Under Construction Property in Bangalore
Why not go for under-construction property?
- The Risk of builder violating the building Bye-Laws
- Builder may construct illegal floors (penthouses etc.) because of which BBMP will not give OC
- 90% of the payment is composed just before the Sale Deed registration, and other terms and conditions like conclusion of amenities, car parking etc.
- BBMP has the power to sanction/clear violations only up-to 5%, that too has some limitations Beyond this you have to depend only on Akrama – Sakrama.
- Most of the builders won’t have stipulation for STP (Sewage Treatment Plant), which is mandatory as KSPCB. STPs were made compulsory in 2010 for all the new apartments with more than 20,000 sq. ft built up area, having more than 50 flats.
- Eminence of the construction may not be as superior as promised before the acquisition, but you can’t do anything as you would already have paid for it.
- You may have to shell-out additional Rs. 6 lakh o Rs. 8 lakh to the bank as pre-emi interest
- Lead time for delivery may be 18-24 months. Many things happen and change during this time frame.
- Agreements generally are one-sided and favouring the builders.
- Also punishment for delay from the builder is peanuts. It is around Rs. 5/Sq.ft/month. Say you are buying a 1000 sqft flat and the penalty works out to be Rs. 5000/- month. While you will be paying close to Rs. 50,000/- month as pre-emi interest alone!
- Since you would have paid 90% of the cost within a few months of sale agreement and need to wait for 12-18 months previous to you get possession of your flat, you will be at the mercy of the builder to get your flat completed and will not be able to increase any issues or objections with the builder.
- Getting any penalty paid to you from builders is cumbersome.
- No clear info on carpet area. All flats are sold based on super-built up area which includes all common areas.
- In all clauses for cancellation due to any reason, refund will be around 80% of the paid money and will be after 3/6 months’ time frame.
- Most of the times undivided share of land of the flat owners won’t tally with the entire land on which apartment is being built.
- Some of the builders may not have NOC from BESCOM, KSPCB, BWSSB, BBMP, BDA etc.
- First-time builders who want to make more money, end-up in messing up the entire project and lastly flat purchases will be affected.
- Sometimes you might get less carpet area than what is committed.
Advice to Buyer
- Make sure that the builder commits OC and ‘A’ Khata in writing and make it as part of Sale Agreement / Sale Deed.
- Make the bank release payment only after completion of each stage.
- Make the payment schedule reflect the stages for actual completion of your flat and also till handing over all the legal documents like OC and ‘A’ Khata.
- Form an association along with other residents so that pressure can be put on the builder to convey as per schedule and commitments.
- Instruct bank to release payment only after receiving written approval from you (builder generally sends demand note to banker for payment release and puts pressure on bank for release of payment)
- Don’t fall prey to builder saying that your flat will appreciate within 1 year or so and forces you to pay more etc. It is not true. Approximately if you take construction period as 12 months and loan as Rs. 50 Lakhs, you will pay close to Rs. 6.0 Lacs as pre-EMI interest to the Bank (taking 1% per month as interest on Rs. 50.0 Lacs). So that the whole flat cost at the end of 12 months is: Rs. 50.0 Lacs + Rs. 6.0 Lacs = Rs. 56.0 Lacs. Please note you would have given much more than appreciation already and will have remaining installments to pay.
- In practice, since apartment construction is rising and in full swing in and around Bangalore, availability is also growing day-by-day. So any new buyer of an apartment will look for new flat because it would have constructed using newest technology and novel safety methods. So finding a buyer for an old flat might be an issue.
- After the completion of the project, make sure that the builder hands over the whole set of documents to residents association
- Check that the builder has all the required clearances, like sanctioned plan, commencement certificate etc.
- Now, an under-construction property attracts same VAT as a finished apartment, so you won’t save anything.
- Ensure that the builder doesn’t violate the sanctioned plan/bye-laws