What does due diligence for land purchase

Purchasing a land plot, requires certain additional precautions to be taken, as compared to buying a built house. Here’s an inventory of things that land buyers got to check, before finalising a deal

While every individual dreams of owning a property once in his/her lifetime, many of us still like better to buy or invest directly in land. Land accounts for the main cost component of any land purchase and features a far higher rate of return than other property types. It also gives the customer the liberty of choice, in terms of design, layout, plan, etc. However, one must do thorough due diligence, while purchasing land.

Title due diligence for land purchase

One of the foremost important aspects, before purchasing a land parcel, is to see if the title is obvious and marketable. This suggests that you simply got to confirm, whether the person selling the property is its owner and holds all the required rights to transfer the ownership of the property to you. it’s always advisable to approach a lawyer/ advocate to urge the title documents like sale deed and land tax receipts scrutinised and to get a certificate, confirming the title of the seller . Normally, it’s advisable to trace the title for the previous 30 years, keeping in mind the complexities of land documents and therefore the limitations involved in claiming property rights.

Searches at the sub-registrar’s offices

This search reflects the transactions (change of ownership through deeds) and encumbrances (legal dues) with reference to the land proposed to be acquired. Each state features a different methodology, to hold out searches at the offices of the sub-registrar (deed-registering authority). For instance, in Bengaluru, the sub-registrar issues the encumbrance certificate (search report) whereas in Maharashtra, an advocate or person experienced in completing manual search within the sub-registrar offices issues the report. One has got to ask the concerned authorities for the legal documents, before going ahead with the property deal.

Public notice for land purchase

Before purchasing any property, it’s always advisable to put a public notice in local newspapers (preferably in English and also as within the local language daily newspapers), inviting any claim over the land proposed to be purchased. This may help to understand if there are any claims or third-party rights over the land.

Power of attorney

Many times, land is sold through an individual holding an influence of attorney (POA) on behalf of the owner. This POA should be closely examined, to make sure that it’s an equivalent property that’s being sold. There are times when it’s going to be necessary to sign certain documents within a brief period of your time and delaying an equivalent, may usually cost you. For such situations to be avoided, you’ll authorise somebody else to check in your behalf, to form things easier.

Verification of original documents for land purchase

Prior to concluding the sale transaction, it’s advisable to verify if the first title documents with reference to the land transaction are in situ. This is often to make sure that the vendor has not created any third-party rights / charge and parted with the originals. These original documents should be collected, during the conclusion of the sale transaction.

Approvals and permissions for land purchase

If the property / land forming a part of the sale transaction already has structures or buildings, it’s advisable to verify whether the approved plans, necessary permissions and NOCs are in situ. Factors like heritage rules, set-back for road widening, which can apply to definite buildings, should even be considered.

Taxes and khatha in land purchase

Before purchasing a land, the customer should make sure that the property taxes are paid up to the date of the transfer and original receipts for such payments are produced for verification. it’s also necessary to make sure that the khatha (revenue recording denoting the name of the owner) is out there within the name of the seller .

Local laws for land purchase

The purchaser of the land should make sure that the local laws / rules don’t impose any restrictions on buying land. For instance, in Karnataka, a non-agriculturalist (who doesn’t own agricultural land), companies, firms and persons with an income over Rs 25, 00,000, cannot purchase agricultural land. However, such restrictions are relaxed in few other states. Hence, it’s important to require advice from an area lawyer, before purchasing land.

Tenure of land

The tenure of the land should even be considered, while purchasing land. If the land is under lease and therefore the excess tenure of lease is brief and if there’s no provision for renewal on an equivalent old rent, the extra rent could also be payable by the purchaser of the land. There’s also a high possibility that there could also be no renewal clause for the property.

Pledged land

The seller may need taken a loan from a bank, by pledging or mortgaging their land. The customer should make sure that the vendor has paid back all the amounts due on the land. A release certificate from the bank is important, to work out that the land is free from all debts.

Measurement of the land

Buyers are advised to live the land, before registering it in their name. To make sure that the measurements of the plot and its borders are accurate, the customer should take the assistance of a recognised surveyor. You’ll also compare for accuracy, by acquiring the survey sketch of the land from the survey department.

Floor space index (FSI)

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FSI indicates what proportion construction are often done on a bit of land. FSI is decided by the state’s town and country planning department. It also depends on the situation of the plot. You ought to ask the vendor or the landowner, regarding the quantity of FSI allowable on the land.

Also, it’s vital to involve a property lawyer, for the verification of the documents and therefore the legality of the project.