Mr.Selvaraj,
Clear Title:
• Obtain 7/12 extract ( pahani documents in A.P.State) from the respective revenue office. Please read this page for details on Pahani documents. Do not rely upon photo copies of the documents provided by the seller.
• Make sure there is no outstanding loan, taxes, mortgage, claims, court case – generally pahani information Extract will have these details
• In case there are multiple owners on 7/12 Extract (pahani information in A.P.state), make sure all of the owners sign on the sales deed/ agreement. This is most common cause of subsequent lawsuits.
• Hire title search lawyer and verify ownership details and liability details of past 30 years.
• Even if you full cash, try to borrow a small portion of the amount from the banks, because banks (more so nationalized banks) verify titles and other legal aspects before sanctioning the loan. It takes time but it is worth the wait.
• In case the land is owned by deceased person and name of his or her legal heir are not updated on the 7/12 Extract, avoid purchasing such plot until the names of the legal heir are updated in the 7/12 Extract. In short, do not purchase based on affidavits, undertakings, or Will. You must purchase from the current alive legal owner.
Status of land:
• Non Agricultural (NA) status does not automatically make it legally approved for construction.
• We have seen NA lands that are NA for purpose of warehouses, commercial reasons and are sold as "NA, collector approved, for residential construction", where it is illegal to do residential construction. This is one of the many reasons why you should hire an experienced lawyer to find out legally what is allowed.
• In the State of Maharashtra, land is broadly classified in three classes: Agricultural land (Green Zone), Non-Agricultural land (Urbanisable Zone, Industrial Zone, Recreation Zone), and Forest land (Forest Zone).
• No construction is allowed on Forest land (reserved land)
• Agricultural and non-agricultural (NA) land have different sets of rules and regulations
• Non-Agricultural (NA) status does not mean you get maximum FSI (1). Many lots that have NA status from Collector’s office, have FSI as less as half to 0.75. So need to check what is the FSI
• NA lands don’t qualify loan from nationalized banks and most of the leading private banks. It is good practice to ask if you can pledge the land to borrow from banks. Typically plots that are approved by banks for loan are sold at higher rate.
• 7/12 Utara will have official status of the land (agriculture, non-agriculture, reserved area, restricted area, any other special constraints on the land, for example land owned by or allotted to protected classes of society cannot be sold without written permission from Collector, otherwise the sale can be voided)
• Be extra careful with “proposed” statuses, for example “proposed NA” there is significant risk and delays involved in changing of the status.
• Be extra careful with “guthewari done” plots – you may be able to construct house on the plot however it would not be possible to sell the house on a gunthewari done plot. We recommend avoiding such plots. Technically gunthewari plots are agricultural plots, it is just that they are available in smaller areas, i.e. “gunthas”, i.e. in multiple of 1000 sq ft (vs. acres as in case of proper agricultural plots).
• Take extra precaution while purchasing Gaothan plots (or Gauthan Extension Scheme) with respect to the legal ownership. Gaothan is portion of village where most of the village population lives (it mostly has houses, and not cultivated land). One needs Collector’s permission/ approval to construct on a Gaothan plot.
• Find out who will be the legal owner of the land after you purchase. Many schemes leave legal ownership rights with the developer, builder, society, local authority, township, government. Technically you can build house on these plots, however you are not the legal owner of the land. Best practice is to go for free-hold land that can be transferred in your name.
• Find out if seller is willing to register the sales deed in the office of sub-registrar (or other relevant revenue/ collector office) immediately after sales. If answer is ‘no’, then there is most probably some issues with status of the land. Many times seller ask for months (that goes some times to years) before they are in position to register because they don’t have necessary clearances from the Collector’s office. Avoid plots where the seller is asking for more time to register the sale deed.
• Make sure that the plot is not part of the land that is acquired by the government or pending to be acquired by government for any civil projects (road, water, electricity, sewage, dumping yards, railway, civil markets, city/ town development authority, etc).
• Avoid plots from sellers who guarantee minimum appreciation, and minimum recurring income, and schemes that look too good to be true (e.g. “invest 5 lakhs now, we guarantee 12 lakhs in three years”, “invest 2 lakhs in agricultural land, and we will do farming for you, and sell your vegetables in the market at guaranteed price”).
• Not e that agricultural land had 0.04 FSI, i.e. you can construct 4% of the land, so even with 15000 sq ft plot you can construct 600 sq ft (roughly 1 to 2 BHK), which is not worth the size of the plot and money. You may be better off buying a smaller NA plot (e.g. 3000 sq ft) at higher rate that gives you 1 FSI.
• If you are thinking of buying agricultural plot and converting it into NA, note that it is extremely time consuming process that has very his risk (you may not be able to convert it at all). Unless you know the tricks of the trade and sure about the conversion, it recommended not to consider the conversion option (no issues buying it just as agricultural land and keeping it that way)
• If plot is part of bigger scheme, find out if you must stick to a pre-approved layout for constructing house. Also, find out if you can hire your own architect, contractor to construct the house or must go through the seller/developer for that. We have seen cases where seller/ developer requires you to hire their services and charge higher rates or base the cost on the saleable area (it does not make sense to pay contractor based on saleable are, you lose the benefit of constructing on your own).
• If the seller had recently converted agricultural plot into NA, make sure there are no outstanding fees/ dues/ taxes for such a conversion (because government will ask new owner to pay the same, and you will have to recover from the seller, most likely seller will not pay, and it becomes a legal issue).
• Avoid sellers in hurry or rushing through the process – they are probably covering up land status or ownership related issue (typically they would offer cheap rates or deep discounts for cash payments and closing the deal early).
• Payment in installments is good idea when purchasing plots (that is indication that seller is stable, and is not anticipating any risk), although it is not a guarantee that there is no risk. Your risk is limited to payment you make vs. entire payment.
• There are margin restrictions on plots, that is need to leave some space from the boundaries of the plot. These restrictions put limitation on the plinth area, and thereby can limit overall carpet area.
• Many a times developers do not have necessary approvals for all the survey numbers in the project, buyer needs to make sure entire project, i.e. all the survey numbers are approved, and particularly the plot they are purchasing. Not having approval for entire land covered by the project is big risk hence should be avoided.
