Hi, I am a 27-year-old salaried person and I did not buy land. Here’s why

Last year, I decided to buy a residential plot in Pune. I approached 5 real estate dealers, each one at a time, for properties nearby the Sus area. I educated myself in this sector, I did all my research for each of them and then, rejected them all. So, here’s my story and tips for those of you who at some point want to buy a residential plot in future.

Backstory

I had been working in a stable job for almost 3 years and was living in a rented place by spending almost a fourth of my income. Since long I had this habit of planning my finance and I review my investments regularly. I was living in Sus and the area seemed promising to me for future aspects. I thought about purchasing a residential plot. My reasoning for the decision went like this

1. I can buy a plot of size ~2000 sq ft. Later, I can build a nice home to live and if not, I can resell it.
2. As an investment, this might be a good decision as the rates will increase because it’s near to Hinjewadi IT park. There is news about Pune ring road. It can develop rapidly.
3. I made a budget of ~25L from which I can pay half the money from my savings and the other half using a land loan (which is having really less interest rate, 7.65% in SBI on the date of writing).
4. I am young, so even if it’s not very profitable, I will be able to bear losses.

So, based on the above assumptions, I started to look out for properties on sale. I contacted real estate dealers one by one and on the risk of being blunt, I would say they all seemed shady. I contacted many lawyers in the process also to educate myself. Finally, I gave up on the idea. Now, I majorly invest in mutual funds. But, in the process, I learned a lot. So, I will share some bits here and hope it will be useful for someone, someday.

What is the difference between Agriculture, Non-agriculture & Residential plots?

Agriculture Plot

If you are planning to buy an agriculture plot in Maharashtra then you should know you can only get your name on 7/12 extract if you buy a minimum ~10,000 sq ft plot. In case, your dealer is selling you anything less, then he probably won’t give you ‘Sale deed’ and just provide ‘Power of Attorney’. And, you won’t get your name on 7/12. Also, you should be a farmer to buy such land (or your father/ grand-father should be a farmer).

NA and R Plot

There are many dealers who go by the name of “NA-proposed” plot. Do not fall prey to them. A plot should be either A or NA, nothing in between.

Getting back on point, NA plots can be of the residential kind and non-residential e.g. plot for warehouse.

If you want to make a house in the plot, you should ask for the proper documentation. You should check whether it is clearly mentioned that the NA order is for residential purpose and not for anything else.

You should also know that a minimum of ~3000 sq ft area has to be purchased for R-plots and you can do construction only in ~70% of the plot.

In the case of R-plot, you can get the name on 7/12 in a group (meaning everyone buying plots in that plotting area) and it can’t be identified which specific plot belongs to you, but you should clearly confirm this from the dealer.

What is 7/12 extract and how do I check it?

This is applicable in semi-urban areas of Maharashtra. This contains

1. Survey number of land
2. Size of the land
3. Owner name
4. Loans on the land if any
5. Other agricultural details

You should always ask the dealer if you will get your name on 7/12 of the land. And, even if he says yes, there are many follow- up questions you have to ask to confirm whether he is telling the truth. But for starters, the first thing you should do is to verify the name of the landowner and check whether there are any existing loans on the land. You can do it yourself by just asking the survey number. There are many apps available online where you can enter the survey number and download the 7/12 document.

A similar document is also known as ‘dakhil-kharij’ in North India and also called document for mutation entries.

What is a Search Report?

If the initial screening is ok then you can ask for a search report. This is a record of land for the past ~20 years, it contains information about who had purchased the land from whom over time and the loans taken and cleared till date. You should check this document with a lawyer as it is quite a long document and contains legal technicalities.

Should I get a Sale deed or a Power of Attorney?

Sale deed (also known as Kharedi-Khat in Maharashtra) is a document of purchase of land. Your dealer might say that they will give POA, and lure you by saying that you will save stamp duty, but it’s always good to go for a sale deed. There are many previous incidents of frauds because of the POA.

Can I avail a land loan on my purchase?

The truth of land loan is that you can avail it only if you are going for an R-plot and you have to complete the construction of your house within ~(2–5) years of purchase. (2–5 depending on the bank)

If that’s what you are going for then a land loan is good due to its low-interest rate. But unlike, the home loan you can not save income tax on land loan.

Here are some other small things that you might come across while buying a plot.

What is a Gaothan?

Gaothan (in Maharashtra) is an area in the village which is used for village settlement. The agricultural land within the boundaries of Gaothan can be used for residential purpose and such lands are relatively cheaper also. But, you should duly check what documents you will get with such a deal and confirm their legality with a lawyer.

Some dealers will want to sell you an agriculture plot by saying it’s within 500m from the radius of ‘Gaothan’ so you can do construction.

There is, in fact, a scheme, “Gaothan Expansion Scheme’ under which an area within ~200m radius of Gaothan boundaries can be converted to NA with permission from the Collector.

But, there might be restrictions on Gaothan expansion and you should ask for the document of acceptance from the collector for this conversion.

How Gat number is different than a Survey number?

Some dealers say that some of the points (like above on Gaothan) are not applicable on lands with Survey numbers. They are only for lands with Gat number.

I couldn’t find any sound information about the difference between the two. But, if you come across such a thing, please dig it down before making a final decision. If you already know, comment below and let me know.

How do I know which area is proposed to be included in the Corporation?

I have seen many dealers saying that the area (Sus for example) is proposed to be included in the Pune municipal corporation, and once it’s done the property rates will shoot up. They have sold many properties on this promise already.

This data is available on the internet on PMC site/previous orders etc. Last I checked, Sus was not included in the list. Comment and let me know if I am wrong.

What is the actual size of the road?

Dealers also promise that the main roads will expand to x meter after some time. You can visit the Talathi office (Patwari/Lekhpal in North India) of the area to confirm the road size.

What other things should I check in the map of plots?

If there is an internal road to the plots, always confirm whether the road is also purchased by the dealer and ask for its documents. In village areas, it’s possible that the internal road belongs to someone else and everyone is using it. If at a later point, that person blocks it then you will get in trouble. So, always ask for internal roads.

Footnotes

*Some rules mentioned might be specific to Maharastra state

*All the numbers written are not accurate.

*All the information written above is collected by me over time and might not be correct. I am not an expert in the field. Proper consultation with a lawyer should be done before making a decision.

Did I miss something? Comment and let me know.

Are any of your friends looking out to buy a plot? Share this post with them and help them out.

Originally published at https://blog.campizo.in on October 06, 2020.