Buying a home in Bangalore

To own a home in Bangalore is a dream for all who don't have it, a "job-well-done" kind of feeling for all those who have bought the right ones and "god-save-us" kind of feeling for all those who bought from wrong people. There are risks within our limits and there are risks outside our limits. We have to try and minimize the risks within our limits to have a "peaceful enjoyment of the property" we bought spending a lot of money. Let me jot down some things i noted while I bought a flat in Bangalore. Also let me tell you, I am not a professional in this field  and below what you read is my personal views and experiences over the subject and most of it is only applicable to Bangalore area.

Step 1. Decide whether to buy or to live in rented space.

Advantages of renting: No strings attached. You can move to new place when you want. You can change if bored with current place. You just need to shell out the advance amount and just the rent, so no commitments of EMI payment etc. Advantages of buying: Emotional -  You own a home in a big city like Bangalore. Practical - Tax benefits and returns from the property.

Step 2. Budget, Size and Location of the property

Decide on the budget of the property. Once decided stick to it. Do not exceed your budget or else "trouble in the future". While budgeting, keep in mind that you would have to spend around 10-15% of the basic cost for registration, tax, amenities etc. Size is variable. Some people feel a 750 sq.ft. house is good enough for a 2BHK while some feel 1200sq.ft house is small. So decide on what you need. Its also good to have a plan in mind(a plan of the house you want to own) - which uses the spaces in an optimized way. One of the best plans is attached below. Location also matters because rates are different in different localities. Budget, size and locality are "co-related", I would say. 

Step 3. Identification of properties

Take sometime to identify the best among the available options. Properties can be widely divided into two categories - "Under construction" aka "UC" and "Ready-to-move-in" aka "RTMI". I would put the "Re-sale" ones also in "Ready-to-move-in" category. Both has pros and cons.

Pros for the former is that you get it for a fairer price(than latter); you have sometime to arrange for money; you can do minor modifications in the builder's plan; you can see the construction quality and inspect it by yourself; etc etc. Cons are that you have no guarantee of what will be the final product(flat or villa or other); you have no guarantee of when all the work will be over and you can move in; there is no guarantee whether after construction the builder could attain required approvals from local authorities - fire, water, sewerage, electricity, geological, environmental etc.

Pros for the latter is that you can see, touch and feel the final product; you can decide when to move in; from the documents you can come to know if the necessary approvals are acquired or not; you can compare and find out if the property has deviations from the approved plan for building(this is important because deviations can cause trouble later. I shall explain this later in this article) etc. Cons are that the price will be  around 20%-30% higher than its launch time; you have to arrange the full money for buying it; you cannot do much modifications in the structure or plan; you have no guarantee of the build quality other than the fellow owners' comments etc.

For me, "RTMI" properties are "peace of mind" properties because you know what you are buying and you buy it because you feel it is worth buying. You are in total control of the situation - whether to buy or not. 

So, coming back to identifying property - search in newspapers, search with the brokers, search yourself by going around and finding the projects in one locality - there are many ways. The best being searching yourself. You know what you need than anyone else and its better you check out what is out there. You can search and find out some properties. It is best to make a list of "buyable" properties. Why a list? Step 4 is the answer.

Step 4: Validation of properties

Validation is an "elimination process". So how do you eliminate the items in the "buyable" list? Other than your regular questions like price, built-up-area, amenities, building materials etc, take the below questionnaire:

What is the percentage of deviation from the approved plan? This is important because after the construction of the building, the approvals will depend on the % of deviation. Buildings with deviations upto a certain percentage is approved by levying a penalty amount. But buildings with deviations above this level find it difficult to procure approvals.

What khata the property has? There are two kinds of khatas - A and B. A khata properties are considered safe to be bought because it is a fully legal building with respect to the terms and conditions of the local authorities. B khata properties are the ones which might have deviations or some issues. But this does not mean B khata properties are dangerous to buy. Some of them can be converted to A khata by applying for and paying "betterment charges" specified by local authorities.

Has the builder pledged the property to any financial firm to acquire loans? Many builders pledge the property to financial institutions to raise the fund for construction. After construction they need to clear all titles. Hence this needs to be clarified.

Which all banks have approved the project? Some banks would have already approved and disbursed loans in the same project. Knowing details about them will help to get faster loan approvals. This also makes sure that the project is safe for buying.

Along with these some long term issues like water etc needs to be considered. Make sure there is a dependable water resource and other resources required.

The above questions are "reject criteria". If answers are "reasonable" then go forward. Else its better to reject the item in the list. 

Step 5: Verification of the property

Validation does not mean that you can go ahead and buy the property. You need to verify the property. You need to make sure that the property identified is legally clear from any kind of litigation now and in future. You need to make sure that the owner of the property has all the rights to sell the property. Now you might think that the bank is doing verification and hence I'm out of danger. But I read in an article that if in case you get into a litigation between the bank, banks usually take a stand that they approved and provided loan based on your repayment capacity and not on any other grounds.

How do we do that? For verification, we need documents. Builders will have all the documents - title deeds, approvals, GPA - general power of attornies if any, JV developement agreements and all the related documents for the project. Builders normally share the documents only after you pay the "booking amount"(in case of UC properties) or after you enter into an agreement by paying a token amount(in case of RTMI properties). If you are not satisfied with the verification then the amount is refunded.

Here are some of the documents to be collected from the builder for verification:
1. DC conversion certificate/document
2. Sanctioned building plan - sketch, approval letter
3. Up-to-date encumberence certificate
4. Up-to-date tax paid receipts
5. Approval from BBMP
6. Mother deeds(history of the property)
7. Present docs - sale deed, partition deeds, GPA etc
8. Individual khata certificate and khata extract
9. Occupancy/possession certificate and receipt of penalties paid for deviations, if any
10. Agreement for joint venture developement between builder and landlord
11. Amalgamation/Partition documents if any
12. Betterment charges paid receipt if any
13. Approval letters from fire, pollution etc etc which ever is applicable
14. A copy of the real sale deed with all terms and conditions

My suggestion is to employ a good advocate who works in the real-estate field and get his detailed opinion on the property you wish to buy.

Step 6: Enter into a sale agreement
Once you have verified the property, enter into a sale agreement with the builder/owner. This needs to be registered with the local registering authority. Otherwise its not legal. For registering the document you need to pay a certain prevailing amount. This amount can be then re-imbursed at the time of registering the original sale deed.

Step 7: Buying of the property

Last step is to buy the property by signing the sale deed with the owner/builder. This sale deed document needs to be submitted at the registrar office, and needs to be signed, sealed and registered by paying the respective registration charges. In this registration process, a property search will be done to make sure that this property is sale-able by the seller. After the registration is done, you will receive the original sale deed, receipt for the payment towards registration and an encumberence certificate.

For those who plan to buy land for building houses
Those who want to buy plots and build houses needs to do much more planning and care while identifying a property. One has to know the below:

1. What khata the property holds? A or B?
2. Under which local body does the land fall in? BBMP limits or village or other?
3. How wide is the road for the property? This is very important as the height of the buildings are restricted if the road is narrow.

Again its better to get in touch with a professional who can guide you on this.

After buying
There are some steps after buying a flat or a house.
1. Change of address for electricity meter
2. Khata transfer into your name and get the certificate
3. Payment of property tax - for this you need to perform step2 and then contact BBMP tax collecting centres.

I hope this article gave you some information. Wish you good luck.

The Crude reality

Foreword: There are lots of misleading articles and illustrations in all the media these days regarding the petroleum products' pricing in India. I am an Indian citizen trying to find the facts behind the 'tough decisions' of my government. Please read through this article and if you find this 'reasonable' enough, please share and forward. Please keep your mind open while reading this article. Lets us think and reason with the brain, let the heart pump the blood.

Types of Crude : Let us learn a little bit about crude oil. There are mainly two kinds of crude oil traded in the international markets - WTI(West Texas Intermediate) crude and Brent crude. I would like to quote http://www.oil-price.net/ here : WTI is more important in- and is-limited to the US, probably because WTI is produced and refined within the US. Brent is the real international benchmark. India uses Brent crude. There are many political, geographical and etc etc reasons why we use this, which is out of the scope of this article. Below is the real-time crude prices for WTI and Brent.

Oil trade: I mentioned oil trade. Oil trade is futures. It means, we trade today for future use. Oil companies forecast the quantity of future usage and buy from international markets. We buy today for usage in future. I highlighted it because this is the key to the oil price. I have seen many illustrations which says petrol price is very high in India in media, quoting today's crude oil price. For all those who propagate this, I tell you, "ignorance is bliss". Because, the oil bought today is used after many months. So how could anyone quote today's crude price and illustrate today's petrol price? Please go to this link to know the prices http://www.oil-price.net/ . Here if you hover over the Brent crude chart, you can see price for 1m(1month), 1q(1quarter), 1y(1year) and 5y(years). Check out the price in Feb-Mar 2012. It was around 125 USdollars. Currently it is $98 - $101. Now I guess you will be able to relate the news' in media saying government will reduce price in coming days. Our government is not doing any injustice to us. The crude oil we bought months back is being distilled now and we are using it. Since oil companies bought it for high rates, they have to sell it for high rates. Please note that they bought the crude months back for 125 US dollars, but did not hike the price relatively that time. Even if there was a hike during this period, it would have been for a previous crude hike. Moral of the story is today's Crude price decides tomorrow's fuel price. Today's petrol price is relative to past crude price.

Oil prices: I am no economist. But I try to read and understand economics. From what I understand, Oil prices not only depend on the basic pricing principal - Demand and Supply. It also depends on various political situations or geographical reasons etc. Sometimes, some report comes out saying economic growth will be slowed down due to X reason. The crude price then starts reducing because the buyers who buy for future forecast a lesser amount of usage and buy less. This reduces demand and hence price falls. Some other time news is that economies will see a boom in growth that it will need more resources. Oil traders buy more oil in the assumption(not a dumb assumption, calculated forecast) that there will be more oil usage. Sometimes when the oil prices go too low, the oil producing consortium(group of main oil producing countries - OPEC) meets and decides to reduce the production of oil. Hence supply - demand gap can be maintained and they can have guaranteed income. We have to understand, that is their biggest area of income. War could be another reason for high crude price. Iraq and Iran were very friendly countries with India and both oil producing. You know what is the status now. Please click here to know. Hence all these factors and more, like speculation trade, affect oil prices.

Government's position: Our government is caught in between devil and sea. I agree there are lot of scams and other things which it has to answer for. Let us be focused to the topic in discussion - crude price. Devil and sea. Yes. In one side there is this devil - oil price which it cannot control. There is only one option, buy at whatever price it is sold. Since we cannot produce much crude ourselves, we have to do this until some other source comes up. We also have to understand, government, through its different arms like ONGC, is investing in different explorations to find oil. Inside India and outside. Sea - is us. Many well educated people blindly criticize the government without learning the facts. Sure we have right for expression. But our sentiments should not cloud our ability to think and reason.

Wrong Illustrations: Now lets face the fact. Those who try to illustrate the petrol prices, they quote WTI crude price. By this time, you would know that this is absolutely false. There is a 15-20 dollar difference between these two(WTI is 80-85 us dollars and Brent is 95-105 us dollars : click here), the Brent crude which we use having a higher cost. So how can one illustrate that the government is looting us when the base factor that is used itself is false?

Reality: Reality is that we don't have much crude with us. To produce that, the "break-even" price(amount spent for exploration, building oil wells etc etc until production) is much much higher than the normal oil producers. This is because our best Oil exploration site Mumbai high is in the sea.Oil exploration and production costs much lesser in onshore fields. But we still explore to find more because we don't have to spend much Forex for it. Since we cant produce much crude ourselves, we have to buy it from the market and buy it at that price which prevails in the international market. Although The Government will not be trading day-to-day for crude, we cannot expect it to get lower than average rates from the sellers. Government is trying its best to hold the prices by giving subsidies. It is a fact that diesel, LPG, kerosene etc still have a lot of subsidy from government. All these fuels are given subsidies because increase in these will directly hit the common man and the poor man of India. We should know that the government is spending tens of thousands of crores of rupees to give this subsidy. A comparative study of petrol prices  can be read here. Government is trying hard. Let us help ourselves by understanding the facts.

Useful Links: Request you to also read through following links as this will enlighten you, I'm sure.
http://oil-price.net/index.php?lang=en
http://www.oil-price.net/en/articles/wti-edging-on-brent-crude-oil.php
http://www.oil-price.net/en/articles/oil-price-at-comfortable-level.php
http://www.mcxindia.com/SitePages/ContractSpecification.aspx?ProductCode=BRENT_CRUDE_OIL
http://205.254.135.7/countries/cab.cfm?fips=IN
http://oil-price.net/en/articles/profitability-of-USD100-oil.php
http://useconomy.about.com/od/commoditiesmarketfaq/f/oil_prices.htm

Fuel price - a different view

As usual I left my home to office today morning. But unusually there was very less traffic. It seems many people left their cars at home. Why? Another fuel price hike. I hope you would have read my older post Contrast. This time its not only petrol. It seems we might see hikes in diesel and cooking gas too. Immediate response to this were harthal offerings, protests etc. Since only petrol prices are hiked, I guess I should be concerned too much because I drive a petrol run Ford Fiesta at my hometown and a Hyundai i10 at Bangalore

Lets think about this from different angles.

1. Expenditure - Time, Money. Let's hope this price hike makes people think twice before they drive their car out of the parking. Do i really require a car when I got to office, that too alone? Can I manage with my motorcycle? Can I manage with the public transport? Though its a bit difficult, it gives me some exercise which i miss most often. My experience : My car does not give me any additional respect. If I commute by car, it takes average 1 hour stressful driving for travelling 8 Kms. If I commute by my motorcycle, 20 mins, cool drive. Currently my car runs 20 kms per week and mostly on weekends only.

2. Environment - Pollution. In these times of global warming, it will be a big favor we do to our next generations if we can reduce our carbon footprints by selecting a motorcycle or a public transport. My excuse for choosing a two-wheeler is that my kid will be enjoying a less polluted environment when he grow up. Would you like your kid to dwell in a polluted enviroment? Then keep driving your pride, your fuel guzzling, environment killer. Otherwise we have to  cut-down the unnecessary driving habits ourselves before anyone else does.

3. Impact on the economy - Foreign currency. We all know India heavily depend on imports for its petroleum oil requirement. Hence this is the major expense of the economy and any upward fluctuation of the oil prices directly impact us in all ways. Fuel prices will go up, travel expenses go up, price index and commodities index go up. What do we do in a family when we find that our income and expenses does not meet? When our expenses are much more than our income? Sensible, reasonable people cut down the unnecessary expenditure. This normally solves the problem. So lets do it. If "India is my country. All Indians are my brothers and sisters.. ", then India is also my family. Lets cut down our unnecessary expenses. Before asking anyone else to do it, let us start ourselves.

We can make this place better. Lets start today!!!