per the agreements. In case of any major deviations, you can deny the possession and ask for a full refund with interest from the builder. You can approach your state RERA if the builder denies his obligations.

Built Quality

Check if the building and unit walls are properly built without any cracks. Check for any water leakages in the walls. Ensure that your unit adheres to the building standards & safety norms. Check if the door and windows of the house are placed as per the original plan. Ensure that they are of good quality with proper latching & knobs and are working smoothly.

Paint

Check for the quality of paints applied on the walls, wooden surfaces, doors, roofing sheets and so on. Check if the paint is of a good brand and has been applied as per the manufacturer’s recommendations.

Amenities

Check if you are getting all the amenities as promised. Check for the type of amenities you were promised/advertised such as a park, swimming pool, gym and clubhouse, among other facilities along with their quality and size. Flag any misrepresentations with the developer or approach your state RERA.

Electric Connections

Check if all the lights, fans and buttons are working properly. Ensure that all the sockets, plugs and bulb / light holders are properly fitted and connected to the mains supply. Check for any broken wires in the house. Check that all the meters are installed and ensure that they are running properly. In case there is an inverter, check for the supply shift by turning off the main switch. For this purpose, you can hire an electrician. Check if the Miniature Circuit Breaker (MCB) has been installed and is of good quality. The MCB needs to be suitable as per the voltage supply of your home.

Common Facilities

It is a common occurrence that the flats are ready but the common amenities and facilities remain incomplete. The builder insists on giving you the possession and demands 100% payment even if the project remains incomplete. You should avoid doing such a mistake as there is a risk that the project will never be completed. Remember that you are not just paying for your house but for the common facilities as well. You have the right to deny the possession and demand compensation or refund if the project remains incomplete when it comes to common amenities such as lifts.

Kitchen, Bathroom & Sanitation

Check if all the kitchen, bathroom and sanitary fittings are done in a proper way. The number of fittings, quality & brand should be as per the sales agreements. Check the working of all the taps in the house; if they are opening and closing without any leakages. There should not be any leakages and blockages in the fittings. And lastly, ask for the warranty papers of the fittings as most of the trusted brands come with a few years of warranty.

Flooring

Check for the floor of the new flat, if it is as per builder specifications (ceramic, marble or wooden) and does not have cracks. You would need to do a major rework if you ignore the flooring quality. You should check the material and work quality.

Drainage

Check if the water is flowing properly through the drainage system of the house without any clogs in bathrooms, kitchen and balconies. Also, check for any water leakages in the house. Clogs and leakages will lead to seepage in walls, which can be difficult to rectify later.

Obtain All Sets of Keys

Ask for all the sets of keys before possession for a worry-free stay. Some keys might be held by the construction/maintenance agencies. Ensure that you get back those keys as well.

Others

Some builders may promise additional features such as home furnishing and air conditioners (ACs) among others. Check if the ACs have proper water outlets as improper ducting can lead to water seepages in the walls. If you have invested in a home that has digital features such as lighting control, security cameras and temperature control, do check all the equipment to make sure that they are in a perfect working condition.

Legal Documentation Prior to Home Deal Closure

Encumbrance Certificate

A document that has details of all the transactions on the property over a period of time (usually 13-30 years). It is evident that the property in question is free from any monetary or legal liabilities. The certificate confirms that the property has a clear marketable title and will come to you without any financial obligations.

Khata/Patta (Certificate/Extract)

These documents certify that a particular property belongs to a particular person, who is responsible to pay taxes over the property to the local authorities. The documents also contain property details such as name, size, use and value of the property needed to evaluate tax on the same. Khata is used for registering your property, selling the property, availing loan on the property and applying for utilities such as water & electricity connections.

Sale Deed

Also known as Title Deed/ Mother Deed/Conveyance Deed this is a legal document, confirming the sale of property and transfer of ownership. The document establishes the ownership of the property in favour of the buyer and entitles them for further transactions on the property. A Sale Deed will be your main property document that needs to be registered with the Sub Registrar’s Office within 4 months from the date of execution.

Allotment Letter

A document issued by the developer, Co-operative Society, Housing Board or the Regional Development Authority required by the banks / Housing Finance Companies (HFCs) for the disbursal of your home loan. The document is proof that a certain property has been allocated to the buyer upon the payment of initial funds. The document contains the details like the amount paid, the amount due, the property details and project specifications on the basis of which the banks / HFCs will release the funds as a loan.

Possession Certificate Copy

A document issued by the developer to the home buyer that confirms that the possession of the house is being delivered to the home buyer on a specific date mentioned in the document. The document is essential to get tax deductions. By accepting the possession certificate, you confirm that the final product is delivered in a good condition as initially promised and that there is no major re-work. Do not accept the possession if you are not fully satisfied with the final product. If you notice any shortcomings in the delivery, you can deny the possession or accept conditional possession.

Tripartite Agreement

It is an agreement between the buyer, the builder and the bank/HFC in case one goes for a home loan in an under-construction project. Such an agreement is made because the owner of the flat/apartment lies with the builder until the date of possession. The agreement ensures that the builder has a clear title over the land and makes them liable to complete the project on time as per the actual plan.

The agreement bars the builder from entering into any other agreements over the said property with any other party. It makes the buyer liable to pay the EMIs as per mortgage agreement even if the builder delays or fails to deliver the flat on time or in case of any disputes between the buyer and the builder. In case of a default in repayment by the borrower or in case the deal between the borrower and the builder gets cancelled for any reason, the builder has to refund all the money back to the bank.

Maintenance Service Agreements (MSA)

An agreement between the builder and buyer where the builder agrees to provide and maintain essential services on reasonable maintenance charges to be paid by the residents. Most buyers don’t pay heed to maintenance charges initially but later feel the burden as the possession nears.

Once the society’s Resident Welfare Association (RWA) is formed, and the maintenance work is handed over to it, the builder can no longer charge for maintenance. The RWA can then devise its own set of rules for maintenance charges.

No Dues Certificate

It is given by the builder, once you make all the balance payments and pay all the charges as mentioned in the sales agreement. It is to be noted that the builder will not grant you the possession of your flat until and unless you clear all your dues as per sales agreements.

Joint Development Agreement

Joint Development Agreement comes into picture when the builder develops on the land owned by a third party. The landowners pool their land as a resource and the builder bears the cost of construction. If you are buying property in such an arrangement, make sure to ask for a copy of the Joint Development Agreement registered in the sub-registrar’s office.

Make sure who has the marketing rights over the flat/apartment you are purchasing, the landowner or the builder. You can ask for a NOC from the other party or execute a tripartite agreement involving yourself, the builder and the landowner prior to home deal closure process.