Buying an apartment in Bangalore

Have been thinking of writing this up for some time now, as a logical companion to my “Renting a house in Bangalore” post. These are some questions I had, when I decided to explore buying an apartment. I hope these would be useful for someone in a similar situation. An entire book can be written on this topic, I don’t intend to be that comprehensive. So, I’ll just model this post as an FAQ, to keep it crisp.

Disclaimer (upfront): This is based on my experience, and at the end of the day, it’s just my opinion. I’m not a lawyer & I don’t claim it’s 100% legally accurate, so please do your due diligence. It’s not going to cover all possible cases, because I don’t have experience of all possible cases. Caveat Emptor!

Q. What is the scenario you have experience on?
A. Buying an apartment, not a house. From a seller (resale), not from Builder. Ready to move in, not under-construction. Some processes/documents could be common though. This is for Bangalore (India), I’m not sure of processes in other cities.

Q. What’s the high-level process of buying a home?
A. Here’s a 30,000 ft view of the typical process:
  • Choose a property
  • Indication of interest: Pay a token amount
  • Get copy of property papers from Seller
  • Get property papers verified by a lawyer
  • Negotiate price, Sign a Sale agreement, Pay an advance
  • Approach bank for Loan, pay fee, get approval
  • Sign Sale Deed, Register it, Pay seller (with Bank’s help), take possession of house
  • Bank takes Sale Deed, provides you a copy
Q. What’s the high-level cost breakup?
A. Here are some heads to consider:
  • Base price
  • Stamp duty
  • Registration charges
  • Brokerage, if an Agent is involved
  • Bank legal & processing charges, including Stamp duty for agreement
  • Khatha transfer fees
  • Residents Association membership transfer fees, if applicable
  • Renovation costs, if applicable
  • Monthly maintenance charges (recurring monthly/quarterly)
  • Property Tax (recurring annually)
  • Loan EMI (recurring monthly)
Q. Do I need to get papers verified from a lawyer? Wouldn’t the bank do it before approving the loan?
A. You don’t have to, but it’s strongly recommended. Reason: you’re buying the home, you should be aware of risks, if any. Bank does run some checks before lending money, but the liability is yours. You can ask your lawyer to provide a written report that lists all documents, with key dates, and calls out what’s missing. This report is quite useful as a lot of property papers are in local language (Kannada). A written report does cost more than a verbal report.

Q. How much do lawyers charge for verifying papers?
A. It varies, depending on whether its a house or an apartment or a land, new or resale. Also varies from lawyer to lawyer.
TIP: For new apartments, most (if not all) set of papers are common for all units in the complex. So, you could get in touch with other interested buyers, and share the lawyer fees.

Q. Is there a standard list of documents required for an apartment?
A. The most frequent question amongst the FAQs! No, I found many different checklists on the internet, for lands, apartments & houses. Finally went with the checklist provided by the lawyer I consulted. It was quite comprehensive, and practically, not all of the papers in the list were available. Not all of the papers were applicable too. But, it was a good list to start with.
A lawyer would know best, which documents are important. And lawyers would be aware of the applicable rules/laws. So, it’s recommended that you consult a lawyer & ask for a checklist. Depending on how important a document is, your lawyer might indicate whether it’s required before signing sale agreement, before Registration or just a Nice to Have. If he/she doesn’t mention it, do ask. It’s confusing just picking up a checklist from someplace and going with it, as not all documents are equally important. There’s a chance you might ignore an important document, or let a deal fall through for lack of a less important document.
So, I won’t mention the list here, but here’s a categorization of the nature of documents you can expect in the checklist.
  1. Documents related to agreement/arrangement between the land owner & builder (examples: Construction Agreement, General power of attorney, Joint development agreement etc.)
  2. Document relating to sanctions by Governments bodies (examples: sanctioned plan, layout map, approvals from NHAI/AAI, BESCOM, BWSSB, work commencement certificate, completion certificate, occupancy certificate etc.)
  3. Ownership documents: indicating chain of owners & current owner for apartment (example: Khatha, Encumbrance certificate, BESCOM bill, Sale Deed, tax receipts, any backing documents for Parking etc.)
  4. NOCs for Sale (examples; NOC from Residents welfare association mentioning No Dues & any fees you’ll be expected to pay, NOC from Seller to Bank incase of mortgage)
  5. Documents related to Land (examples: Mother deed, Survey documents, conversion documents incase of agricultural land)
  6. Ownership documents for land (examples: Sale deeds, Khatha, encumbrance certificate, tax receipts)
  7. Documents relating to Builder’s company
  8. Documents supporting any special cases (example: any minor claims, pending cases, ownership change by gift/partition/will/death certificates etc.)
For the documents relating to land, it’s good to go back 30 years. It’s important to keep in mind though, that these checklists are non-standard, & seller might not have all documents ready. For some, he/she might have to go back to builder, so be patient & considerate to see the deal through.
Also, for documents where a seller has physical possession of original documents, it’s a good idea to have your lawyer accompany you to seller/builder & inspect the originals.

Q. Why is a Sale Agreement needed? Is there a standard format for it?
A. A Sale agreement is a formal agreement between the buyer and seller on the terms and conditions they agree upon for selling/buying a property. There are standard formats available online, but I recommend using them only as a starting template. It’s good to document everything that you’ve agreed upon. Ideally, there should be no verbal clauses that are not contained in this document. A bank typically asks for the copy of the Sale agreement when you approach it for a loan, and the original before disbursement. Here are some things that this agreement typically contain:
  1. Names and addresses of buyer & sellers
  2. Address of Property
  3. Details of property, like Khatha numbers, super built-up area, built-up area, common area, parking spaces included, undivided share of land
  4. Mention any change in ownership between original owners and current owners
  5. Price agreed upon (Base), not including Registration and stamp duty
  6. Assumptions of sale: state things like all taxes are paid, the seller is legal owner, there are no legal cases pending, seller hasn’t entered into agreement with any other buyer etc.
  7. Advance paid, along with mode of payment (Cheque/DD details)
  8. List of documents that the seller needs to provide to the buyer, with due date
  9. Maximum time by which sale must be completed, failing which the agreement would become null and void and seller would have to return the advance paid by buyer. Factor in the time it’ll take for seller to provide all documents and time it’ll take for buyer to get the loan approved.
  10. Any other Exit clauses
Q. Do I have to take loan from the same bank that the seller has a loan with?
A. No, but if your loan is with a different bank, it often leads to the following Catch-22 situation: Seller’s bank won’t part with the original papers/sale deed till the seller’s loan is Paid. The process could take a day or two. Buyer’s bank will ask for papers at the time of disbursement. In this situation, either buyer has to come up with the funds to payback loan & get Sale Deed released, or one of the banks has to agree to break the deadlock.
This situation gets eased if you go to the same bank that the seller has a loan with. In that case, seller provides NOC to the bank to process your loan on the same property, clear his loan using part of your disbursement, and transfer papers from his account to buyer’s account

Q. In case of loan with the same bank, how do I make sure that the original sale deed is indeed transferred under my account?
A. After a month of disbursement, you can request the bank to provide a signed & stamped copy of the original Sale deed. Banks provide such copies on request. If you get the copy, the bank was able to retrieve the original for your loan account. Hope there’s no else here.

Q. After registering the property, what other papers would I need to get in order?
A. Apply for Khatha transfer, BESCOM meter transfer in your name. Get Apartment association membership transferred in your name.

Q. Compared to renting, what are the factors to check while buying?
A. A lot of things are common. The key difference being: there are some things that can be changed easily, and some can’t be. Things that can be easily changed can be ignored when you’re buying. Anyways, here are some important things I recommend checking:
  • Woodwork present? Is it good enough to retain, or will you have to re-do? Factor in costs.
  • Availability of water supply
  • Power backup, check if it’s minimal or partial or full
  • Reserved parking. Open or closed?
  • Association membership transfer charges, factor in costs
  • Monthly maintenance charges, factor in costs
  • Condition of doors
  • Check if there’s any seepage present, this could be a deal breaker
  • Check for any major structural deviations from apartment plan
  • Natural lighting in apartment
  • Vastu compliance, if applicable
  • Check for recent sales in the apartment complex to get an idea of baseline rates. Mark up/down based on condition of apartment.
  • Security in area
  • Factor in all renovation costs into the price and evaluate if the price is still good.
  • Check water pressure.
  • Check condition of bathroom and kitchen fitments
  • Check for any termites around woodwork & kitchen sink
  • Get an feel of the kind of crowd in apartment complex
  • Visit the apartment at least twice, once during day time and other in the evening, take notes (unless you have a photographic memory)
  • Ask yourself: Does it feel good? Do you see yourself happily living there? There are some intangible things that the mind cannot measure but the heart can feel. Listen to the voice inside!
Q. Any other tips before moving-in
A. It’s easier to get renovation and painting completed before you move in. Keep some spare paint and brushes to touch-up, in case shifting causes some marks on walls.
Also good to get pesticide/insecticide treatment done before your stuff moves in.

Hope this is helpful … All the Best!

[Trivia: This post comes 953 days after my last post, I thought of waiting till 1000 days but couldn’t]

Renting a house in Bangalore

I know this is going to be a marathon post, the experience was no less, believe me. My intent of writing this is to share my experience of renting an apartment in Bangalore, might come in handy for someone going through a similar search. The facts stated are true for Bangalore only, and not necessarily for other Indian cities.

Disclaimer: I’m not against landlords and agents, but my experience is from the POV of a tenant 😉

Some key points (as of today):

  • Both individual houses (or floor/units in them) and apartments are available.
  • Unlike many other cities, houses are available cheaper than apartments.
  • A deposit equivalent to 10 months rental has to be paid to the landlord which is refunded post-deductions, when you vacate the premises.
  • Deductions could include last month’s rent (if not paid) and painting charges (tenants are often asked to bear annual painting charges)
  • In case of apartments, society maintenance is payable by the tenant and includes water charges.
  • In case of houses, there’s no maintenance but water charges are shared by all units on the site.
  • Electricity charges are borne by the tenant
  • In most cases, one month notice is required from either party for vacating the house
  • Rental agreement is signed for a period of 11 months
  • Houses can be found via agents (property dealers) or directly.
  • Agents charge a maximum of one month’s rental (negotiable) as their brokerage

Some best practices & ground realities:

Finding a house:

  • Find a broker, he shows you houses, but it costs you brokerage: this is a no brainer so I won’t elaborate much on this
  • Lookup owner postings on sites like 99acres.com, MagicBricks.com, IndiaProperty.com & CraigsList and contact them directly. Most of these websites have been cluttered up by agents/brokers posting as owners (I wish these sites would do something about this menace) but it’s easy to filter out the noise by using this thumb rule: if you see the same name and contact info on multiple ads, its a broker. Also, owners generally post precise information on location of property, sometimes even the address, whereas broker ads are generally vague. From my own experience, I’ve also found that agents post ads for fictitious properties available for lower rents on these websites. When you call them up, they’ll simply say that property is no longer available but they’ll be happy to show you other properties in the area.
  • In you’re interested in a particular area, pick up a two-wheeler and venture out around the streets looking out for To-Let signs. Most have direct contact numbers of owners. This works mostly for areas having more houses though (not apartments; for apartments, read next bullet). It isn’t as silly as it sounds and you do get quite a few leads. But this approach doesn’t work for areas where demand is high.
  • If you’re interested in apartments around a particular area, visit those apartments and ask the apartment security desk if any apartments are available for rent there. The guards can pass you owners’ contact information if any are available. Beware though, of guards who direct you to the builders’ marketing office or an agent, both will charge brokerage.
  • Subscribe to your company’s informal distribution lists.
  • Ask your friends in other IT companies to let you know if they hear about some property available for rent. Companies like Infosys and TCS have very active email lists where property rental emails are circulated. Due to the large strength of these companies and long-term travels, there are always people moving & houses being put up for rent.

Inspecting the house:
If you don’t care much for Vastu compliance, this should be a pretty straightforward checklist, but a very important one. I’ll be skipping the Vastu thing here since that’s very comprehensive, I’m a novice and so won’t be able to do justice to it in this post.

  • Does the apartment get Cauvery (municipal supply) water? Try to get a house that does. Houses that don’t get Cauvery water have to rely on secondary sources like tankers & so have higher maintenance charges.
  • Does the house have a bore-well for secondary water supply? This is also very important as Cauvery water supply is time-bound and you would need either a large enough storage or a secondary source of water to get by.
  • How big is the water storage? Is it dedicated for your unit or shared with other units? In apartments, shared is better as if the tank empties out, someone will get water pumped up. In houses, individual is better as you’ll be pumping water yourself and when there’s no water, you’ll want to conserve.
  • Generator backup? An important nice to have, though it would raise the maintenance charges. Let’s just say that if you don’t want to invest in an inverter, this is important.
  • Individual electricity meter: Does the unit have have a dedicated electricity meter? This sounds obvious but it isn’t. It’s a given in an apartment though. However, in some houses, there is only one official meter for the site and multiple unofficial meters for each of the units. So, every month, all residents have to get together, calculate and split the bill. Such arrangements cause confusion and I would suggest you to avoid a house that has something like this.
  • Sunlight: Does the house get adequate natural light & sunlight? Which direction does the balcony face in? Do the rooms get natural light?
  • Parking: does the house have a reserved parking
  • Balcony: not all houses and apartments in Bangalore have them but it’s important if you want to sit out sometimes, or hang out clothes for drying.
  • General condition of the house: fixtures, paint. Is the color of the walls and fllor pleasing to the eye? Confirm whether the flat will be painted before its rented out. Note any other thinsg that need repairs.
  • Lighting: Note whether the house has enough lighting (florescent tubes, bulbs etc.)
  • Mesh on windows: this is actually quite important to keep out mosquitoes and still have a flow of air, though it isn’t a deal breaker
  • Curtain rods: Yes, curtains are needed 🙂
  • For apartments, security is a given. However, for houses, evaluate whether all direct or indirect openings into the house are secured by grills. Does the front door allow you to look outside (Magic eye or window overlooking entrance) before you open the door?
  • Wardrobes and storage: Does the house have enough storage space built-in? Check the kitchen too.

Reviewing the locality/area
Ideally:

  • Distance from your workspace
  • Distance from nearest shop/market
  • Not too crowded
  • Not too noisy
  • No slums in the vicinity
  • Clean approach road
  • Close to public transport and auto stand
  • Not in the middle of nowhere

Pre-token:

  • Deposit amount can be negotiated on. Most landlords (if asked) would agree for 6 months rent instead of 10, or a round figure.
  • Some landlords state a combination of rent & deposit, rent can be increased if you want to pay lesser deposit and vice-versa. There’s no set formula for this.
  • Most people would ask up-front if tenants are a family or a group of bachelors. Some people want to let out their property only to families. Reasons stated mostly include a) more damage to property by bachelors & b) bachelors could cause disturbance to families living around
  • You may be asked if you’re a vegetarian or a non-vegetarian. Some people want to let out only to vegetarians.
  • Most landlords would be willing to negotiate on rent. Around 10%.
  • Some landlords “prefer” to let out to vegetarian families,but are open to group of bachelors & non-vegetarians. If they get their preferred tenant, the appetite for negotiation may become 15-20% too.
  • Finalize the rent and deposit before giving a token.
  • Visit the house with owner & list any repairs that you would like to be done before you move in. Check all elctrical switches, fans, lights & geysers.
  • If you went through a broker, this is the time to negotiate on brokerage with him.

Token:

  • If you like the house and would like the owner to hold it for you, give the owner some token advance. It’s important to give this to the owner and not the broker. Ideally, it’s a token amount so doesn’t have to be a big amount, but it’s good give between INR 3000-5000 so that the owner is sure of your interest and can stop showing the property to other potential tenants. If you change your mind, the token amount may not be returned so give a token when you’re really interested and honour your word.
  • Pass on your details to the owner (or agent) for the rental agreement.
  • Insist that you read the agreement draft before it’s typed on stamp paper.

Paperwork:

  • The first page of the rental agreement should be typed n a stamp paper. The rest of the pages can be on plain A4 Bond paper. Stamp papers are available from banks and intermediaries on payment of stamp duty. For rental agreement, make sure that the duty paid is INR 100 or more. Agreements made out on stamp papers less than INR 100 are not valid as address proof. This is important as you could need to use the rental agreement as residence proof while taking a mobile connection etc.
  • Rental agreement should mention all clauses clearly. Read the draft and ask for changes if you don’t agree with a clause. You may be told that its a standard format and just a formality. Remember that its a legal document and you should agree with what you’re signing up for.
  • The deductions from deposit should also be mentioned, preferably in absolute figures. example: painting charges
  • Pay the deposit by one or more cheques, and mention the cheque numbers and amounts on the rental agreement. Don’t pay in cash.
  • It’s advisable (though not necessary) that rent should also be paid by cheque or bank transfer.
  • There is an original copy of the rental agreement which stays with the tenant and a copy of the agreement that stays with the landlord. It’s standard practice to sign both original and copy in ink. Some landlords would insist that they should retain the original, and give you the copy. This is debatable and I’m not sure on what the law says.
  • The rental agreement is signed in presence of two witnesses and you hand over the deposit cheques to the owner.
  • If you went through a broker, this is the time to pay him too.

Taking possession:

  • Take possession no later than the date mentioned in the rental agreement. This is the date from which you’ll need to pay rent (pro-rated)
  • Note the electricity and water meter readings in presence of the owner. You’ll be paying for units consumed thereafter. Any unpaid usages will have to be cleared by the owner. (or cleared by you and adjusted in rent payout to owner)
  • Ensure all repairs requestsed have been completed.
  • Put your own lock on the house. Since the house was available to-let, its possible that one or more keys of original/owner’s might still be there will some agents in the area to show to prospective tenants, this is just to prevent people entering.

Living:

  • Pay rent by the due date mentioned in the agreement.
  • Pay electricity bill by due-date.
  • Pay maintenance/water charges to residents association by due date.

And then …. some day …

Leaving a house:

  • Give verbal notice to the owner a month before vacating, mention the date of which you’ll be vacating the house
  • During the notice period, the owner would want to show the place to other prospective tenants. The owner could choose to let out directly or through an agent. You may be asked to provide a duplicate key for this; its OK to provide this to the owner. However, giving a duplicate key to agent could mean that he could enter your house at any time using that key. Try not to provide the key. Be supportive though, by showing the place when you’re present in the house. You could also pass the word around on the distribution list in your office, so that if someone else is interested in renting out the place, they can contact the owner directly.
  • A couple of days before you vacate, the owner might want to inspect the house to make sure any breakage/damages can be accounted for. Confirm the deposit amount that you’ll be expecting back so that both parties are in-sync
  • On the day you’re vacating the house, collect the deposit amount after deductions from the owner. On receipt of the amount, hand over the keys and the original rental agreement. You might have to attest the agreement saying you’ve received the refund of the deposit amount.
  • A lot of times, owners insist that they’ll return the amount after the next tenant moves in and pays the deposit. Sadly, this is a situation that people encounter a lot of times. Hand over the key and agreement only once you’ve gotten your advance back. This may result in a deadlock, but the owner would need to refund your money and resolve the deadlock. It’s the owner’s responsibility to refund your deposit money in time, and there’s no reason why you should wait till the next tenant moves in. Depending on the situation, and how soon the owner decides to resolve the deadlock, you’ll get your money back. The key is persistence.

Terminology:

  • BHK: Short for Bedroom, Hall & Kitchen. A 2BHK would mean: 2 bredrooms, a hall & kitchen.
  • Individual house: a house or a floor/unit in it
  • Cots: Doesn’t mean charpoy, it means the usual wooden beds
  • Semi-furnished: could simply mean that the house has wardrobes and storage space. If additional furnishings and items are present, they’ll be specifically mentioned
  • Open parking: designated parking space at the ground level, with no shade on top
  • Covered parking: designated parking space either on ground level or in basement. If on ground, it would have shade on top.