Things to look for while buying an under construction home

Home seekers, mostly prefer buying apartments in under construction buildings because they are less expensive than completed ones. Based on the construction stage along with the response received from investors and buyers, the developer may offer a discount of 15 to 30 percent. Moreover, the design of a particular flat can be altered without investing more money in renovations. At the time of booking a buyer has to pay the booking amount only and get a year at least for arranging the rest of the corpus. For fully built properties, this is not possible.

However, all is not as rosy with under construction properties as there is a lot at stake when it comes to buying under construction homes or properties. 

If you are thinking of buying a property prior to launch or during construction, you must inspect the location’s connectivity and social infrastructure, future returns from the project and whether the builder has the ability of timely delivering the project. If there is a sudden market crash or the developer exhausts his fund or the bank ceases to fund the project, the project may be stuck in limbo. Small developers normally do not have the funds needed for spearheading a project at the time of announcement. For ensuring liquidity, they attempt to sell the property to end-users and investors at pre-launch. If the minimum sales needed for launching the project are not reached, then the construction may be deferred.

Verifying the reputation of a developer is very important as there are several developers who enter to ride the high wave of the realty market, but, are actually traders who will be constructing this apartment complex for the first and last time in their lives. They are often devoid of bank funds, experience and technical knowledge. More often than not, they work on disputed lands. You must make sure you do not invest your money in such projects as it would never be realised.
It is advisable to always opt for construction linked payment plans where the payment needs to be made as per the construction progress of the building. Therefore, even if there is a delay in the project, your corpus does not get locked.


Make sure you hire an experienced attorney who specialises in issues related to real estate. Your lawyer will then be able to check the authenticity of the project and also the approvals that the builder has in hand.

NRI’s Legal FAQ's - Frequently Asked Question Part -1

This is a three part series, wherein our experts answer all NRI questions related to buying property in India.

Whenever an NRI or PIO plans to buy a new home or any property in a foreign country, they tend to seek clarity in certain areas. These questions will answer all the common customer queries about owning and buying a property in India. Refer this NRI guide sectioned into legal, home loan and tax categories, to accustom yourself with laws, rules and important information on the Indian real estate sector. 

Legal FAQs

Q1. Why to invest in property in India?
Ans: To tap the potential of Indian real estate market and expedite the sector with a double digit growth rate, the developers have shifted their focus to offer timely possession of projects and adapt to the new FDI rules.
The economic contribution of the real estate sector is most likely to increase significantly during the period, from 6.3% in 2013 to almost 13% in 2025. This spiral growth is attributed to the intensive demand for first-rated projects that can be delivered on time.
During H1 2014, prices in Bangalore have appreciated at the fastest pace of 11%, compared to H1 2013. Mumbai, currently suffering a downfall of 49% is expected to recover the sales volume by the end of FY 2014. As real estate demand in India improves, capital values in other major cities are also likely to increase, albeit marginally.
Purchasing a property in India, thus, stands as a top priority for a non-resident Indian (NRI). The purchase transaction is governed by the Reserve Bank of India (RBI) and the rules and regulations that fall under the purview of the Foreign Exchange Management Act (FEMA).

Q2. Who is an NRI?

Ans: Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).

Q3. Who is a PIO?
Ans: Person of Indian Origin (PIO) (NOT being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
(a) At any time, held Indian passport, or
(b) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Q4. Can an NRI/PIO purchase immovable property in India?
Ans: Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
(a) Non-resident Indian (NRI) - that is a citizen of India residing outside India
(b) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who:
(i) At any time, held an Indian passport or
(ii) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955). 

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can purchase immovable property in India except agricultural land/plantation property/farmhouse.

Q5. Can an NRI/PIO acquire agricultural land/plantation property/farm house in India?
Ans: It requires specific approval of Reserve Bank of India and the proposals are considered in consultation with the Government of India.

Q6. What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/OCI?
Ans: The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (it is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
  
Q7. Is there any restriction upon the number of properties bought by NRI/PIO/OCI?
Ans: There is no restriction on the number of properties that can be bought.

Q8. Is there any specific way of payment for buying / acquisition of immovable property by NRI/PIO should be made out of?
Ans: There are multiple ways as mentioned below:

      (a) Funds received in India through normal banking channels by way of inward remittance from any place outside India
      (b) Funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank
       (c) No payment of the purchase price for acquisition of immovable property shall be made either by traveler’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above

Q9. What are the key points to be considered at the time of purchase?

Ans: Investment in real estate is a simple but long-term move so, one should be cautious enough at the time of purchase to secure the deal.

Few points of consideration are mentioned below:
   (a)  Property Title: The title of property should be clear from the issues and the seller should have the required right to sell it, especially if it is inherited or any joint property.
  (b)  NDC: Always check that there will be no outstanding electricity/water bills or any other authority dues pending with the property. Take a no dues certificate from the seller at the time of purchase
   (c) Bank release letter: It is advisable to take the bank release letter from the concerned bank, if the property had been mortgaged as security in any type of loan
  (d) Permits: The property for sale should have all approvals and permits from the civic authorities in terms of construction
  
Q10. What are the key points that ensure a safe deal to buy a property in India?

Ans: Below are the key safety measures to be considered while buying a property:

  (a) Whenever you plan to invest in real estate, you should go through the proper channels, either through a Reliable Broking Firm, friend or relative to ensure the authenticity of the property
 (b) You can also approach through property expos and seminars to choose a right property and select reputed developer
  (c)  It will be wise to get the title papers of the property verified by a lawyer before going ahead
If and when you want to purchase /dispose the property, you can give Power of Attorney to a reliable person who is resident in India & who may be able to act on your behalf to complete formalities such as registration, possession, execution of the agreement of sale, etc.

Read Other FAQ's:  Tax NRI FAQ's , Home Loan FAQ's

About the Author: Naveen Kr. Jain, VP, Head of Operations & Customer Services, IndiaHomes Property Group, is an MBA & LLB with 16 years of experience in operations and customer services. At IndiaHomes.com, he is responsible to ensure that all processes, policies and practices followed by the organisation are customer centric and should result in an optimal solution for the end user. Naveen has held senior leadership roles in ING Vysya Bank, HDFC Bank & Stock Holding Corporation of India. Being a certified six sigma black belt & ISO 9001: 2008 lead auditor, the implementation of quality management systems and standards for operational excellence have been Naveen’s key strengths and areas of focus.

The Puranik Group brings you affordable 1BHK apartments in Pune

Given the paucity of space, time and money, the youth today prefers buying studio and 1BHK apartments. The trend has been observed in big cities like Mumbai and Delhi and emerging metropolises like Pune and Bangalore are also witnessing this trend. The low maintenance status coupled with the upmarket lifestyle offered in these properties is what is attracting more people to them.

The Puranik Group is one of the most prominent property developers in Western India. The group has been operating since 1968 and has developed several commercial and residential properties along with IT parks. The company has a land bank of more than 300 acres and is involved in developing several residential properties in Dombivli, Mulund, Neral, Pune, Thane, Kalyan and Nashik. The group has been instrumental in delivering 4000 families their dream homes through their various projects.

The group is developing a project which has a slew of 1BHK apartments on offer in Bavdhan, Pune. Nestled in the lap of nature, residents can soak in the mesmerising views of Pune’s greenery and rolling hills. Not only does the property offer 1BHK flats, but, also 2BHK and 3BHK ones to choose from. Home owners can enjoy amenities such as designer landscaped gardens, vineyards, central plaza and canals which would make you feel no less adventurous.  Residents shall enjoy an uninterrupted supply of water and power. Located only a few minutes away from the Pune-Mumbai Expressway, it is in the vicinity of other micro markets and IT zones like Kothrud (10 minutes), Baner (8 minutes) and Hinjewadi (10 minutes). Amenities such as colleges, hospitals and schools are a short drive away.

Builders all over have vouched that the demand for 1BHK properties have been steady and they have been the most dynamic in the residential property segment. Even during the global meltdown, these properties continued to sell. To buy a 1BHK apartment, a buyer has to shell out Rs 33 lakhs approximately at Puraniks’ Abitante. The apartment shall be around 400 sq. ft. in terms of space. For couples and singles, this is the best configuration as it does not need any maintenance almost. Moreover, home owners can make up the rooms the way they want to, without thinking of how to fill up blank spaces. Developers have been marketing these properties strategically so that buyers are more inclined towards them. Indeed, the sales of 1BHK properties have been steadily rising because of the way they are marketed.

With our changing culture, youngsters keeping full time jobs cannot give much time to housekeeping or housekeepers. In a 1BHK apartment, there is hardly much to do after coming back from work. The setting is perfect for a couple as well. As your family expands, you can always move to a bigger apartment and put this up for rent. Students, single professionals and newly married couples would snap up the apartment within a flash. If you are looking for 1BHK apartments for investment, then the Puraniks Abitante will be a great idea for its strategic position, amenities and concept. 

Government approves of regularisation of residential colonies in Delhi

The major announcement of Union Cabinet passing the ordinance to regularise 895 unauthorised colonies that have come till June 1, 2014, has given a sigh of relief for about 60 lakh people of Delhi. As per the media reports a separate cabinet note is in the process to restrict the use of Rule81 of the Land Acquisition Act and for the regularisation of the colonies. According to the norms in the rule, agricultural land cannot be used for any construction purpose. 

This regularisation will be benefited in a lot of aspects, such as more planned colonies will come up with proper electricity, water and drainage facilities. The removal of this restriction will be a boon for the developers as well, as it will be a clear way for them to construct more properties that can be available through loans.

Though this regularisation will increase the property rate, but still there will be rise in more potential buyers also, due to the loan facility and comparatively less amount to shell out to buy homes for them. At the same time, buyers will take interest in buying these properties for the same reason of loan and the best pricing of the property. As a result the banks will get benefit in terms of more customers to avail of home loans. Lastly, the regularisation will enable the residents to get their properties registered and avail benefits associated with the registration.

However, there is no doubt that the news of regularisation of several unauthorised colonies in Delhi has brought in great hope altogether and will remove major and some basic road blocks. For instance, if someone of middle class income group wants to buy a house in South Delhi, with the help of the loan within a limited budget of Rs 30-40 Lakhs. It is impossible for him to buy one in places like GK or Green Park, Lajpat Nagar or even Malviya Nagar. It's impossible for him or her to even think about it. But on the other side South Delhi also has places like Chattarpur, Mehrauli or even Khanpur which are centrally located and the best part the property rates are not that high. But these areas are unauthorised and loans are not available, hence the person is stuck. 

Hence, this regularisation (which is in line) will be the best gift of this year for those who wants to buy their dream home within a limited budget.

Preferred property options for first time buyers

There is a broad distinction between first time home buyers and second time buyers. First time buyers shall be making such a huge investment for the first time in their life which is why they invest a lot of time in researching the market. Unless extremely lucky, it may be the only asset of this scale, they purchase which is why they take into account every possible information before making a decision.

  

Studies have revealed that there are certain recurring traits among first time home buyers across different cities. Some of these recurring trends have been explored below:

First time buyers prefer purchasing apartments:

      Roughly 7 out of 10 first time buyers prefer purchasing an apartment over row houses or builder floors.

Apartments are cheaper and provide all the amenities that are needed to live a good life. Home buyers of Tier I and II cities prefer purchasing apartments mostly. Usually home buyers prefer buying 2 and 3 BHK properties.

         Preference for ready to move in properties over under construction ones:

This can be considered to be paradigm shifts in terms of the buyer’s psyche. Even some time ago, first time buyers preferred buying under construction properties because they were less expensive. However, most buyers prefer to buy ready properties because of delays in under construction ones. A lot of first time buyers also prefer to buy houses in communities which are under construction but offer possession within 2 years. Ready to move in properties offer rent saving and tax deduction up to Rs 2 lakhs per annum on the interest paid on home loans. The only issue with ready to move in properties is that they are more expensive compared to under construction ones. However, buyers are willing to go that extra mile.

       End usage is the dominant cause behind property purchase:

Usually first time buyers prefer to purchase an apartment for living in it rather than subletting it for rental income. First time buyers usually live in rented accommodations which they want to give up when they buy a property. Only a handful of first time buyers prefers to buy properties for subletting it to others or earning capital gains from it or tax benefits.

       Property purchase is for families rather than self-occupation:

First time buyers usually prefer to buy properties to live in with their families. They would rather buy apartments or houses with multiple rooms to accommodate the 3-5 members of the family. Only a handful of people prefer buying single room apartments for self-occupancy.

       Location and pricing are the two most important considerations for purchasing a property for first time buyers

Prime locations and budget are the two most essential points which are considered by first time buyers. Surveys have revealed that price is the top most consideration while locations came close second. Other parameters that a first time buyer must consider is connectivity to different areas via public transport, builder reputation, closeness to work, social amenities and size. Home buyers essentially look for properties in India which are closer to their preferred location, within limited budgets. It can be seen that over the past 10 years, that capital appreciation has been seen in areas which are well connected and close to prime locations more compared to other areas.

Want to Sell Your House? Know the Tax Implications!

The first budget proposed by the finance minister after the ascent of the new government at the center has had several changes in income tax laws with respect to capital gains accrued from the sale of property. The finance minister has capped the amount that can be saved from taxes through investment in capital gains of longer terms for sale of property in specific bonds, also termed as capital gains bonds. The finance minister has also specified that investment must be made on residential properties located in India for availing benefit of longer term capital gains.

According to current rules of income tax, capital gains in the long term accrued from property held for 3 years attracts 20% tax. Exemptions have been granted under specific conditions. However, some of the changes proposed for income tax laws seek to overturn a couple of these laws. Some of the changes proposed are as following.

Exemption of capital gains tax on housing property

According to current tax provisions, longer term capital gains that come about from a capital asset’s sale is exempted under Section 54/54F in case it is invested in construction or purchase of housing property, subject to specific conditions. For gaining exemption on capital gains, an assesse must purchase a new house one year below or 2 years post transfer of the original house. For the properties under construction, the construction must be completed within 3 years from the transfer date of the original property.

The finance minister has clarified now that investment for availing benefit of capital gains must be in residential housing property located in India and not abroad. The amendment shall apply for the assessment year of 2015-16 and following years.

Availing exemption on long term capital gains by investing in bonds

A lot of investors who sell off properties, save taxes on longer term capital gains through investment of capital gains amount in specific bonds, also known as capital gains bonds. Tax payers who wish to claim these exemptions from longer term capital gains must invest the sum in capital gains bonds within 6 months from the sale date or prior to filing of income tax returns, whichever comes earlier. The benefit can be availed from Section 54EC of Income Tax Act of 1961 till a capping amount of Rs 50 lakhs in a particular financial year.

The ministry of finance has clarified now that total exemption with respect to long term capital gains for investing in capital gains bonds would be limited to Rs 50 lakhs. The amendment shall be applicable for the assessment year of 2015-16.

Advance acquired for property sale and its forfeiture

The finance minister has proposed to levy taxes on advances received and forfeited later by individuals for sales of capital assets such as flats in case the transaction falls through. If negotiations do not translate into capital asset transfers and money charged as advance is forfeited by an assesse, then the sum shall be taxed in the assessment year under “income from other sources”. Under current provisions, the amount may be reduced from acquisition cost of an asset subsequently in the sale year of the capital asset when determining capital gains. This amendment shall also be applicable from 2015-16 and subsequent years. 

Transforming home buying experience

Home buying experience has been much simplified compared to what it used to be even a decade ago. No more do home seekers have to rely solely on brokers to locate the best properties within their budgets. Real estate websites provide a holistic solution to home seekers in netting their dream home within an affordable budget.

Real estate websites not only work as property consultants, advising you about the different profitable residential communities coming up within the city, but also accompany you for site visits and help you with the paper work. For instance, on IndiaHomes, more than 600 employees work collectively to make home buying a pleasant, fruitful and hassle free experience for home seekers.

As a buyer or investor, you should look for the parameters to choose the best property available within your preferred location(s), budget or specification(s). Consider the nearby projects, the profitability of investing in certain areas around the city and similar factors. Home buying may be a personal affair, but there is no harm in trying to find out the best value of your selected property. You can also participate in the discussions being held on several websites where people share their myriad home buying experiences. You could take a tip or two from their experiences to ensure that you get the best option.

To transform the experience of buying a property, you can register your name, mobile number and other details on the website. IndiaHomes provide a 5 minute call back facility to discuss your requirements. They will explain you the pros and cons of the residential community. Not only will they help you in selecting the right property, but also in getting your loan approved at the lowest possible interest rate with a feasible repayment plan.

Reputed real estate websites often give special offers on occasions. For instance, IndiaHomes offered to pay Rs. 1 Lac to select home buyers on completing 5 years in business. Recently, the company conducted a real estate sale for buyers to pick the best properties in India as per their budget. 

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