Pune Plot Purchase Precautions and Tips

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.

Clear Title:
• 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”).
• Note 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.

Basic infrastructure:
• 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.