Land Acquisition and Permits

Building a house is a dream come true for many families. The process is long-drawn and complex, but the result is worth every drop of sweat for a place to call your own. The previous articles provide information on the overview and choosing the appropriate land segments. The next step is to get into the details of acquiring the land and the legal permits for the property.

Land acquisition

  • Covering the bases

    Land acquisition refers to the act of purchasing a piece of land for purposes like the building of a structure or an investment plan. Whether you are willing to buy barren land or a property that you wish to demolish and rebuild depends on your desire.

    Understand that if you purchase a piece of land that comes with a building, you will be paying the price for both. The cost of demolishing is just an added burden.

    It is extremely necessary that one thoroughly researches all the essential details before buying a plot. Whatever be the motives, it is still a type of investment, so browsing through millions of options and verifying whether there are any potential risks or hazards with the property is a must. Precautions are vital for this process because if you get roped into a fraudulent activity, the legal issues you will face are bound to be vicious.

    Since the basics have been covered, we will move on to the first step - verifying the dealer and the land.

  • Checklist of documents and verifications

    Purchasing a plot is a process that requires meticulous attention to all the documentation and details. Verifying the background of the dealer and the land on itself is an act that will be rewarding for you in the future. Check out the details you will need to inspect:

    • The authenticity of the dealer
    • The nature of the dealer - whether they are an individual or a company or a trust.
    • The dealer's nationality
    • Consent of authorities

    If you are buying land from a company, give a thorough look over their details and complete background verification to ensure the firm's legitimacy.

    Below is the list of documents and permits that you should inspect rigorously to avoid any future complications.

  • Title deed

    Title deed is the document that assures a buyer that the dealer has full rights to sell the land. Inspect the title deed thoroughly and check whether the land is registered under the dealer's name. To prosecute the legal procedures without any disputes, one should contact a property lawyer and check the document carefully.

    The title deed will also mention the rights of the seller over their land. Run a complete check and ensure that they have the exclusive rights to sell the land to you. Also, make sure to check for the approval of the necessary authorities.

  • Non-Agricultural (NA) order

    In India, every piece of land is considered agricultural land. You should have the NA (non-agricultural land) to partake in any real estate or other activity. There are numerous types of NA orders, and to build your own house, you will have to acquire an NA-Residential order.

  • Encumbrance Certificate

    The EC document verifies that no legal dues are pending on the plot that you are about to purchase. This document is essential, so make sure you get it by asking for it in the sub-registrar's office.

  • Release Certificate

    This certificate is for those who are buying land from the resale market. A release certificate ensures that all the previous dues of the loans acquired for the plot have been cleared. The bank releases it - make sure to secure a copy of it before you get ready with the purchase amount.

  • Tax receipts

    Ask your dealer for the tax receipts of the past few months. By checking them, you can be assured that no tax dues are pending on the property. These receipts will be helpful in case there is a legal issue.

  • Floor space index

    FSI or Floor Space Index is the proportion that decides how much construction can be done on the plot you are purchasing. For example, if you have purchased a plot of area of 3000 sq.ft., and if the FSI is 50%, you will be able to build structures for only about 1500 sq. ft.

    Now that the paperwork is done, there are a few other verifications related to the land that you might want to do. Take a look below.

  • The actual size of the plot

    Inspecting the physical boundaries of the plot with the help of an engineer is a vital step before proceeding with any purchasing plans for the land. It is a rule of thumb that everyone should be aware of, so make sure to check the physical boundaries of the property by yourself.

  • Appreciation value

    Buying a plot at the right place will provide you with a great appreciation value over the years. So, before finalising the plot, you could research the property's appreciation potential and decide if you want to continue with the purchaproperty’s appreciation potential- inspecting the cost of the plot and arranging for the finances.

Cost of a Plot

What are the deciding factors?

One should understand that there is always tough competition for buying a piece of land. Eventually, there is a high chance that you will pay more than the actual value of the plot because of the demand. Several factors determine the value of a plot. They include:

  • Location of the plot and the amenities found near the property
  • Vastu of the property
  • Size and shape of the plot
  • Accessibility to transport and other facilities
  • Nature of the land
  • The trend in the real estate market

Dealing with Finances: Loans, Payments, and Taxes

It is advised that one should pay the rest of the money in a demand draft (DD) or a cheque after the initial payment. It will help you avoid any tax-related problems that may arise in the future.

  • Loans

    If you plan on obtaining a loan to purchase the property, you will get one under the category of land loan. It also goes by the name plot loan. Home loans are applicable for buying an existing property or for a property about to undergo construction. You can avail of a plot loan even if you plan to keep your land for other uses.

    Land loans are approved only for plots that are within municipal or corporation limits. If you are looking to buy a plot in a village, then you will have to apply for a home loan and then proceed with the construction subsequently. The Loan To Value (LTV) is 70% for plot loans - you will be paying a minimum of 30% of the total amount by yourself.

  • Payments

    As a buyer, you will be paying several miscellaneous fees while you are in the process of land acquisition. Additionally, you will be paying an advance payment or a booking fee that settles the deal between you and the dealer. This settlement, also known as token money, is a common practice because this acts as goodwill for the dealer. The payment you are making in advance is the assurance they have.

    To sign the agreement for sale, you will be paying a minimum token amount and then 10% of the accepted transaction value. Unless and until the sale deed is sealed, do not make the full payment for the plot.

  • Taxes

    Under Section 194IA of the Income Tax Act, for any purchase of immovable property other than agricultural land of Rs 50 lakhs and above, you are required to deduct a tax of 1% from the payment you are making to the seller. This clause is known as TDS on the purchase of immovable property.

Registration - Sale's Agreement

Drafting a sale agreement between the buyer and dealer is crucial for securing a piece of land. The sale agreement will include:
  • The physical boundaries and nature of the land.
  • The token amount you have paid for the purchase.
  • The total amount that both parties have finalised.
  • A cancellation clause.
  • The period in which the whole process will be completed.

With the sale agreement and title deed drafted, you can visit the sub-registrar's office and register the land under your name. A few fees like stamp duty, registration fees, and document writer's fees will have to be paid during the registration.

Permits and clearances

The first and foremost permit you have to acquire is the conversion and land-use approval. Under this, the process of converting agricultural to non-agricultural land will be stated and approved. Moreover, one should check the zonal plans and layout of the city to ensure that the plot documents are under the same guidelines.

After the purchase of the plot, you will be asked to pay an annual maintenance payment. This amount will cover all the basic amenities your plot has access to, so make sure you pay it on time.

The next step would be to obtain the construction approval, which you will know in the next article.

Seeking the help of a real estate agent

The land acquisition process might seem like an easy step when it comes to the whole process of house building. But, it is for the better if you get the help of a professional for this process. A real estate dealer will know the differences between purchasing a property and how to deal with any fraud that might be a part of the process. Similarly, they will be aware of the current market trends and be familiar with the highs and lows in the market value.

Approaching a lawyer

The assistance of a lawyer will be immensely valuable during this process. Going through the plot documents with your lawyer is a necessary act - this way, you will be able to spot any risks or issues related to the land or the owner of the said land. To avoid any legal penalties, verifying the documents and plans thoroughly is advised.

Although this process is comparatively less complicated, a lawyer specialising in dealing with real estate property will be able to guide you through the permissions and legal documentations. In India, several state-specific laws deal with the process of land acquisition, so getting in touch with an experienced lawyer would be wise motility.

Final thoughts

Land acquisition is one of the most crucial parts of the process of building your dream home. Besides, this is the step where you are spending the most money, so exercising extreme caution and diligence is necessary.

Always make sure to cross-check all the documents before you sign any of them. Along with the agent, check if the seller has established the right price on the plot. There is always a chance for fraud, so examining and cross-checking all the documents and details several times will help you stay vigilant and safe during this process and acquisition process.

There are a few permits, as zonal approval, that you have to keep in mind during the purchase of a plot. Most of the other approvals come in only during the design of the building. That would be the next step - drafting the layout and design of your home with your architect. You will have to see that these plans are approved by the municipal body to proceed to the actual building process.

Abide by the law, check the documents, and pay the taxes - with these points in mind, you can complete the land acquisition process without a hitch!

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