Read previous article in Home Buying Guide series: 8 ways to discover your dream property

How to shortlist a real estate project for investment?
When you have multiple builders to choose from and with each builder having several projects, shortlisting and comparing real estate projects can get difficult and overwhelming. Do not worry. Listed below are important parameters which can help you in quick shortlisting of projects.
    1. RERA Registration

    For an under construction project as of 1 May ’17, it is compulsory to get a RERA registration number. Check if project is RERA registered or not. Shortlist any under-construction project only if it is RERA registered with all projects details appearing clearly on RERA website. This should be your first shortlisting criteria. For already completed and ready-to-move-in projects prior to May ’17 or resale purchases in old projects, RERA may not be required.

    Pro-Tip: Verify RERA registration status of a project by directly going to the state RERA websites. Ex: Karnataka RERA, Maha RERA.

    2. Location
    Location is a very important aspect for any real estate investment. This should be your second shortlisting criteria. As a buyer you may have a personal preference for a particular location in a city(not purely from cost factor but also affinity for a location) – say North, East or South of the city. You should weigh in proximity of the project from city centre and from your work place. If you are married and have a working spouse, check proximity from spouse’s workplace as well. If you have kids, check how far are schools of your interest from the project. Evaluate how far are other important landmarks like – a good hospital, metro station, bus stand, railway station and airport. Also figure out commuting time to these places from the project. Check other factors of town planning like liveability of area, water supply, greenery and future expansion for deciding preferred location.
    Pro-Tip: On a holistic basis, give a location score to every project to decide which projects are worth considering. Since workplace can change in future, give more weightage to distance from schools, hospitals and city centre.
    3. Appreciation
    Compare how is the overall appreciation in the area and particularly appreciation of the project you are shortlisting for your research. Appreciation is important for any real estate investment as it leads to higher rate of return when you decide to sell the unit in future or increasing rental income if you let it out.
    Pro-Tip: Check appreciation trend for a period of 5 years for the area and of other projects in the same area to analyze if the project is a good fit for your appreciation expectation.
    4. Budget
    Evaluate on the basis of rate/sqft and total cost(not just basic cost) you have to shell out to purchase the property. Almost all real estate portals just give you clarity about basic cost and final cost is unknown until you go to the builder and ask about it. Don’t go overboard here and spend more than what you can afford in terms of EMI you have to pay. Weigh in future expenses for at least next 3 years for shortlisting projects with affordable EMI. Evaluate increase in school fees for kids, healthcare for parents, travel and vacations, insurance premiums, job security etc to decide right EMI and period of loan you can afford.
    Pro-Tip: Since most builders have a lock-in of 3 years(for under construction projects) from the date of agreement, you will not be able to sell your unit in this period and will have to keep paying the EMIs to the bank. Weigh this factor in while shortlisting projects.
    5. Builder Reputation
    Factor in background of the builder in terms of:
    -How many projects builder has launched till date, home many completed and how many delivered on time?
    -Are there any known pending litigations against the builder in public domain? Check RERA website link of the project to know more details on this.
    -Is the title of projects which builder has been launching clear or there are land disputes in them?
    -How transparent is the builder in furnishing details related to property documents for verification?
    -What are other Buyers saying about the Builder on public forums?
    -Are construction flaws highlighted on any public forum for any project of the builder?
    -Check if anyone in your network has invested in a property by this builder. Probe set of problems residents are raising in internal community groups. You get to understand real issues with a project and a builder per se from these internal community groups. Residents are usually reluctant in letting this info go out in public domain to not affect resale value for homebuyers who have invested in the project.
    Pro-Tip: Try to find someone you know who has already invested in the project and is part of internal community groups to understand real problems faced by Buyers who have already invested in the project.
    6. Compare Master and Floor Plans
    At a high level, analyze the size of project, number of towers, and floor count and shortlist the project if it suits your preference and liking for a particular building architecture. Then compare if the project has the unit configuration you are interested in: 2 BHK or 3 BHK Apartment, Row House, Villa, Penthouse etc. Check if floor plans have sufficient number of bathrooms, balconies, servant room, study room etc or not basis your preference. Check what percentage of Super Built-up Area is given as Carpet Area. Higher the percentage better it is.
    Pro-Tip: Avoid investing in a very small project(say 1 acre). Such projects will be cramped with constructions on all sides and will be noisy. Will also not have space for good set of even basic amenities. 
    7. Compare Amenities 
    Make a list of must-to-have amenities for you and your family. Also check quality of amenity construction. Amenities should not exist just for the sake of it.
    Families with/without kids: Sports and fitness related amenities like Gym, Jogging Track, Courts (Badminton, Basketball etc), Toddler Swimming Pool, Kids Play Area, Creche etc can be good ones to watch out for.
    Families with parents: Yoga/Meditation area, Garden and Reading Lounge etc. can be good amenities for elderly. These are also good for youngsters as well though.
    Another important amenity that cannot be overlooked are parking spaces. A well planned parking area with adequate parking spots for a good number of 4 wheelers and 2 wheelers is a crucial prerequisite to shortlist your dream project.

    Also Read:  A Guide To Understanding Everything About Parking While Buying Home

    Pro-Tip:
    1. Look for finer details in amenities info. Ex: An outdoor badminton court is useless as it can’t be used in all-weather conditions. Same with swimming pools. Many projects have temperature controlled indoor pools which are better than outdoor ones.
    2. Many builders do not deliver all promised set of amenities at the time of possession. Check compensation clauses(if any) in sale agreement. Housing society has to get some of the amenities developed later by pooling in money.
    8. Compare Authorized Banks and Payment Schemes
    Check list of banks which have tied up with the project for home loans. Approval from some PSU banks like State Bank of India(SBI) is good as they carry more rigorous due diligence of a project than private banks before approving a project for home loan. Next, check set of payment schemes offered by the builder.
    Construction linked plan: Payment to be made in phases by the Buyer as per construction progress of the project.
    Subvention schemes: These are schemes which involve Builder, Buyer and Bank in a tripartite agreement. Buyer pays some money upfront(say 10% of total price) for booking. Builder bears the interest cost until the subvention period(usually 2-3 years). Buyer starts paying EMI after subvention period ends. Subvention period in some projects is until final possession or for a fixed period. Any delay in possession can be troublesome for buyer as you have to pay both EMI and rent when subvention period ends.
    Pro-Tip: Carefully check subvention period listed in agreement with the Builder. Do not pay any amount until this is clarified. Factor in the amount you will end up paying as rent from the time when subvention period ends till the date of final possession. Do calculations assuming delay of at least 1 year.  
    9. Necessary Clearances 
    Another important criteria for shortlisting a project is around necessary clearances. Check if builder is willing to share all legal docs with you for perusal of a legal expert. Usually every project has a legal document folder which is updated every time it gets new clearances or other receipts. Some of the important clearances/legal documents are:
    Under construction projects:
    1. Land Registration or Title Deed of the property(in the name of Builder)
    2. Plan Sanction Letter (proof of construction plan being approved)
    3. Encumbrance Certificate (certifies property is free from legal dues)
    4. Agriculture to Non-Agricultural Land Conversion Certificate (given by town planning department as a NOC for using an agricultural land for non-agricultaral purposes)
    5. Land Use Certificate (certifies residential use of a land)
    6. No Objection Certificate (given to Builder from land Seller)
    7. Fire Department NOC (to be obtained during pre-construction phase)
    8. Environmental clearance (to be obtained from state Pollution Control Boards)
    9. Commencement Certificate (certifies commencement of construction)
    10. Khata (Account) Certificate/ Extract of the Property (represents current owner of a property, of prime importance when you go for khata transfer from Builder’s name to yours after property is purchased)
    11. Tax receipts of the property (past 3 years property tax receipts which the Builder should have paid)
    12. Insurance premium receipts (proof of property being insured against unwanted events which delay construction or cause financial loss to the Builder)
    For completed projects(in addition to above):
    13. Completion Certificate
    14. Occupancy Certificate
    15. Fire NOC (post completion)
    Pro-Tip: Avoid investing in projects where Builder is hesitant in sharing legal documents or these documents are promised to be shared only after token amount is paid.
     
    10. Completion Date
    Do not believe in verbal communication for project completion dates as given by the sales staff of the builder in their sales pitch. Ask for exact date of completion which will be given in the sale agreement if you decide to invest. Check grace period which the builder is going to have in the agreement for project completion.
    Pro-Tip: Verify if completion date in the agreement is same as the date registered with state RERA regulator. Do financial planning assuming delay of at least 1 year.
    11. Cancellation Policy 
    What happens if you cancel your investment plans after paying booking amount? How much is the penalty, mode of payment and within how many days will you get booking amount back? What is the interest at which you will be compensated if you do not get refund in time?
    These are the questions that arise when you have to cancel your booking for unforeseen reasons – financial emergency, change of  mind, found a better project or deal elsewhere etc.
    Pro-Tip: Ask the Builder for all the terms and conditions related to cancellation of a booking. Make sure you understand all the cancellation clauses listed in sale agreement. 

    Please share feedback about this post in comments below. Also please let us know if you think there are more critical parameters for shortlisting projects while property hunting.

    Read next article in Home Buying Guide series: 6 steps to comparing real estate projects for buying

     

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