1. Doing a bit of research on the track record of builder can help.
2. For any real estate purchase it is preferable to make visits to the sites before buying them. This exercise is worth it not only because we are committing a large amount of money but also because reversing the decision proves costly as well. If the NRI is not able to make it, he can request a trusted friend or relative to opt for the site visit.
3. Going for a home loan through a bank will ensure that the money is released in stages only. This keeps the money safe during the construction. Also, all the banks at their local branches have their list of shortlisted builders for whose constructions loans are pre-approved. It is better to buy only these constructions, as the banks are quite stringent in their norms for pre-approval and shortlist only those builders who have a proven track record and those project, which comply to all legal norms.
4. Post the construction, the management of the asset is one of the major issues faced by NRIs. There is no easy solution for this. There are some society associations which support the owners of the buildings with services like maintenance and rent collection. There are again the “friendly neighborhood real estate agents” who may some times double up as the maintenance manager too. Many times though the “friendly” turn into “greedy” after some time. There are a few professional real estate management firms in most metros, which are now expanding into the Tier-II cities too.
5. Some of the other checks for any real estate purchase are:
i. Whether the construction rate quoted is for Built-up area or Carpet area? Construction is generally quoted for built-up area and rental is quoted only for the carpet area. There can be a difference of 15 % to 20% between the two based on the type of construction. Today in apartments there is the concept of super built-up area which apart from the built-up area includes stair case, common passages, fire escape passage, etc. The super built-up area can be bloated by as much as 50% of the carpet area.
ii. Robert Allen, the Real Estate Mogul suggests the 100 – 20 – 10 – 1 rule for any real estate purchase. The idea is to check out 100 properties in person; shortlist 20 of them for a deeper scrutiny; enter into negotiation with sellers for 10 of the properties and finally buy the ONE that is best suited.
iii. Technically there should be a check for all the statutory approvals – town planning, water supply and sewage disposal, safety approval from the local fire department, etc. It is always better to ask for the encumbrance certificate and the title deed from the builder to get a legal opinion from a lawyer.
6. Don’t hesitate to ask. This is probably the most important point. Many times, for avoiding being thought of as less intelligent, we question less. For any investing and particularly for real estate the more the questions asked the better the investment. The genuineness of the promoter can be gauged by the patience, the promptness and depth of the answers. Answers like, “Don’t worry about that, we will manage”, without going into the specifics are danger signs.
7. Take time. Do not restrain yourself by limiting the time for checking the properties and decision making to the time that you are present in India. A 2-4 week holiday cannot be hoped to be converted into a real estate investment period. Start the process before you come here. In case you cannot decide before you leave, it is OK. A Power of Attorney to a parent or a relative can be used to decide on the actual purchase even after you leave the shores of India.
