Documents FIs look for before sanctioning loan

Before buying your dream home, conduct realty check about the background and credentials of the builder

Caveat emptor means ‘buyers beware’. It is the principle applicable to the buyers in case of purchases. In extension, the principle means, ‘Buyers are responsible for checking quality of the goods that they are buying’. Buying or building a sweet home to live is everyone’s lifetime dream, and it is a buying activity, one needs to be cautions while buying a home/site.

As investment layout in buying a home or building it being huge, it is but quite natural for one to look for financial institutions for money. While obtaining the documents, if the FIs’-bankers’ perspective is kept in view, it would be a cake walk in having the loan sanctioned quickly and without impediments. It is also imperative to obtain the title documents needed to establish flawless ownership of seller/ builder to ward-off future complications.

Here are the documents which FIs-bankers’ look for normally to sanction housing loans either for buying a ready house/flat or for constructing a house:

• Title related documents of the seller to the property-house/flat or site/ plot. Whether the property is in the name of the seller and how he/she has acquired it. In case the property to be sold has been purchased by the seller, the flow of title to the property to be seen invariably and related to mother deed. If the property has come through lineage i.e. as ancestral property either by virtue of partition or will, the partition deed or will has to be closely examined and a copy duly attested by the Notary to be obtained. 

• If a flat is purchased in an apartment, apart from the above document/s, how the builder has acquired the site on which the apartment is being built or has been built to be ascertained. The builder may be owner of the site or plot or he/she would have entered into registered Joint Development Agreement (JDA) with the owner/s of the site or plot. JDA should be gone through carefully as it determines apportionment of flats between the builder and the owner/s.

• It is necessary to ascertain whether the property — house/flat or site on which it is being built has ‘A’ Khata or ‘B’ Khatha. FIs-banks’ normally do not finance for ‘B’ Khata properties. In exceptional cases, ‘B’ Khata properties are considered for finance in case a property with ‘A’ Khata is offered as collateral.

• Tax paid receipt/s till the current year is/are to be obtained invariably as any arrears would be burdensome as buyer since arrears of taxes are liable to be recovered as land revenue arrears.

• Encumbrance Certificate issued from the jurisdictional Sub-Registrar’s office at least for 13 years is a must to ensure the property is unencumbered.

• It is quintessential to ascertain whether necessary plan and construction approvals have been obtained from the concerned Civic Body-TMC/CMC/BBMP/BIAPP or Town Planning Authorities and the plan is adhered to.

• It is to be ascertained whether land conversion for ‘Residential’ purpose for the site/plot from the  Revenue Authority (Deputy Commissioner) concerned has been obtained.          
• If a site/plot is purchased from realtor in the layout formed by him/her, whether BMRDA or Town Planning authority has approved it and the site/plot in question has been released by such an authority. If it has not been released, it is hardly possible to get ‘e’ Khata.
• If a flat is purchased in an apartment, it is necessary to look for commencement certificate (CC) issued from the civic authority concerned. It is also imperative to look for Occupation Certificate (OC) issued from that civic authority. In case OC has not been issued, occupation of such a flat may amount unauthorised and it may be difficult to get the Khata transferred to buyer’s name without which subsequent transactions would be difficult.
• It is necessary to ascertain whether betterment charges at stipulated rate/s have been paid by the builder. Obtain a copy of the receipt issued by the civic authorauthority concernedase the betterment charges have not been paid, the burden to pay may fall on the buyer.
• It is also necessary in case of a flat, to ascertain whether the builder has made provision for STP and rain water harvesting facilities in the apartment as mandated while sanctioning the plan.

Before buying a flat, conduct realty check about the background and credentials of the builder.

CREDAI –Confederation of Real Estate Dealers Association of India conducts Realty Expos often in which one may participate since well-known builders will showcase their projects in the expo. Check whether the project/s has/have been approved by the bankers.

It is needless to over-emphasise keeping ready the Form No 16 or the IT returns preferably for three preceding years filed in the respective assessment years.

One should also keep the margin money ready — normally 30% of the project cost which ensures requisite LTV and the estimate if the house is to be built.  

Before sanction of the loan, FIs also conduct due diligence by conducting spot inspections and referring the documents to their empanelled advocate/s for opinion and to find out legal lacunae, if any.

Buy and be a proud owner of your ‘Dream Home’ with clear title/s.

(The writer is a retired chief manager at State Bank of Mysore)