Properties are never a bad investment — a popular belief shared by most.
From January to July this year, the Chennai Metropolitan Development Authority (CMDA) gave approval for 57 housing layouts (4,461 plots) in Chennai and surrounding suburbs, and many citizens may be mulling over an investment in one of these. However, the process of buying a property can get messy if one is a first-time buyer. All the jargon generally thrown around does not make things any easier.
It is very important to check and ensure that the property is completely legal, and that all paperwork is in order, given how unsuspecting buyers people are often duped.
Here is an attempt to answer various questions that a buyer might have in mind.
Which are the documents to check before a property transaction?
Parent deed and Sale deed
Parent deed is a statement that has the details of the rightful owner over a particular piece of property. This document is also referred to as ‘thai pathram’ in Tamil and includes the unbroken flow of the title up to the present owner.
When the two parties in a property transaction agree, the title of the property is transferred through a sale deed. It is done at the sub-registrar’s office. It is a legal document that records the change of possession of title, rights, and ownership of the property to the buyer from a seller.
Chances of the documents getting lost could be there; in such cases, buyers can trace the title from the earliest document that the seller has. With the help of a lawyer, the buyer can verify if the titles are clear and uninterrupted.
The earliest document should be authorised by a court or government or authorising agency, explicitly transferring the rights to the property to its first owner. Then, documents which identify the subsequent owners of the property through an unbroken sequence of legal acts up to the present owner, i.e. the seller, should be traced. While buying a property, it is essential to trace at least 30 years’ history.
“If the documents dating back to 30 years are found to be missing, the buyer should immediately register an FIR. An advertisement should be published in newspapers about the lost documents and a timeframe provided within which if no one claims ownership, the property may be considered legal,” said advocate, notary public and oaths commissioner P B Ramanujam.
Encumbrance Certificate (EC)
The certificate is an affirmation that the property is free from monetary and legal liabilities. It is one of the most important documents for seeking a loan against property from banks. It has all the details about transactions relating to the property and will help achieve proper entitlement.
The Encumbrance Certificate should be bought by the buyer. The computerised copy of EC can be accessed for free in Chennai here by entering the document number and year of registration. It is issued by the sub-registrar’s office, and can also be applied for offline via Form 22.
Legal scrutiny report
The buyer should get a legal report from an advocate specialising in the real estate sector. If the buyer takes a loan to develop a property, an advocate attached to the bank extending the loan will assess the property. However, it is advisable to seek a legal opinion in one’s individual capacity to ensure that the property is free from legal liabilities.
Tax paid receipts
There are two types of taxes: Revenue tax for lands and house tax/property tax for houses and apartments. The revenue tax is paid to the Revenue department and the house tax/property tax is paid to the Greater Chennai Corporation (GCC).
For apartments under construction, the builder/owner of the land should pay the revenue tax. Once construction work is completed, the tax assessment officer will assess the tax, which should be paid thereupon.
The buyer should scrutinise if the tax is paid regularly by checking the receipts for the above.
Checklist while buying plots
Types of layouts/plots
In Chennai, layouts/plots are of two types — approved and unapproved. A group of plots is generally referred to as a layout. Layouts that have explicit approval for sale and construction by CMDA are approved Layouts.
Approved plans of such layouts define the minimum length and width of the road, space reserved for parks, etc. In approved layouts, the land intended to lay roads and OSR (Open Space Reserve) space would be handed over to the GCC through a gift deed. The layouts are then approved by the authority, whereas the unapproved layouts are just unorganised pieces of land.
It is not advisable to buy unapproved plots, as there may be considerable risk involved. The layout may not have proper infrastructure for constructing a building in the future. The buyer may not avail a water connection or electricity connection from the local authorities as the plot does not have approval.
This is a legal document obtained from the Tahsildar’s office in the name of the actual owner of the land.
It is an important record to claim ownership of land. To proceed with any transactions involving the land in question, it requires the patta document.
The following details are listed in a patta:
- Name of the District, Taluk and Village
- Patta Number
- Name of the owner
- Survey number and subdivision
- Is it a Wetland or a Dryland (Nanjai Nilam/Punjai Nilam in Tamil)?
- Area of the land and tax details
Patta can be checked online here. Once the registration of the property is done, the patta will automatically be transferred to the new owner.
For apartments, the owners will have a joint-patta since the land is shared with multiple owners.
The importance of personal scrutiny
After checking the parent deed, encumbrance certificate and tax paid receipts, it is essential to visit the property in person. The layouts/plots should be mandatorily approved by the CMDA and not the panchayat.
It is advisable for the buyer to measure the plot as discrepancies around the total size of the plot are common. “People who buy corner plots are often unaware of the fact that a portion of their plot would be taken for laying a road which would not be explicitly conveyed by the seller. When not inspected properly, it further leads to a dispute between neighbours in the future,” adds Ramanujam.
Checklist while buying an independent house/apartment
Building plan approval
In Chennai, the GCC approves the building plan for residential buildings up to two floors (ground floor and first floor). For buildings more than two floors, CMDA is the approving authority.
According to the norms, the developer should begin the construction work after seeking approval of the building plan from the authorising agency. The Tamil Nadu Real Estate Regulatory Authority (TN RERA) Act came into effect in 2017.
Properties having more than six dwelling units or measuring more than 500 sq metres must be registered with TN RERA. Details such as the building plan, current status and date when the construction began can be checked online here. If the developer is unable to complete the project, TN RERA has powers to delegate the work to another builder for completion.
For independent houses, the approval documents can be obtained from the owner and verified by an advocate.
For properties that measure below 500 sq. metres or have less than six dwelling units, the buyer may obtain the building plan approval from the seller and have the same verified by a lawyer.
A buyer should compare the building plan document with the actual construction and scrutinise if there is any deviation from the plan. In case of any deviation, the builder needs to obtain permission from the CMDA even in case of an approved plan. A revised plan showing the deviations should be submitted for clearance.
Structural stability report
Buying a property is often a lifetime investment, hence it is advisable to assess the strength of the building and its lifetime. For newly constructed apartments, the stability of the building would be mentioned in the building plan, which is approved by CMDA.
If one is buying an old property, it is suggested that he appoints an engineer to assess the building and get a structural stability report.
The completion certificate is issued by the CMDA if the construction meets the building standards like the presence of rainwater harvesting system, in-situ sewage treatment plants (if an apartment is over 500 sq ft), etc. The certificate is mandatory for availing government services like water connection and electricity connection. A completion certificate will not be available for apartments that are under construction.
Joint Development Agreement (JDA)
In the city, many apartments are built under a JDA. It is an agreement signed between the landowner and the developer/builder. The landowner gives the land to the developer to build and sell apartments; in return, he gets a fixed set of apartments to sell. The landowner issues a JDA to the developer.
For properties that are constructed with a JDA, the buyer should inspect the parent deed and other documents as mentioned above. An exception that the JDA has provided is that the buyer cannot be legally charged for car parking space. However, both Ramanujam and Balaji point out that the builders often levy separate charges for parking, as buyers are unaware of the rules.
Undivided Share (UDS)
It is the ratio of the size of one apartment to the total built-up area of the complex. The sum of UDS of all apartments must be proportionate to the entire size of the plot.
An apartment owner should be mindful of scrutinising the UDS value while purchasing an apartment. If the apartment is going to be demolished or reconstructed, the compensation will depend on the UDS in the property.
After scrutinising the documents, Advocate Balaji Prem Kumar advises a buyer to measure the size of the apartment with the help of an architect or engineer before making the purchase. For example, he says, “While purchasing a buyer is charged for every square foot of the house, but there may be slight variations. Hence it is safe to scale the flat with the help of an engineer and pay for the actual size of the flat.”
Dealing with delayed handover
Instances of developers delaying the completion of construction work and handover are aplenty in Chennai, but the Real Estate Regulation and Development Act lays down provisions to empower buyers. According to the TN Real Estate (Regulation & Development) Rules, 2017, the buyer can claim compensation until the work is completed or send a legal notice to the builder.
To summarise in brief what the Act says under the Return of Amount and Compensation section:
- If the builder is unable to complete the construction of the property within the stipulated time, the buyer can rightfully claim the due compensation, if he/she lives in a rental house until completion.
- The builder is bound to compensate the buyers if there is any problem with the title of the land.
(Inputs from Balaji Prem Kumar, practising advocate at the Madras High Court and P B Ramanujam, advocate, notary public and Oaths commissioner)