New Delhi: While scouting for a house or flat, many consider older homes too. And it can be done various reasons such as location, build, architecture etc. Older homes are often located in established neighborhoods that offer better infrastructure and connectivity.
Additionally, the price of an older home in such a location may be lower than that of a new project. However, if you plan to finance the purchase through a home loan, looking only at the price and EMI is insufficient. Banks require clarity regarding the title, documentation, construction details, and legal status of the property being offered as security for the loan.
Condition of property important
When buying an older property, the decision should not be based solely on its age. A 15-year-old house differs from a 40-year-old one, yet a property cannot be evaluated based on age alone. A buyer should examine the property’s structural condition, past alterations, maintenance history, and anticipated repair or renovation costs. If the house is quite old or has undergone major modifications, obtaining a structural stability assessment can also be beneficial.
Consider costs of repair
If a home loan applicant has Rs 15 lakh set aside for the down payment and other upfront costs, the additional expense for repairs and renovations could alter their financing requirements. In other words, home loan planning should not be based solely on the property price. Buyers should formulate a comprehensive financial plan that accounts for EMIs, the down payment, repairs, renovations, maintenance, and other costs associated with ownership.
Verification is essential
When purchasing an older property, the registration process does not mark the end of due diligence. Buyers should verify the title, ownership history, encumbrance status, property tax records, and other critical documents. Additionally, it is crucial to check whether the property’s current construction aligns with the sanctioned plan and applicable approvals.
Older homes often feature modifications made after the original construction, such as additional floors, extensions, or enclosed balconies. If documentation for these changes is unavailable or if the documents do not match the property’s actual structure, securing home loan financing could become problematic. Consequently, buyers should thoroughly verify all property documentation before committing to a loan.
Banks too scrutinize property
In the case of a home loan, banks do not look solely at the borrower’s income and repayment capacity; the property itself is a crucial part of the loan process. According to sources, under the RBI’s housing finance framework, a borrower purchasing a constructed property must declare that the property has been built in accordance with the sanctioned plan and/or building bylaws. Wherever possible, a completion certificate should also be available. Additionally, before loan disbursement, the bank is required to obtain a compliance certificate from an architect.
Greater caution for ‘Lal Dora’ and unauthorised colonies
The legal history of certain older properties can be complex. For instance, when purchasing a ‘Lal Dora’ property, the buyer must thoroughly understand the documents related to the land’s nature and ownership. According to the Delhi Revenue Department, a ‘Lal Dora’ certificate establishes ownership of property or land within a village’s inhabited area. However, even in such cases, the buyer should verify the complete title and all relevant property documents.
Many banks won’t grant housing loans in unauthorised colonies unless the colony has been regularised and the applicable charges have been paid.
Therefore, before purchasing a resale home, the first step is to verify ownership and the title. Next, check the registration status and verify for any encumbrances. Then, examine the construction quality, sanctioned plans, and necessary approvals. Follow this by assessing the property’s physical condition and estimating repair costs. Finally, determine the appropriate loan amount and tenure based on the property’s actual condition and the total cost involved.
