For most people, buying a home is the biggest financial investment they will ever make. This article tells you how you can go through this difficult but important process smoothly.
1. Figure out your needs and goals
A home can be purchased for several purposes: a place to live in, a source of rental income, an investment in the hope of capital appreciation or a combination of all three.
You should have as clear an idea as possible about what you wish to do with your home in the long run. It's probably best to factor in all three uses since you never know what contingency may force you to move or sell your home in the future.
For example, when choosing the size of your home, you should keep in mind that a two bedroom flat will be easier to rent out than a three bedroom one.
2. Financing your home
You will probably be financing your purchase through a bank loan. Though this is a separate topic by itself, let's understand two basic points.
Your relationship with your housing finance provider is a long-term one, which will probably last for 10-15 years. After your job, it may be the most important financial relationship in your life. Make sure you pick an institution that you trust and are comfortable working with.
Secondly, the monthly payments you will have to make to repay your loan (EMI or equated monthly installments) will take a big chunk out of your salary. When you choose the size of the loan, you should be comfortable with the regular payments you will have to make.
If you have opted to pay the floating interest rate on your loan, your EMI may increase if interest rates go up. Also, unexpected expenses like a medical emergency may make it difficult for you to pay your EMI. It's perhaps best to be conservative and choose a relatively inexpensive home with a correspondingly smaller loan.
3. Examining your home and surroundings
It's obviously important to examine your home carefully before purchasing it. Some of the things to look at are the plumbing and electrical systems, the ceilings, walls, floors, etc. If possible, try to find out whether there are any leakages during the monsoon.
The rest of the building is also important. Some of the things to look out for include the reliability of the water supply, the size and quality of the compound and whether there is 24 hour security.
Finally, don't forget your surrounding area, which will determine a large part of the value of your property. Some of the questions to ask are:
~ How reliable is the electricity supply?
~ Does the area flood during the monsoon?
~ What is the quality of the roads and nearby public transport?
~ How good are the nearby amenities like the market, bus stop, railway station, restaurants, shopping centres, schools, hospitals, cinemas, etc?
If possible, try to visit the area during a weekday to get a better idea of regular traffic conditions. Don't forget online resources: for instance Google Maps with its satellite maps provide a great bird's eye view of the general area.
When evaluating the house and surroundings, it's important to keep in mind not just your personal preferences but also those of potential buyers and people who rent homes. For instance, you may not own a car and care about parking space but it may be very important for a future buyer.
4. Understand the basic terminology and concepts
The property market uses a fair amount of jargon that you should become familiar with when you make a purchase. For example you should understand the difference between carpet area, built-up area and super-built up area.
The first refers to the area inside the home on which you could lay a carpet. Built-up area is the carpet area plus the area of the walls.
Super-built up area is the built-up area plus the flat's share of the common spaces like the lobby, staircase, lift, etc. Whenever you come across a figure for the area of the home, you should know which concept it refers to.
5. Don't forget the closing costs
When you are planning for your purchase, don't forget the costs of closing the deal which may be 10-15 per cent of the transaction value. These include stamp duty, brokerage charges, insurance, registration charges, property taxes, etc.
