No other real estate transaction has the potential to become as complicated as buying land. Some of the land transactions look simple. To begin with buyers are shown an innocent looking land parcel, stories of a rosy future are shared, imaginary connectivity from ORR or any other landmark/s are shown, clients fall for it and buy it.

Thereafter begins the unending story of problems that some of these land transactions give birth too. Either title is not clear or it is a panchayat layout on which land regularization might now be required or somebody else also claims ownership or government starts an acquisition process, which buyer was not aware off or landuse is not what was promised.

Many times clients call us wanting help to sell a land parcel bought by them some years back in some futuristic location. We realize that such clients are actually stuck in a senseless land transaction / project. Some of them request us to come for a site visit. We keep requesting them back for Google map coordinates so that we can at first glance be clear as to whether to even invest time and effort for a site visit. We realize that clients don't even know where their land is located. So when they propose to show us their land, they are also probably planning to see it for the first time. Not sure why, but a lot of land buyers become native when buying land. Either they get carried away by an overall market hype or project promises or just because any friend or relative had bought recently.

Land transactions can be tricky especially in our city and buyers need to be extremely careful before buying land. I was involved in a land transaction for a fund a few years back and realized first hand the many challenges, which even a corporate found it difficult to gauge. This was a large land deal of over 150 acres and took more than 2 years to complete. This transaction was done during the peak market period of 2006-07.

The sale price kept going up regularly during the transition years that this transaction dragged on for. The eventual price paid was 100% higher than the initially agreed price. The real problem was the legal due-diligence process undertaken by the corporate before buying the land. Since the land was located in the suburbs of a metro hence the buyers employed good lawyers available in that metro.

During the sale process the confidence levels between the buyer and seller kept going downward. The buyers had all kinds of doubts but nothing on hand to prove their doubts. Their lawyers also could not find out anything plus the seller kept giving satisfactory answers to all their queries. Closure to signing the deal, the corporates global office got involved and employed a leading national law firm. This corporate also had a financial partner who put their legal team on this due-diligence job.

For the final signing the buyer's director came from aboard and had couple of rounds of discussions with the sellers. He was extremely uncomfortable with the transaction put persisted since his local team was keen. One day before signing the buyer's director insisted on 2 non-negotiable clauses, first since the transaction was to be done in phases hence seller had to build a boundary wall at the buyer's expense and second was a liability clause on the sellers. This clause imposed crores worth of damages incase the buyer's found that any material fact / matter was hidden from them and because of which their ownership became questionable in future.

With these 2 conditions now in picture, the seller's facial expression instantly changed. The buyer's director was all the more convinced that the sellers where hiding something. On the day of the signing we all met and the buyers came with their documents and sale consideration draft. The sellers wanted to talk before they signed. They finally shared that the land parcel had 2 problems, which had not been shared by them till now. First problem was already resolved but the final resolution papers had to be obtained, the second problem had to be resolved.

Post this acknowledgement this transaction was almost called off. Somehow the transaction came back on track and the sellers then shared all relevant details and resolved the problems to the satisfaction of the buyers. Eventually with a few months delay the transaction got completed. This was a case of a corporate which put all its experience and legal resources to get to the bottom of the problem. I would say to a large extent they were lucky that the problem got resolved before they bought the land. In most cases buyers are not so lucky.

Some do's and don'ts for land deals that we have realized over the years are as follows :

• First and foremost buyers need to spend time on land transactions. If time constraints are being put up and pressure being built to complete a deal then our suggestion is to let such time sensitive opportunities pass by.
• If buyers do not work on legal due-diligence with sufficient time in hand, post agreeing on commercials, then they could be headed for trouble. One needs to realize that due-diligence is time consuming and dynamic. While you are working on a certain aspect of due-diligence then results could push you to take a different course / action. There is no one magical way to complete due-diligence in a hurry.
• Before the due-diligence is completed ideally do not out money on the table. The only way to get seller's cooperation is by withholding payment till you are satisfied with the due-diligence results.
• Buyers should not get perturbed seeing a lot of title papers. Apart from taking opinion from lawyers, one should also try to read these papers. You would be surprised how much you will begin to understand and question with just one reading.
• Obviously as per the above experience a wall or partition is desirable. A wall / partitions when built has the best potential to get all possible problematic ghosts out of the land.
• Ideally a liability clause should be included. This is the second time I have seen a corporate use it. On another occasion the buyer corporate, post sale, actually investigated whether the seller knew about certain issues, which came up later and changed their landuse / utility. When they realized that their seller was not aware then they did not enforce the liability clause.
• One standard thing that some buyer's use is releasing a newspaper advertisement inviting issues if any.
• Check the banks that are offering loans on the project. Clients should be comfortable only if standard housing finance banks / institutions offer loans. If the banks offering loans are not the standard ones and the issuing branch is located in the nearest village etc. then it is advisable to run the legal papers through a standard housing finance institution.
• Check the valuation that the standard banks are offering for the land. If the gap between the developer's offer price and bank's valuation is too high then it is a cause for further investigation.
• Whatever landmarks / future potential projects etc. being shown in the brochure should be checked physically just to be doubly sure. The landmarks / future potential projects should be within a certain distance from the desired site for it to get any rub-off benefit.
• Panchayat layouts are best avoidable. Prefer only HMDA approved layouts.
• Our personal preference is always land within a gated community wherein the amenities have to be built by the builder. Amenities in terms of electricity, water, drainage, clubhouse, pool etc. have to be developed by the builder. No point buying land in a gated community where one is always waiting for somebody else to start construction. We have seen projects where actually nobody starts construction or one house has been constructed and they stay in wilderness.
• As per current rules in a HMDA approved layout the roads provided for have to be 40 ft and generally after leaving the mandatory open space, in a acre of land only 10 plots / houses of approx. 270 sq yds each can be developed. One should always check the current rules and do some calculations to check if all rules are being followed.
• The masterplan for the core area and outside the ORR have been notified. These documents are available online or at HMDA / GHMC offices. One should always check with the relevant survey nos. on this map to reconfirm the landuse of the project.
• Discuss and check with experts, other buyers, professional brokers and any other stakeholder before making the decision to buy.

All the above points are not full proof but will help buyers mitigate risks. Statutory rules and regulations are not rocket science. One can easily understand and make necessary judgment basis these documents. We just need to have some patience to read them. The adage that 'prevention is better than cure' is quite relevant to any of your real estate investments decisions especially land.