Due Diligence Demystified

Due Diligence

Due Diligence Demystified

In the world of real estate, buying a property is usually a big decision that happens only once in a while for most people. It can be really exciting to think about owning a home or investing in real estate, but it can also make you worried. There have been many times in the past where people were promised houses or properties that never actually happened, and that left them feeling disappointed and struggling with money. To deal with these worries, it’s important for people who are thinking about buying property to learn as much as they can and really look into things before they decide to go ahead.

What is Due Diligence

Due diligence is a thorough investigation or examination of a potential investment or purchase before making a decision. It involves researching and verifying all relevant aspects, such as financial records, legal documents, and physical assets, to ensure that there are no hidden risks or liabilities associated with the transaction.

There is a palpable fear among buyers due to numerous historical cases in the real estate industry where promised properties were not delivered as expected. Hence, it is important for customers to be well-informed and conduct thorough due diligence to reduce risks and safeguard their investments.

Legal Due Diligence: The Pillar of Protection

Legal due diligence involves a comprehensive examination of various documents to ensure the legality and authenticity of a real estate project. This process begins with understanding the necessary documents required for legal due diligence, including ensuring that the project is registered under the Real Estate Regulatory Authority (RERA). Key documents related to land ownership, such as sale deeds, jamabandi, non-encumbrance certificates, trace maps, and certificates confirming the absence of litigation, are scrutinised to verify the ownership and legal status of the land. Similarly, documents pertaining to the builder, such as partnership deeds or company registration, and agreements like joint development agreements (in the case of joint ventures), are thoroughly reviewed to ascertain the legitimacy of the project. Additionally, approval documents from relevant authorities, such as building NOCs from the municipal corporation, planning permits from the development authority, and fire NOCs, are examined to ensure compliance with regulatory requirements.

Customers seeking access to these documents can use the RERA website, which hosts a repository of all relevant documents for RERA-approved projects. By accessing this platform, customers can review and verify the authenticity of the project’s legal documents, providing them with confidence and assurance before making any investment decisions.

Financial Due Diligence: Ensuring Stability and Reliability

Understanding the financial standing of builders is paramount to assessing the viability of a project. Investigating their track record, including past projects completed and their timely delivery, offers valuable insight into their reliability. Additionally, verifying whether the project has received approval from major banks for loan sanctions to individual customers provides assurance of financial stability.

Physical Due Diligence: Ensuring Quality and Integrity

Physical due diligence entails evaluating the reputation of the architect and structural engineer involved in the project. This includes conducting site visits over a period of three months to gauge the progress of construction. Furthermore, it involves scrutinising the quality and brands of materials used, such as the brand of steel, elevators, bathroom fittings, and other essential components. This meticulous examination ensures that the construction adheres to the highest standards of quality and reliability.

 

In a landscape where the stakes are high and the risks are real, due diligence emerges as the ultimate tool for homebuyers to safeguard their interests. By arming themselves with knowledge and conducting thorough assessments across legal, financial, and physical dimensions, buyers can navigate the complexities of the real estate market with confidence.

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