- Date : 02/12/2020
- Read: 5 mins
Process and documentation when buying a house
Each of us, at some point in our lives, would have dreamt of buying a home of our own. A home is probably the most important and expensive purchase in one’s life. Many of us would have spent days and weeks designing our dream homes on paper, or in our minds. But after a while, it's time to stop daydreaming and actively work towards getting the finances ready.
An event like buying a dream home compels us to go through some steps. This includes saving the money required for the down payment, visiting properties after consulting with real estate agents, finalising a home, closing a purchase price, budgeting for peripheral expenses, and gaining an understanding of the entire home buying procedure.
The home buying process can be cumbersome in reality, especially if you are a first-time home buyer. The list of documents that are required varies depending on the type of property. If you are planning to take a home loan, the documentation list is longer. You will also have to agree on an interest rate with a financer and accept their terms and conditions.
Read on for a comprehensive list of documents required while buying a house:
1. Sale deed
The sale deed (popularly known as dastavej) is an essential legal document denoting proof of the sale and the transfer of property from the seller to the buyer. Often, decades after buying a home, we may want to sell our house and upgrade. Or we may shift cities and wish to sell our existing house. At such times, this document is mandatory. It comes into execution after the compliance of the terms and conditions of the sale agreement as agreed to by the seller and buyer.
2. Mother deed (for loan against property)
The mother deed is an important document asked by financers when a buyer wishes to take a loan to purchase a house. This document traces the ownership history of the property.
3. Sale agreement and purchase agreement
The sale agreement or banakhat and purchase agreement consist of a list of terms and conditions that are agreed to by the buyer and the seller. The purchase price that both agree to for the house will be stated in both the agreements.
Related: An expert guide on how the price of a house is determined [Premium]
4. Building approval plan
Builders need to cross many legal hurdles before construction can commence. This includes necessary sanctions under the provisions of the building bylaws, master plan, and local body acts. A building approval plan involves two things: the building plan and the layout approval. Sometimes, buyers do not insist on builders meeting the terms and conditions of the building plan and layout approval before purchasing the house. This is an important document.
5. Possession letter
The possession letter is a document drafted by the builder. It states the date of the buyer’s possession of the house. It is made in the builder’s name and is created after receipt of the completion certificate. It is not proof of one’s ownership of the property. For proof, the buyer needs to get an occupancy certificate or completion certificate.
6. Completion certificate or occupancy certificate
An occupation certificate becomes important when you are buying a flat in a building which has recently been constructed. This is also applicable to those who are purchasing a resale flat.
However, there are investors or speculators who may invest in under-construction property with the intention of flipping it soon. An OC may not be important for such buyers. But if they wish to hold on to their flat for a long time, they will eventually need an OC.
A completion certificate or occupancy certificate is a document that mentions whether the building has passed inspection after completion. It confirms that the building follows all the laws laid down by the local development authority and is essential for availing of basic utilities like a water connection, electric supply, and drainage. Do not buy a new flat without this document as it could be deemed illegal and you may have to pay a penalty or even face eviction. Even if you have invested in a flat which is in an under-construction building, ensure that the builder offers the OC, once the construction of the building is completed.
Related: 5 Affordable cities to buy or rent a house in India
7. Encumbrance certificate
Popularly called EC, it is a certificate of assurance that the house in question is free from any legal or monetary liability such as a mortgage or an outstanding loan.
8. Khata certificate
Khata certificate is a revenue document containing the details of the house like its size, address, etc. This lets buyers pay property taxes. It is a form of identification and is a requisite while taking a home loan. Khata certificate is also needed to apply for electricity and water supply.
9. Allotment letter
An allotment letter is a crucial procurement if one plans on booking a house that is still under construction. It includes all the required details regarding the payment for the flat. It also contains the charges for additional facilities. This letter is required to be submitted if one needs a home loan.
Costs involved in the home registration process
There are some mandatory costs involved in the process of home buying. Stamp duty is the main charge and is a compulsory fee that the buyer is supposed to pay to the state government. Paying this ensures that the house is registered in their name. This charge differs from state to state, but is generally between 5% and 8%. Court fees will be 1%-2%. If you availed of the services of a broker, a brokerage fee of 1%-2% of the total house cost may be applicable. Getting a dedicated parking space could involve additional charges. For an under-construction property, there is a GST charge of 5%.
Related: Why legal opinion is important when the property is funded through a home loan?
It is extremely important to understand these charges before committing to a house. It is equally important to store all these documents safely once the transaction is complete.
Each of us, at some point in our lives, would have dreamt of buying a home of our own. A home is probably the most important and expensive purchase in one’s life. Many of us would have spent days and weeks designing our dream homes on paper, or in our minds. But after a while, it's time to stop daydreaming and actively work towards getting the finances ready.
An event like buying a dream home compels us to go through some steps. This includes saving the money required for the down payment, visiting properties after consulting with real estate agents, finalising a home, closing a purchase price, budgeting for peripheral expenses, and gaining an understanding of the entire home buying procedure.
The home buying process can be cumbersome in reality, especially if you are a first-time home buyer. The list of documents that are required varies depending on the type of property. If you are planning to take a home loan, the documentation list is longer. You will also have to agree on an interest rate with a financer and accept their terms and conditions.
Read on for a comprehensive list of documents required while buying a house:
1. Sale deed
The sale deed (popularly known as dastavej) is an essential legal document denoting proof of the sale and the transfer of property from the seller to the buyer. Often, decades after buying a home, we may want to sell our house and upgrade. Or we may shift cities and wish to sell our existing house. At such times, this document is mandatory. It comes into execution after the compliance of the terms and conditions of the sale agreement as agreed to by the seller and buyer.
2. Mother deed (for loan against property)
The mother deed is an important document asked by financers when a buyer wishes to take a loan to purchase a house. This document traces the ownership history of the property.
3. Sale agreement and purchase agreement
The sale agreement or banakhat and purchase agreement consist of a list of terms and conditions that are agreed to by the buyer and the seller. The purchase price that both agree to for the house will be stated in both the agreements.
Related: An expert guide on how the price of a house is determined [Premium]
4. Building approval plan
Builders need to cross many legal hurdles before construction can commence. This includes necessary sanctions under the provisions of the building bylaws, master plan, and local body acts. A building approval plan involves two things: the building plan and the layout approval. Sometimes, buyers do not insist on builders meeting the terms and conditions of the building plan and layout approval before purchasing the house. This is an important document.
5. Possession letter
The possession letter is a document drafted by the builder. It states the date of the buyer’s possession of the house. It is made in the builder’s name and is created after receipt of the completion certificate. It is not proof of one’s ownership of the property. For proof, the buyer needs to get an occupancy certificate or completion certificate.
6. Completion certificate or occupancy certificate
An occupation certificate becomes important when you are buying a flat in a building which has recently been constructed. This is also applicable to those who are purchasing a resale flat.
However, there are investors or speculators who may invest in under-construction property with the intention of flipping it soon. An OC may not be important for such buyers. But if they wish to hold on to their flat for a long time, they will eventually need an OC.
A completion certificate or occupancy certificate is a document that mentions whether the building has passed inspection after completion. It confirms that the building follows all the laws laid down by the local development authority and is essential for availing of basic utilities like a water connection, electric supply, and drainage. Do not buy a new flat without this document as it could be deemed illegal and you may have to pay a penalty or even face eviction. Even if you have invested in a flat which is in an under-construction building, ensure that the builder offers the OC, once the construction of the building is completed.
Related: 5 Affordable cities to buy or rent a house in India
7. Encumbrance certificate
Popularly called EC, it is a certificate of assurance that the house in question is free from any legal or monetary liability such as a mortgage or an outstanding loan.
8. Khata certificate
Khata certificate is a revenue document containing the details of the house like its size, address, etc. This lets buyers pay property taxes. It is a form of identification and is a requisite while taking a home loan. Khata certificate is also needed to apply for electricity and water supply.
9. Allotment letter
An allotment letter is a crucial procurement if one plans on booking a house that is still under construction. It includes all the required details regarding the payment for the flat. It also contains the charges for additional facilities. This letter is required to be submitted if one needs a home loan.
Costs involved in the home registration process
There are some mandatory costs involved in the process of home buying. Stamp duty is the main charge and is a compulsory fee that the buyer is supposed to pay to the state government. Paying this ensures that the house is registered in their name. This charge differs from state to state, but is generally between 5% and 8%. Court fees will be 1%-2%. If you availed of the services of a broker, a brokerage fee of 1%-2% of the total house cost may be applicable. Getting a dedicated parking space could involve additional charges. For an under-construction property, there is a GST charge of 5%.
Related: Why legal opinion is important when the property is funded through a home loan?
It is extremely important to understand these charges before committing to a house. It is equally important to store all these documents safely once the transaction is complete.
