Our houses are such unwieldy property that we are often imprisoned rather than housed by them. – Henry David Thoreau
The moment you graduate and start earning, advice pours in from every mouth you know – save money, don’t spend it all, invest your money, make it grow, invest in gold, sign up with an insurance plan, save up for your house. Save up for your house, that’s what has bothered me amongst everything. Well, it is good advice to buy a house of your own. Big or small, you need to have a house that you can call your own. Not rented, not leased, but owned by you. I’m sure it gives a wonderful feeling to sit in the balcony and sip your coffee the day you have paid off all your loans you took for the house.
Well, I seem to be having a problem with it, more so in this country. Problems are innumerable, which I would try to concise, but before that let’s see the arguments advocated for owning a house.
- It is good investment. The value will definitely appreciate. Of course, With a billion plus population in this tiny piece of land, the demand-supply ration is so high that the value of a small piece of land, however worthless it may be, is bound to increase. There is no parallel to the appreciation it gives.
- The peace you get in staying in your house is beyond compare. There is no comparison to the feeling and security you get when you own a house. So true. In your house, what is there is yours. You don’t need to shift houses at short notice or worry about what the owner will say if you puncture the wall to hang your favourite photo. When it’s your house, everything in it is at your mercy. Puncture or make a big hole, nobody other that you bothers.
- You need to have a house for any unfortunate times. Yes, you may lose your ability to pay rent or be not find any place that is ready to be rented out.
- Convenience. I can’t agree more. You can buy all you want, have any number of guests. Your extended family wants a place to crash, even when you are not in the town, you move out for a year – job, travel, visit family. You don’t need to worry about losing the rent, or having to dump your stuff at someone else’s house. You have your house, be pleased to use it when you want and how you want, and not use it whenever you don’t want or however you don’t want.
I agree to all of this. No questions asked.
My problem lies with the accepted norm while buying and selling the house.
Let’s start with buying the house.
- The land records in India are not completely computerised and centralised. I do not know for sure if the land / plot that I want to buy is already registered on someone else’s name. Or worse, how many people have been sold that same piece of land. I go to the person who is selling that plot, usually a broker and I say that I want to verify the authenticity of the sale. He being the shrewd, opportunistic businessman would reply, “Madam, you want to buy or not? I have another party waiting and ready to pay the token amount. If you want it tell me now, or I am selling it to someone else.” You bargain and ask for some time to think about it. He too knows that if I go into investigating about the details of the land, it would take ages, and he would not be able to sell, forget the land, not even a grain of sand. This brings me to the second problem.
- When you want to get information about a certain property for sale, it’s not one hurdle you have to cross. First hurdle, bribe. The officer in charge would give you all the hints, and sometimes shamelessly and blatantly. You choose to be ignorant of all those, your task gets 100 times difficult. Second hurdle, files/records not found, they are with the other department, or something else. They tell you to come on so and so date. You go, and there would have been no progress. And this continues until you give up or you are lucky to get some information say after 2 years(well this 2 years is really a reasonable time considering the practicality people go through). The land you wanted to buy, is already gone. Now this information is of no use. Third hurdle, the records are found, but now you still don’t know whether it’s complete. Well, anyways it’s too late for this information.
- Alright, somehow you decide on a property, go with your gut feeling, pray to god that everything should be fine, apply for loan and get it sanctioned. Now comes the registration part. It seems to be an open secret that you register your property for less than what you pay for it. Let me explain. Say you buy a house for Rs. 20 Lakhs. The builder would give you the documents and registers your house for Rs. 9 Lakhs. Why you ask? You silly, it’s to save on the taxes. So in a nutshell, you buy a house for some amount, and the paper value of it is significantly lesser. What is the use or what benefit you would make(apart from saving on the registration tax)? We’ll see that when we are selling the house.
My dad when he was buying his one and only house, asked the builder to register the house for what he was paying. The builder tried to explain that this is not the practice. But he won’t listen a word. He wanted the money he was paying = the registration amount. He wasn’t bothered about the taxes, but he was adamant on his demand. Well, he got what he wanted, but at the ridicule of many.
- You have planned diligently how you want your house to be. Which room where, how many floors, duplex with stairs inside or outside and all the fine details. You layout a plan with your engineer and builder, and set off to get it approved from the concerned department. Here it comes again, those hints progressing from being subtle to outright. So your struggle starts again, frequent visits, requests and a lot of work. Either you pay them ‘token amount’ or get your contacts into working. You need something here to proceed any further.
This happened to my aunt who went to get her plan approved. The lady officer asked for a blatant 17,000 rupees. She being a bit meek, quietly walked out of the office. She felt very bad that day, though she was not at fault even an iota. She gathered courage after a few days and approached again. Luck being on her side, she got it approved.
Now you have bought the house. You own it. And you are happily sipping coffee sitting in your balcony with a lovely garden view. You have cleared all your loans and relieved of all the stress and tension. You have also saved up money and your financial capabilities have increased. You want to buy a bigger house, future family, more rooms, more space, and other things that makes you want to buy a bigger house. Now comes the real problem which is an absolute pisser for me.
The brokers and everyone projects the property price to be 40 Lakhs rupees. “Wow! An appreciation of 20Lakhs in 4 years!! I am very prudent in my investment plans. With 40 Lakhs from this house and a 40 more, I can buy a pretty awesome house”. And then you keep on dreaming until they are shattered with the ground reality.
Ground reality: Nobody will be ready to pay you 40 Lakhs legally. “What?” Well, remember, the builder was registering the house of 20Lakhs for 9 Lakhs (to save taxes), and your 20 Lakh property was worth only 9 on paper. Well, now that 9 on paper is now 20 on paper. The new buyer will register it for 20 Lakhs. Give you 20 Lakhs in ‘white’ and the rest 20 in ‘black’. “Woaw! So I can’t sell the house for what it’s worth(the market rate)?” Ummm, to be brutally practical, 99 percent, NO. The explanation people give, ‘nobody will be ready to give all white’.
Let’s just assume you take this offer. This will mean that the next house you buy, you would want to register your property for 20 lakh less, so that you can dispose of this ‘extra’ money that you got from selling the previous house. Yes, and this is the way the cycle continues. You have done your bit in contributing to the cycle, and you have been a part of the trap. Good job! Congratualtions!
So to sum it up:
- Once you buy a house, there is no escape from falling into the trap of ‘extra’ money, unless you are extremely lucky and find someone who would be willing pay every penny of it legally.
- There are illegal transactions going on in open. What is sadder is that it is the accepted norm.
- The market rates are not what the paper value says. There is a lot of discrepancy.
- And people who don’t want to get indulged in all this ill gotten money don’t have any escape. Try how hard they may, there is just no escape. Either you live in a rented house all your life, or live in the first house you bought. This domain is not open for investment if you can’t deal with unaccounted money.
- It’s a shame that such transactions have been going on for so long, people have decided to accept it as a part of life and play along. “What can we do? The market trend is like that.”
Well then, let’s not cry about white papers on black money, or roads are not being built, or the cop demands bribe, or the officer wants a cut of your sanctioned loan, or that the country is not developing. Why? Hello! The market trend is like that. I may be ignorant about the good, legal transactions happening in the country, but my experience tells me this. I would be happy to know that there are people who are willing not to accept a single paisa of illegal money and want to live a truthful life, in every way.
And in the end if you do decide to stay in the only house you bought, and not indulge in the transactions that pains your heart, and you are sipping your coffee in your balcony with a beautiful garden view 30 years after you bought the house, awaiting the arrival of your grandkids, don’t be shocked if you get an evacuation notice because the house/ the apartment was built on a leased land and the lease has come to an end. Good luck with your prayers.