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Things to Know Before Buying a Residential Apartment



A dream home is something you buy once in your life time. The price of a dream residential apartment is in many lakhs and if purchased in the metro cities can be in crores. Such a high cost means any mistakes you make while buying your dream apartment can haunt you for a lifetime.
Remember : If you buy your dream apartment in haste then you will have to repent at leisure

Those Plaster of Paris Models



When you visit the builder’s office you would see a sample (model of your dream apartment made with plaster of Paris) complete with ceiling, wooden furnishings, marble tiles, glass panes and a spacious kitchen. Apartments are well marketed by builders. To attract customers the sample model of the apartment might show a spacious kitchen, expensive tiles and flooring and glass partitioning which might not be provided in the actual apartment.

Remember : What you see might not be what you get. You need to enquire if all these amenities would be provided with the actual constructed apartment and if yes would you have to pay more for them. Builders charge an additional 10% at the time you take possession of the flat towards super built up area.(Common spaces such as lift, lobbies and parking lots).

Does your builder have a tie up with banks?



  • Banks do a due diligence (Check all documents of the residential apartment thoroughly before sanctioning a home loan).
  • If your builder has a good track record (Delivers well completed residential apartments on time) then he would easily have a tie up with reputed private and public sector banks.
  • Public sector banks are known to thoroughly check builder’s projects before sanctioning them. Check for builders tie up with a public sector bank.
    Remember : If you avail a home loan from a reputed bank the due diligence (document check) of the residential property and the builder’s track record would be verified by the bank.

Flat allotment letter

The flat allotment letter gives you the buyer the right over the flat/apartment.

It includes:

  • Building plan and details of the size of the apartment.
  • Schedule of construction (When what will be constructed).
  • Payment installments.(As each stage of construction is completed the payment is made)
  • If additional facilities are provided such as marble flooring or a glass partitioning then an extra amount is charged.
  • If the builder provides a gym facility or a swimming pool (amenities) you have to pay more for this.
  • Delivery date of the apartment (Date on which you would get possession of your flat). You would get the flat allotment letter once you make a payment of 15-20% of the cost of the apartment to the builder.

    Remember : You need a flat allotment letter when you avail a home loan from your bank.

Possession date

Builders are known to give an ambiguous time frame for the possession date of your flat.(possession will be handed over in 2-3 years and no exact date is specified). Try to get an exact possession date if possible. This could be difficult as generally all clauses and rulings favor builders and since the real estate sector is not regulated in India you need to make sure that you get what you pay for. You get the possession of the flat after you make all the payments to the builder.

The late penalty clause

You must have heard of cases where builders complete half the construction and then hold customers to ransom (Pay more or else….) You need to include a late penalty clause in the agreement (flat allotment letter) that has a punishment (a high payment paid to you) in case the builder does not give you the possession of the flat in time. The penalty could be the monthly rentals you would have got had the flat been completed in time.(Say INR 15000 for each month of delay). A penalty payment of INR 5-7 per square foot to be paid by the builder for each month of delay .(If the size of the apartment is 1200 square foot the builder would have to pay INR 6000-8400 for each month of delay). The builder definitely has a clause where you would have to pay a fine if you do not make your payments on time. So why should you not protect yourself too? Why should all clauses favor only the builder?
Why you need to get possession of that new residential apartment from your builder within 3 years (Self occupied residential flat or apartment) if you have availed a home loan?

  • Under Section 24 (b) you get a tax deduction of INR 2 Lakhs on the EMI (interest component) you pay on your home loan for your self occupied apartment or flat.
  • If the builder doesn’t give you possession of your flat within 3 years from the financial year you have borrowed (availed the home loan) you will get a tax exemption of only INR 30000 on the interest you pay on your home loan and not INR 2 Lakhs which you would have got under Section 24(b) had your apartment been completed in time.
    Remember : If your flat is not completed in time you lose tax benefits.

Protection for the builder

The builder inserts a clause where he is entitled to an extension in time if the construction is delayed due to factors beyond his control.

The factors may be :

  • The price of raw materials used in construction may have increased.
  • Shortage of construction material (Lack of sand).
  • There is a labor shortage in the market.
  • There is a downturn (think recession) and a paucity of funds.
    Well this pretty much includes everything.....

What happens if you do not make your payments in time to the builder?

The builder would charge you an interest of 18-20% of the outstanding amount (Amount you have to pay) for each day of delay from the due date. (Day you were supposed to make the payment).
Compare this with the measly sum (small amount) you get if the builder delays the possession of your dream residential apartment.