If you’re looking to invest in an under-construction project in Bengaluru - we’ve put together an exhaustive list of everything a project’s lifespan involves. Right from the time it is conceived
1. Before construction starts
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When a project is conceived by a builder - they need to take several mandatory project plan approvals from the BBMP (the municipal corporation of Bengaluru). They might also need clearances from other local bodies like the BWSSB that is responsible for water supply and sewage disposal.
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Once their plan is approved by all the relevant agencies - they receive a commencement certificate that lets them begin construction.
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Post this - they can start marketing their project along with their affiliated marketing partners.
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This is done by promoting an EOI - an Expression of Interest.
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A customer who is interested in applying for a unit in the project can submit an EOI to the builder. This is just a simple application form along with basic customer details like PAN, etc.
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In some cases - some developers might also take a post-dated cheque.
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However - they cannot take any monetary deposit along with the EOI unless a RERA approval is received.
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RERA is a state-level governing body for the real estate industry. Their approval for a project is mandatory for a developer before they can formally start bookings.
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Once the RERA is approved - customers who have submitted EOIs are allocated units. This is usually on a first-come-first-serve basis.
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Customers are required to put down a deposit at the time of allocation. This can range from 1 to 5% of the value of the property.
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Post this - customers are given an allotment letter. This details out the unit they are allocated, payment schedule details, etc.
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At this time - customers are advised to have a consultant thoroughly vet the allotment letter for any discrepancies, hidden or unfair clauses, etc.
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Customers should also check if the builder has a history of being RERA compliant, for any existing title clearance issues and potential environmental issues.
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After this - the sale agreement is drawn up. Note that builders tend to draft sale agreements in a one-sided manner. It is highly advisable for customers to have a lawyer and broker go through the agreement and negotiate with the builder for better terms.
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Post signing of the sale agreement - the customer is required to deposit the booking amount - this is usually around 10% of the total value of the apartment.
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Note: For NRIs - this process will not be possible to do in-person. This is why they usually give a PoA (Power of attorney) to relatives or agents in India who can do this for them.
2. During construction
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Most customers take a bank loan to pay for their property. To apply for a bank loan - you need to hand over several documents. One of them is a MODT - Memorandum of Deposit of Title Deed.
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Through a MODT deed, a borrower gives a printed undertaking. It states that they have deposited their property’s title document with the lender out of their free will. The title document deposit takes place in exchange for a loan.
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Once this is done - the payment schedule is activated. Depending on the project and developer - the payment schedule can be linked to time (for eg - monthly/quarterly installments) or construction (for eg - paying a certain amount when 5 floors of a building are constructed).
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At the time of payment - the developer will raise a demand with the bank to release it. The customer and bank will both have to approve the demand for it to get processed.
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Occasionally - either the customer or bank can refuse or dispute the payment - if they feel the developer has violated the terms of the sale agreement.
3. After construction is done
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When the construction is completed - the developer applies for an Occupancy Certificate (OC) and Completion Certificate (CC) from the BBMP. These are granted after the building has been verified to be safe for occupancy, and to certify that the builder has not deviated from the original plans that were submitted.
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After this - a khata is created for the entire project, and then generated for every unit in the project. A khata document that proves that the person buying a property has an account with the BBMP for taxation purposes.
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Post this - the developer generates a sale deed for the customer. The sale deed is required to legally transfer ownership of the property from the builder to the customer.
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With the sale deed done - the khata is transferred from the developer to the customer. Along with the sale deed - this also requires the previous property tax receipts and the encumbrance certificate (a certificate that confirms the property is free from any legal or monetary dues such as uncleared debts or mortgages). Both of these will be provided by the builder.
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Once the khata is transferred - customers are also required to transfer the electricity bill in their name. This is the final step for customers before they can take possession of their property.