In our experience, investment in plots is economically better option than buying constructed properties. That is because land appreciates more than constructed properties, and you get better value for money as illustrated in this article. However, purchasing plots involves more steps and precautions than purchasing apartments, and pre-built houses. The primary considerations are clear title and ownership, no pending liabilities and outstanding, status of the land, and basic infrastructure. This article will throw light on each of these in details so that those considering purchasing plot in Pune will get good idea about necessary precautions. If you hire us, we will guide you through the process. If you are planning to pursue this on your own, it won’t hurt to keep these points in mind.
• Obtain 7/12 Utara from the respective revenue office. Please read this page for details on 7/12 Utara. Do not rely upon photo copies of the documents provided by the seller.
• Make sure there is no outstanding loan, taxes, mortgage, claims, court case – generally 7/12 Extract will have these details
• In case there are multiple owners on 7/12 Extract, make sure all of the owners sign on the sales deed/ agreement. This is most common cause of subsequent lawsuits.
• Hire title search lawyer and verify ownership details and liability details of past 30 years.
• Even if you full cash, try to borrow a small portion of the amount from the banks, because banks (more so nationalized banks) verify titles and other legal aspects before sanctioning the loan. It takes time but it is worth the wait.
• In case the land is owned by deceased person and name of his or her legal heir are not updated on the 7/12 Extract, avoid purchasing such plot until the names of the legal heir are updated in the 7/12 Extract. In short, do not purchase based on affidavits, undertakings, or Will. You must purchase from the current alive legal owner.
Status of land:
• Non Agricultural (NA) status does not automatically make it legally approved for construction.
• We have seen NA lands that are NA for purpose of warehouses, commercial reasons and are sold as "NA, collector approved, for residential construction", where it is illegal to do residential construction. This is one of the many reasons why you should hire an experienced lawyer to find out legally what is allowed.
• In the State of Maharashtra, land is broadly classified in three classes: Agricultural land (Green Zone), Non-Agricultural land (Urbanisable Zone, Industrial Zone, Recreation Zone), and Forest land (Forest Zone).
• No construction is allowed on Forest land (reserved land)
• Agricultural and non-agricultural (NA) land have different sets of rules and regulations
• Non-Agricultural (NA) status does not mean you get maximum FSI (1). Many lots that have NA status from Collector’s office, have FSI as less as half to 0.75. So need to check what is the FSI
• NA lands don’t qualify loan from nationalized banks and most of the leading private banks. It is good practice to ask if you can pledge the land to borrow from banks. Typically plots that are approved by banks for loan are sold at higher rate.
• 7/12 Utara will have official status of the land (agriculture, non-agriculture, reserved area, restricted area, any other special constraints on the land, for example land owned by or allotted to protected classes of society cannot be sold without written permission from Collector, otherwise the sale can be voided)
• Be extra careful with “proposed” statuses, for example “proposed NA” there is significant risk and delays involved in changing of the status.
• Be extra careful with “guthewari done” plots – you may be able to construct house on the plot however it would not be possible to sell the house on a gunthewari done plot. We recommend avoiding such plots. Technically gunthewari plots are agricultural plots, it is just that they are available in smaller areas, i.e. “gunthas”, i.e. in multiple of 1000 sq ft (vs. acres as in case of proper agricultural plots).
• Take extra precaution while purchasing Gaothan plots (or Gauthan Extension Scheme) with respect to the legal ownership. Gaothan is portion of village where most of the village population lives (it mostly has houses, and not cultivated land). One needs Collector’s permission/ approval to construct on a Gaothan plot.
• Find out who will be the legal owner of the land after you purchase. Many schemes leave legal ownership rights with the developer, builder, society, local authority, township, government. Technically you can build house on these plots, however you are not the legal owner of the land. Best practice is to go for free-hold land that can be transferred in your name.
• Find out if seller is willing to register the sales deed in the office of sub-registrar (or other relevant revenue/ collector office) immediately after sales. If answer is ‘no’, then there is most probably some issues with status of the land. Many times seller ask for months (that goes some times to years) before they are in position to register because they don’t have necessary clearances from the Collector’s office. Avoid plots where the seller is asking for more time to register the sale deed.
• Make sure that the plot is not part of the land that is acquired by the government or pending to be acquired by government for any civil projects (road, water, electricity, sewage, dumping yards, railway, civil markets, city/ town development authority, etc).
• Avoid plots from sellers who guarantee minimum appreciation, and minimum recurring income, and schemes that look too good to be true (e.g. “invest 5 lakhs now, we guarantee 12 lakhs in three years”, “invest 2 lakhs in agricultural land, and we will do farming for you, and sell your vegetables in the market at guaranteed price”).
• Not e that agricultural land had 0.04 FSI, i.e. you can construct 4% of the land, so even with 15000 sq ft plot you can construct 600 sq ft (roughly 1 to 2 BHK), which is not worth the size of the plot and money. You may be better off buying a smaller NA plot (e.g. 3000 sq ft) at higher rate that gives you 1 FSI.
• If you are thinking of buying agricultural plot and converting it into NA, note that it is extremely time consuming process that has very his risk (you may not be able to convert it at all). Unless you know the tricks of the trade and sure about the conversion, it recommended not to consider the conversion option (no issues buying it just as agricultural land and keeping it that way)
• If plot is part of bigger scheme, find out if you must stick to a pre-approved layout for constructing house. Also, find out if you can hire your own architect, contractor to construct the house or must go through the seller/developer for that. We have seen cases where seller/ developer requires you to hire their services and charge higher rates or base the cost on the saleable area (it does not make sense to pay contractor based on saleable are, you lose the benefit of constructing on your own).
• If the seller had recently converted agricultural plot into NA, make sure there are no outstanding fees/ dues/ taxes for such a conversion (because government will ask new owner to pay the same, and you will have to recover from the seller, most likely seller will not pay, and it becomes a legal issue).
• Avoid sellers in hurry or rushing through the process – they are probably covering up land status or ownership related issue (typically they would offer cheap rates or deep discounts for cash payments and closing the deal early).
• Payment in installments is good idea when purchasing plots (that is indication that seller is stable, and is not anticipating any risk), although it is not a guarantee that there is no risk. Your risk is limited to payment you make vs. entire payment.
• There are margin restrictions on plots, that is need to leave some space from the boundaries of the plot. These restrictions put limitation on the plinth area, and thereby can limit overall carpet area.
• Many a times developers do not have necessary approvals for all the survey numbers in the project, buyer needs to make sure entire project, i.e. all the survey numbers are approved, and particularly the plot they are purchasing. Not having approval for entire land covered by the project is big risk hence should be avoided.
Geographical and physical factors:
• Elevation: make sure the plot is on relative higher elevation to avoid flooding during rainy season. Another point about elevation is, if the plot is on slope, it is possible that trash/ mud will flow towards it from higher elevations, more so when the land at higher elevation has houses/ buildings.
• Make sure the plot can be used for construction of house or structure – there would be patch of plot that has rocks that make it impossible to lay foundation (it is very expensive to lay foundation on a rocky plot)
• Make sure the plot gets natural light, pure/pollution free air
• Make sure the plot does not have mosquitoes, insects, and flies
• Make sure there are no heavy industries, chemical plants in surrounding areas
• Level: Make sure that plot is of even level (no ups and downs, variation, no slope). Plots that are not leveled required additional expense to level them or it becomes difficult to fully utilize these plots.
• Rivers/ water: Avoid plots adjoining rivers, any other natural water source. Also, avoid plots near marshy land.
• Avoid plots surrounded by buildings – you won’t get privacy and it looks very odd to be staying in such place. It is tricky situation if you are buying independent plot (i.e. not part of a bigger scheme/ project). Because you don’t know what is going to show up next to the plot in few years.
• Find out access roads, and paths. We have seen cases where plots were sold w/o having legal access to the plot (i.e. at the time of sales, the seller goes through a road that looks like normal/ common road), but subsequently discovered that the road is a private property and there is no legal understanding to use the road to access the plot.
• Avoid plots that are sold under “proposed road” – at the time of purchase the plot must have proper, legal road to access the property.
• Keep in mind safety aspects – the plot may not be safe when you buy it, but think about what would be the picture in 2-5 year timeframe (or timeframe that you have in mind) – it must be safe to stay by then.
• In case you decide to buy, make sure sale deed include exact location of the plot, dimensions of the plot, and map of the area indicating exact location of the plot.
• Find out if plot has basic infrastructure such as water connection, sewage, electricity connection.
• Loading: Find out if the seller is adding any “loading” on the plot. Many a times they charge loading as high as 11% to cover other facilities provided (e.g. club house, internal road, etc). Ideally you should be paying based on net area that you get. At the least find out what is your effective rate. Effective rate for plots is calculated as gross payment divided by net square footage. For example, if seller is selling 5500 sq ft plot at rate of Rs. 700 PSF, you will be paying 5500 x 700 = and dimensions of area that you are getting is 50’x100’= 5000 sq ft, then you will be paying Rs. 38,50,000. Effective rate = 38,50,000 / 5000 = Rs. 770 PSF.
• Find out how much is the ongoing maintenance charge for the infrastructure and what are the onetime charges to get idea of the ‘hidden’ charges
• If the plot is part of a project or scheme, get the approved plan for the scheme, note location of each and every facility, and infrastructure (e.g. location water tank, generator, inverters, common parking space, gardens, etc). Sometimes developers make changes to these and that may not be favorable to the plot you are looking for, having an approved plan in writing will ensure you have some legal remedy in future.
Valuation Research (you can do this online as a beginning):
• Find out what are resale prices in the same area for similar plots, many a times you would find resale plots at better rates than first sales
• Find out how many plots are available for sales in same scheme, and same area
• Find out what are the prices for constructed properties (e.g. housed built on plots) in same area
• Find out what is rental situation in the area (e.g. what is going rate for rental properties such as independent houses in same area, how many of the units are available for rate, etc)
Status of buyer:
• NRIs cannot own agricultural properties in India (note that farm houses are type of a agricultural property)
• NRIs can own non-agricultural (NA) land in India
• Avoid schemes that promise you agriculturist status in case you are an NRIs
• If you are an NRI, consider buying the property in name of your blood relatives who have agriculturist status (i.e. they have their name on agricultural land as per 7/12 Utara) and from whom you can inherit the land
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