Buying a piece of land is a lifelong dream for many. While it might sound like any other transactional purchase, there are a lot of factors associated with buying land. Whether it’s the price, location, ownership, and even taxes – a potential buyer has to consider a lot of aspects before heading on to purchase land. There are also instances of fraudulent transactions and joint ownership. So, what’s the best way to purchase land? And what should be the prime considerations before purchasing land? Let’s find out.
Is Purchasing Land a Good Investment?
There’s a saying that land is one of the most secure investment options. While the inflation rate is increasing day by day and the value of currency is decreasing, investing in a tangible asset like land is rationally a good investment. But that investment also depends on several factors.
Location plays a huge role in the overall ROI from land purchase. A simple example will make it obvious. A survey shows that between 1990 to 2010, per katha land in the Gulshan area has seen a price increment of over 1036%. And the story is somewhat similar in all the urban areas across the country.
The price of land also depends on the zoning regulations. For example, there might be zoning regulations for commercial, residential, and office spaces. Some areas might have zoning against new developments. It’s important to check the zoning regulations before purchasing land.
The type of land also factors in the investment decision. For example, land suitable for agricultural production will have less value compared to land intended for residential use. So, make sure to have the right pricing strategy while buying land.
Land purchase is not as simple as just another transaction. Upfront costs regarding the survey, registration, and taxes are something that should be factored in as a total cumulative investment decision.
Purchasing land as an investment is a long-haul game. Land prices do not appreciate overnight. It might be years or decades before there is a substantial increment in value. So long-term commitment should also be considered while investing in land.
Factors to Consider Before Buying Land
There are several factors to consider before purchasing land. Usual pricing and market overviews aside, a person should consider several aspects of ownership and transfer of ownership of an immovable property like land.
Record of Rights/Ownership Rights
The ownership of land is documented in several government documents issued by the land office under the Ministry of Land. These documents are the legal tender that verifies the ownership as well as the ability to transfer the ownership to a different person.
To ensure there are no fraudulent activities associated with the land, the relevant documents should be checked by a land lawyer.
The sales deed is the document outlining the ownership of the land through generations. The detailed sales deed can be found in the sub-registry office of the local area. A person can obtain a certified copy of the sales deed by paying the government stipulated fees.
At least 10 to 25 years of sales deed should be checked to ensure that there is no ownership-related issue with the land. In the case of inheritance, the inheritance deed (“Bontonnama”) should also be checked.
The “Khatiyan” and the “Porcha” are the records of rights prepared by the land authority against the actual ownership of the land. The Khatiyan or Porcha should be cross-checked with the sales deed to determine the authenticity of the ownership of the land.
There are two types of Khatiyan – draft and certified. It is better to avoid a draft Khatiyan.
Regulation on Land (Khas/Auctioned/Unapproved)
The local land office (Tohsil) should also have information on whether the land has been auctioned before or not. In such cases, the Government Claim Act 1993 Section 7 can bar anyone from buying or selling such land.
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The auction information can be found on the footnote of the Khatiyan if the land ever went for auction.
A potential buyer should also check whether the land is “Khas” or unapproved land. Many lands fall under Khas (government owned), abandoned, unapproved, or approved for acquisition. Sometimes people with forced acquisition (“Dokhol”) try to sell these lands as authentic Khatiyan cleared lands.
The information on the condition of the land can also be found in the DC office upon payment of a small government fee. Any land which falls in any of the categories above should be strictly avoided.
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DAG is the land office registry of the area of land under the ownership of the record of rights. A potential buyer should crosscheck the DAG measurement mentioned in the records with the actual property space.
The property should also be crosschecked to see whether there are any ongoing legal issues with the land or not. If there is a building on the said land, documents of construction and permits of the building should also be checked to see whether they meet the regulations or not.
There are several costs associated with the transfer of the property. First of all, the non-encumbrance certificate should be obtained as the primary preamble to start the process of handing over the property.
After that, a legal stamp should be signed outlining the handing over of the property. This stamp is usually valued at 3% of the property valuation. Then the property has to be registered under the new owner in the sub-registry office.
To make sure there are no future issues with the transfer, the Khatiyan, Porcha, and sales deed should be updated as soon as possible. This will help to ensure that there won’t be any legal troubles when the land is sold again.
Land ownership is not a straightforward process. There can be issues with ownership defrauding, inability to transfer, and litigations. Thankfully, there are also steps to properly check for information before purchasing any piece of land. While these processes of investigation may be cumbersome and often require fees, it is still recommended to absolutely check for their authenticity before purchasing any land.