Buying a property usually starts with a visit. You look at the location, inspect the interiors and exteriors, study the construction or development quality, compare it with similar properties in terms of price etc. You may even imagine if living there will suit you perfectly or not.

But these are all steps that go into the due diligence process of a property. A property might well look perfect, but it could have several other issues that might not come out on a visual inspection.

This is why property due diligence plays such an important role. It is a process of examining legal, financial, technical, ownership, documentation and location-related details of a property before buying it.

For buyers and investors, due diligence is not about finding faults, but more about understanding the product, who owns it, what approvals have been taken (if any), and if the investment makes sense.

In markets like Gurgaon & Goa, where residential, plotted developments, luxury villas, apartments & land can come in varied forms with varied approvals, documentation & developer status, buyers can make more informed choices by taking up a property due diligence.

What Is Real Estate Due Diligence?

A property due diligence is a verification process that takes place before buying a property. It is an involved process of checking property ownership, approvals, documentation, financial liabilities, development & other pertinent details of a property.

The objective of a property due diligence is straightforward: to find out the important risks before the deal closes.

A property visit can help you know that a villa comes with a great garden or that an apartment offers a marvellous view, but it might not tell you if the title papers are clear, if the project has required approvals, or if there are any dues pending. So much so that property due diligence should be treated as a separate exercise apart from a property inspection.

Why Looking At The Property Is Not Enough?

A property is not just about the physical structure. When you buy a property, you not only buy the property but the associated rights that come with it. You may be buying land or a developed or developing property. You may be purchasing the apartment or rights to develop within the project. You could even be buying multiple rights: apartment + plot + rights to build a villa on it. Here is a simple example to illustrate.

You find a villa in the best location in Goa. The location, beauty and price all appeal to you. You go and inspect the villa and everything seems to be in order. But what if the title documents show an owned property? Or the property itself is under an unrepayable encumbrance? And if the individual who sells the house does not own the property legally? Or are there no approvals for the necessary documents?

Such issues cannot be discovered during a property visit and hence experienced buyers treat the physical and legal inspection as two separate exercises.

The Main Areas Covered In Property Due Diligence

Property due diligence covers several areas. All the relevant checks would depend on the type of property, location, ownership, development & transaction.

1. Ownership & Title Verification

The very first question that any buyer must ask himself is: Who owns the property? Ownership needs to be verified with title documents and available property records.

The objective of this is to establish that the person selling the property has the legal right to do so and that there are no other parties who might have a claim on the property.

For inherited properties jointly owned properties, company-owned properties, and properties sold with powers of attorney, extra verification would be needed to establish the right to sell. So much so that a buyer should not rely on verbal confirmation from the seller or the intermediary as to the ownership. What matters is the ownership trail.

2. Checking The Property Documents

Based on the transaction, the documents required vary. Depending on the property, there are several documents that may need to be reviewed. For example: sale deed, previous titles, allotment documents, agreement, possession documents, mutation record, property tax records, sanctioned plans, approvals, and other pertinent documents. 

The objective behind reviewing the documents is not just to collect them. It is to review if they are consistent. Names match the titles, the description matches, the area mentioned matches the survey number & plot number, all the dates are logical and the transaction details match. In case of mismatched documents it is important to pay attention to it

3. Encumbrance And Existing Liabilities

There are properties that come with financial or legal liabilities attached to them. This is why checking for encumbrances is an important part of a real estate due diligence checklist.

Depending on the situation, the verification process can involve checking mortgages, charges, claims, liens, disputes, or other obligations.

If a property comes with an existing loan, the buyer needs to understand how this loan will be settled as well as how the relevant charge will be discharged as part of this transaction. What matters is that a buyer understands that he would either be taking over a property where the transfer of ownership is clean or there may be some additional steps needed before closing.

4. Land, Property Records

When it comes to land purchase or properties where land ownership is very important, land records need special scrutiny.

It is important to look at survey numbers, land category, ownership records, boundaries, and permitted use. This becomes important when a buyer purchases plots, villas with large parcels, agricultural land and other property types that come with land-based approvals & developments. 

In Goa, for example, buyers considering land or independent properties need to pay special attention to land records and development and planning-related requirements. The documents & authorities involved would be dependent on the location and local checks apply.

5. Building Approvals & Development Permissions

A building can be physically present but may not necessarily have all the required approvals for its development.

For apartments, villas, commercial properties & development projects buyers should understand what approvals apply to the property as well as what the project has completed in terms of the approvals.

Depending on the property & project this can include sanctioned building plans, development permissions, completion related documents, occupancy related approvals, environmental permissions and other regulatory requirements. 

What matters is that a buyer does not assume that the completed structure means that all approvals are in place. The approvals relevant to the property & development should be checked to match with the specific property & its development.

6. Physical And Technical Inspection

While legally verifying the ownership of a property is important, physical inspection remains crucial to identifying risks.

A technical inspection can help detect issues that may not be visible to a casual inspection. For example, for an apartment this would involve looking at construction quality, moisture issues, plumbing, electricals, common areas, structural issues, ventilation and other physical aspects. 

For villas & independent properties, inspections can include boundary conditions, drainage, access, and external structures, landscaping, water supply and maintenance requirements.

7. Location & Access Verification

While location is one of the biggest factors influencing real estate value, it is always worth understanding the access too.

Do not take the locality names as a reference. Check the actual road access, the developments around, the access to the property in terms of connectivity, infrastructure, public facilities, and the surrounding area. For example, a property might be marketed as being in a particular well known area, but it could be several kilometres away from what you actually consider to be the area! This is where GEO focused real estate content & research becomes important. 

The local environment is very important as it depends on the physical location of the property. For example, the local environment of people buying property in Gurgaon could be things like access to main roads, employment centers, metro, schools, hospitals, and planned infrastructural facilities.

In Goa, aspects like access to beaches, tourism areas, commercial centres, airports, road connectivity & local development patterns may be relevant depending on the investment objective.

8. Seller Or Developer Verification

While a buyer looks at the property, due diligence should not stop there. The seller also deserves verification.

For a resale property, buyers need to understand who the seller is. And if they have the legal right to resell the property. For a developer project, buyers can study the developer’s project history, available regulatory information, project documentation, delivery record, and relevant approvals. This does not mean that a developer with a known name will have no issues. Every property transaction should be studied on its own merit.

Financial Due Diligence Matters Too

A property may look desirable but not be a financially viable option. Before buying property make sure to calculate the complete acquisition cost.

The purchase price may be applicable but depending on the nature of the transaction one may also need to consider and bear stamp duty, registration charges, taxes, brokerage, legal, maintenance, renovation, cost of financing, and other costs involved in the transaction.

For investment properties one also needs to look at the projected rental income, possible vacancy, maintenance and operation costs, liquidity, sale prospects, time period of investment and other such factors.

A property that may seem cheap could turn out to be not a good value based on the full picture including the transaction costs.

A Practical Real Estate Due Diligence Checklist

Before finalizing the purchase of any property a buyer can go through the following checklist: 

• Verify the identity and ownership rights of the seller.
• Check the title and previous ownership documents.
• Check land or property records.
• See applicable encumbrance information.
• Verify measurements and boundaries.
• Check applicable building and development approvals.
• Review regulatory information applicable to the property or project.
• Check applicable property taxes and dues.
• Conduct a physical and technical inspection.
• Check access to roads and location.
• Review maintenance and recurring costs.
• Calculate the complete transaction cost.
• Review the agreement before signing.
• Check how loans or charges will be cleared.
• Seek professional legal advice if needed.

This due diligence checklist should not replace professional legal, technical and other expertise. It highlights some key areas which could help a buyer raise questions and take cognizance of all pertinent issues.

Why Local Knowledge Can Make a Difference?

Real estate documents and regulations vary across locations. The questions relevant to an apartment in Gurgaon will hardly be the same for a villa or land in Goa.

Local knowledge can assist a buyer with questions related to records, approvals, authorities and other location specific items. The need for local expertise can be critical for someone who is buying property from a distance.

A buyer from Delhi, Mumbai, Bengaluru or elsewhere may not be able to verify and assess the authenticity of the buyer, physical inspection of the property, technical aspects and so on related to a property in Goa. A thorough due diligence process can help provide clarity before the money changes hands.

Due Diligence Is Not about Creating Fear

One of the biggest myths about due diligence is that it should only be done if something seems fishy. That’s actually not a correct view.

A property transaction due diligence needs to be executed even if everything seems to check out. It’s not about creating fear but ensuring there is no uncertainty around the deal.

Due diligence should ask the following questions:

• What does the document say?
• Who owns the property?
• What approvals are applicable?
• Are there any pending dues or liabilities?
• Does the physical property match the documents?
• What exactly am I buying?
• What does the complete transaction cost comprise?
• These questions can make the property buying and buying process more organized.
• When Should Real Estate Due Diligence Happen?

Due diligence should ideally be carried out before signing documents which may be binding and making non refundable payments.

Even at the initial stages a buyer can raise certain due diligence questions. More involved legal and technical verification can happen before reaching a point where one will have little choice but to accept or reject the offer.

If the due diligence happens at the last moment the buyer may find that there is a lot at stake based on what’s discovered. At this point, the buyer has limited options: question the deal, request more documents, negotiate terms, seek professional help or reconsider.

The Bigger Picture: Buying the Right Property Is Only Part of the Work

A good due diligence process will highlight not only the beauty of the property or the investment opportunity but also aspects that are likely to impact the ownership of the property, its title, approvals, documentation, liabilities, physical state, and financial viability.

That’s why buyers should see real estate due diligence as a decision making tool and not mere a formality.

For those buyers and investors who are keen on making sensible decisions on buying real estate rather than rushing to buy it simply because it looks good, the goal is not to move from the property tour to the payment counter.

Conclusion

Real estate is a big ticket item and the most important information about the property may not always be evident during the walk through.

A pretty apartment, villa, plot or commercial property can carry the responsibility of going through the ownership, title, approvals, records, liabilities, physical and financial aspects before signing off. A structured property due diligence process can help bring these aspects together.

Whether it’s an apartment in Gurgaon, a villa in Porvorim, a property in Calangute or land elsewhere in Goa the need to understand what one is buying holds true.

The objective of a real estate due diligence checklist is not to hinder a genuine transaction but to help make it faster by raising pertinent questions to enable a smooth deal.

In real estate, seeing the property is the beginning. Knowing the property is the real work.

Real Estate Due Diligence: FAQs