Critical components in the process of buying a home

Finance, documentation and legal matters are critical components in the process of buying a home. Property investors also need to evaluate returns and repayment of loan.

The first consideration when purchasing property, whether commercial or residential, is location. Depending on the intended use of the plot of land or building, you will be able to ascertain whether it is easily accessible to major roads and public transit, and whether it is close to amenities such as shopping malls, apartment complexes, recreational facilities, schools, and industrial belts. Also, find out if the property has easy access to utilities such as electricity and water.

Another crucial factor is development potential. Before buying a plot of land, you must determine whether it is possible to build upon it. A piece of land may be in a prime location, but you will lose the value of your investment if you discover that you cannot build upon it until after you buy it.

Factors that influence buildability include the quality of the soil and the general topography. Will the soil support the foundation of whatever structure you intend to build on the property? Is there sufficient drainage or is the land susceptible to flooding? Is there easy access to a sewage system? These are all essential questions for which the answers should be obtained before you complete your purchase.

Also, research the plans and policies of the local civic bodies in that area.

Once you have finalised on the property to be purchased, be prepared to look around for best loan options available in order to make the financing efficient.

Some factors to keep in mind while looking for a loan:

Interest rate: Look for the lending institution offering the lowest interest rate.

Prepayment option: Check what will be the penalty if you repay the loan before the stipulated time. The lesser the penalty the better it is for you.

* Form 16 for the last three consecutive years
* IT returns of the last three years
* Salary slip
* Bank statement for the last financial year
* PAN, identity proof
* Complete set of house documents
* If the property is an apartment you will have to furnish the MoU between the builder and you. The MoU should state that the property will become yours and will be registered in your name once the payment is made
* You will also have to fill in forms at the bank
* A letter from the builder stating how much he has received from you as advance
* NOC from the builder of the apartment
* Sale deed from the builder showing the worth of the property

The loan amount sanctioned to borrowers is based on age, salary, educational qualifications, credit history and previous employment track record. You can club the income of your spouse, in order to increase your loan eligibility. Typically, banks only lend the amount where your monthly EMI outflow is 30 to 40 per cent of your salary. Any amount greater than this would make repayments towards the loan a burden and one may default.

* Understand the market you will be buying in
* Consider adding other furniture, fixtures and equipment into your loan
* Consider buying/building more square footage than you need right now - you can always grow into it, and this will also allow you to get some rental income until that time
* Make feasibility studies
* More and more businesses in foreign countries want to open offices here, so focus on standardising your construction to suit their requirements