FAQs: Ownership (Documents; Rights; Responsibilities)

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Before buying a property, you need to familiarize yourself, as well as clearly understand the implications of various terms connected with acquiring a property. It is entirely possible that you might have heard these terms in the course of everyday conversation, but unlike those in the trade, you may not be fully conversant with their scope and meaning. Once you are, you will find yourself in a much stronger position to interact with persons in the trade. In addition, you must make sure to take possession of several documents that establish you as a bona fide owner. Knowledge of your rights and responsibilities as a property owner is equally important.

What is the importance of the Builder/Buyer Agreement ?
  • The importance of the Builder/Buyer Agreement lies in the fact that, with reference to the future, it determines exactly what will be yours once you affix your signature to it. Nothing more need be said about its importance. The document must be studied in detail with respect to several points such as ownership of the clubhouse‚ internal roads‚ terraces and open spaces, and society formation. It is advisable to enlist the services of a legal expert since you are making a lifetime investment.
What is the importance of the Completion Certificate ?
  • The completion certificate vouches for the fact that the building had indeed been constructed as per the approved plan, without any deviations or violations.
What is the importance of the Building Permit ?
  • By issuing an Approved Building Permit, a competent authority gives its approval for a construction, whether new, an add-on to a pervious construction, or a major renovation. The Corporation of Chennai is the competent authority for constructions with city limits, whereas it is either the local Municipality or Panchayat for constructions that fall outside the city limits. Constructions undertaken without an Approved Building Permit, that is unauthorized constructions, can be fined and even demolished as, during stage inspections, they may be disqualified for non-compliance with national‚ regional and local building codes. Thus, any construction should be undertaken only after an Approved Building Permit has been obtained by the builder.
What is the importance of the Encumbrance Certificate ?
  • When buying a property it may not be immediately known whether it has a clear and marketable title. There can be instances where the property has been mortgaged, dues against which remain unpaid, or where actual ownership is under litigation; there could be a loan against the property which the owner is liable to pay, or some other restriction. These are limiting circumstances that encumber the property from having a clear and marketable title. This can be verified by obtaining an Encumbrance Certificate from the sub-registrar’s office of the particular taluk where the property is located. If the Encumbrance Certificate does not reflect a mortgage any other legal dues, the property’s title is clear and marketable.
What is the importance of the Original Title deed ?
  • The Original Title Deed carries details about a builder’s legal right to sell a property. It is imperative for homebuyers to examine the Original Title Deed and verify that the builder is proposing to sell has rightfully devolved on him or his authorized agents. If a Power of Attorney has been executed in favour of the builder by the owner/s with respect to selling the property that too, should be examined in detail because proper documentation is essential for reselling apartments.
What does FSI mean ?
  • FSI is an abbreviation of the term floor space index. It has great significance in the real estate industry since it is the lone determinant of what would be the total floor area of a building vis-à-vis the size of the land on which it is being built. FSI depends on a number of factors like frontage, road width etc. Essentially, the ratio of total floor area to the size of the land, an FSI of 1.5 indicates that the total floor space that can be constructed is one and a half times the gross size of the land on which the construction will be done. Once confirmed, no deviation from the sanctioned FSI is permitted, including setback areas and building height. Any deviation could lead to demolition of a construction beyond the sanctioned limit.
What does Guideline Value mean ?
  • The value that the government fixes for land in different parts of the city, taking into account available infrastructural facilities and growth plan, is referred to a Guideline Value. The Guideline Value of land is subject to periodic revisions in order to balance them with market price. The stamp duty to be paid for registering a property in the homebuyers’ name is based on Guideline Value. As such, Guideline Value can be a primary indicator of the price of a property in any given location.
What does UDS mean ?
  • UDS stands for undivided share of land. It is extremely important to have a clear idea about it because it cannot be physically partitioned or demarcated. However, the conveyance deed in favor of an apartment owner will mention a specific figure as UDS, which is actually the specific portion of land an apartment occupies in relation to the super built up area. The sum total of the UDS of all the apartments in a building should be equal to 100% of the extent of land on which the construction stands. Once the Sale Deed has been executed, homebuyers, in their own interest, must confirm the UDS of their respective apartments by obtaining individual Encumbrance Certificates (EC). An EC accurately reflects the UDS of an apartment and it is legally binding. Once 100% UDS has been conveyed to the homebuyers in a complex, the developer/landowner or their legal heirs would have passed on all their rights in the property to the apartment owners. This will debar the developer/landowner or their legal heirs from making any claim or putting up further constructions in the property.
What does Terrace Rights mean ?
  • Terrace Rights pertain to what apartment owners can or cannot do with respect to using this common area. In addition, Terrace Rights form part of the Builder/Buyer Agreement to safeguard against unauthorized construction and misuse of the terrace, such as being let out on rent for putting up towers for mobile phones, billboards etc. Private terraces must have direct access from the apartment, which must be mentioned separately in the Builder/Buyer Agreement.
What does OSR mean ?
  • Open Space Reservation, OSR in short, denotes open-to-space common area meant for creating facilities like parks, playgrounds and the like, in gated communities and multi-storied buildings. CMDA rules specify OSR provision should be 10% of the land, where the extent of land under development exceeds 3000 sq. m. It is the developer’s responsibility to keep OSR free from any construction. In case the builder cannot provide OSR due to physical constraints, he must obtain exemption, provided he is willing to pay the market for equivalent land as per the valuation of the Registration Department. In case of any proposal for laying roads in the development area by a local body, the particular area is excluded for purposes of calculating OSR; the particular portion of the land is transferred to the local body via a Gift Deed.
What is the meaning and usefulness of “Valuation of property” ?
  • A property is valued to obtain an idea of its market price. The valuation is based on factors such as type and quality of the construction, its location, available infrastructure, and the prevailing demand and supply position in the market.
  • Getting a property valued by a registered valuer has quite a few advantages: it can expedite the loan sanction process as nowadays, many bankers insist on a valuation certificate for issuing loan against property; it might be able to get an enhanced loan amount; it may help to fetch a higher price when negotiating for sale of a property.
What is the meaning of a property’s “Market Value” ?
  • “Market value” denotes the price a property can command in the open market.
How is stamp duty determined; who is liable to pay, and in whose name ?
  • Either the market value or the Agreement value, whichever is greater, is the basis for the amount of the Stamp Duty to be paid during registration of the property. Payment of Stamp Duty is usually the owners’ liability, unless agreed otherwise with the builder/seller. The necessary stamp papers have to be bought in the name of the party paying the Stamp Duty.
When is sale of a property considered to have been concluded ?
  • The sale is considered to have been concluded upon signing of the Sale Deed, payment of the entire purchase consideration, and handing over possession of the property to the homebuyer.
Is it necessary to register the Sale Deed ?
  • Yes, it is necessary to register the Sale Deed as per provisions of prevailing laws in a country. The time frame within which the registration has to be completed is four months from the date of execution of the Sale Deed. The registration is done in the sub-Registrar’s office as per provisions of the relevant Registration Act.
Does "Gifting" a property entail any legal formalities ?
  • Yes. Under the Transfer of Property Act, gifting of immovable property is considered "transfer of property." As such, when an immovable property is gifted is has to be registered through a Gift Deed and Stamp Duty paid as per provisions of Stamp Duty Act.
Is there a distinction between the terms Carpet area, Built-up area, and Super-built-up area ?
  • Yes the distinction is clear and as follows: carpet area refers to the area of an apartment minus the walls; built-up area includes walls and balconies along with the carpet area; and, super built-up area adds common spaces like lobby, lifts, stairs, garden, and swimming pool to the built-up area.
How are maintenance charges calculated in a complex with different apartment sizes ?
  • The legal basis to calculate maintenance charges is to apportion the cost proportionately, according to the size of each flat.
Is it necessary to pay Infrastructure Fee ?
  • Yes, as this is a fee paid to the Tamil Nadu government for the ultimate benefit of the homebuyers. The Tamil Nadu government collects an infrastructure fee upfront from builders for making use of facilities such as roads‚ drainage‚ sewerage‚ and drinking water supply. As the ultimate beneficiaries, homebuyers are expected to reimburse the fee paid to the government by the builder.
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