Property Evaluation – From A Legal Perspective

What does it mean when one refers to “evaluation of a property”?

A property needs to qualify against certain parameters to hold a marketable competence in the reality sector. Before we decide to invest in any property, it is important to know what are the essential parameters based on which it could be evaluated. In a more generic sense ‘Evaluate A Property’ means assessment of a property to determine the risk factors involved. This assessment help us to analyse and determine whether to invest in a particular property or not.

Parameters for evaluation are broadly based on location, sale price, payment schedule, delivery of possession, legal sanctions and requisite approvals obtained for the building and the clear marketable title of the property itself.

How crucial is it to evaluate a property before buying it?

Evaluation of a property is crucial to rule out possible litigations in future, ensure adherence to statutory norms and regulations with regard to the construction and establishing the marketable title of the property.

Here are some of the significant aspects to be evaluated before finalising on any property.

A. Legal Ownership:

Does the seller have rights to sell the property, or, in other words, are we buying the property from its rightful owner? It is most essential that we ascertain whether the person who is claiming to be the owner of the property has a clear and marketable title. Verify the title deeds and other related documents to evaluate whether the property is self-acquired or ancestral or a joint family property so as to determine that there are no other legal claimant’s to that property.

B. Legal Construction:

If we are planning to buy an independent house or an apartment or villa, it is quite critical to ensure that the building which is constructed is as per the sanctioned plan. If there are deviations beyond permissible limits, such constructions are irregular constructions and holds no sanctity in the eye of law. Occupancy Certificate will not be issued for such buildings. This makes it difficult to avail any loan from a nationalized bank against such a property. Moreover, obtaining Khatha/mutation document from the jurisdictional municipal limits are also ruled out.

C. Land Conversion: In many states like Karnataka, Maharashtra, etc. all lands other than the gramthana or abadi land (land where village population lives) are considered to be agricultural lands. To use such lands for non-agricultural purposes like residential, industrial, commercial etc., permission known as land ‘Conversion’ is necessary. Conversion of land is changing the status of land from agriculture to non-agriculture. Once a land is converted, its primary character is changed from agricultural to non- agricultural and the land permanently loses its agricultural character. If the conversion order from the competent authority is not in place, one should think twice before moving ahead, as non-compliance of this requirement has dire consequences. The state government may take suo-moto action as per the prevailing laws and take possession of the land.

D. Zoning of the Land: When the owner of a land intends to develop the land for any purpose other than what it has been earmarked for under the approved Master Plan or Comprehensive Development Plan, then the owner has to apply for change of land use before the concerned authority and obtain the Change of land Use Order. If the property in consideration is not in the residential zone as per the Comprehensive Development Plan, one must ask for proper Change of land Use Order. In the absence of this document, usage of the property for residential purpose may be questioned.

In essence, it is crucial to evaluate a property to avoid:

  • any legal dispute with persons claiming legal ownership of the property
  • hefty penalty for regularizing an illegal construction
  • difficulty in obtaining Khatha/mutation document due to the absence of Occupancy Certificate
  • difficulty in availing a loan from a nationalized bank
  • the property turning out to be a burden to dispose off or for resale.

Let us Evaluate A Property before we buy it.

Watch this space for more property related matters that affects us all.

RealDocs Team

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