Access to information is now very common and readily available. Yet, when it comes to substantial investment decisions such as purchasing of a property, our ability to do research and due diligence tends to elude us. Newspapers often publish stories about buyers being duped into purchasing properties that do not have the requisite approvals, or have multiple encumbrances and in some extreme cases don't even exist. Why does this happen inspite of having access to credible information?

With any investment decision, more so in the case of Real Estate, it is integral to do your due diligence before making a purchase. Regardless of whether you are an investor or and end user, a real estate purchase requires a significant amount of money. Therefore, it is only appropriate that one should spend a proportionate amount of time doing research to minimise the risk associated with the investment decision.

When assessing any real estate property it helps to start with the structure. Identify the actual useable carpet area and layout. A calculation made considering the cubic feet of a unit is generally more useful as the floor to ceiling height of a room can largely affect its perceived space. A good property should have high quality finishing and well laid out electrical and plumbing lines. In the case of re-sale flats it is important to understand if the beams and columns have been tampered with, whether there are any leakages and any other issues arising out of poor construction. A property located in a low density project that well constructed, has ample amenities, along with robust firefighting and security systems is most desirable.

A legal title report of a property is an essential document. This must be thoroughly understood, before making a purchase. A title report contains important information about the history of ownership, title of the land, encumbrances attached to it, etc. It also provides details about the property such as the location, layout, carpet area and built up area. Information provided in this report can directly impact the value of the property. Properties built on free-hold land, with a clear title and no encumbrances usually attract a premium on account of its legal status.

In the case of under construction or newly constructed properties, it bodes well to check if the builder has procured all the necessary approvals to begin, continue and complete construction. If the project is built in violation of any zoning policy it is likely that it will always be subject to scrutiny. Inadequate approvals can also sometimes impact electrical and water supply to a property.

When it comes to the commerce of the deal, many people assume the lowest price to mean the best deal. The price offered by a seller is indicative of how he values his asset. To ascertain the correct value of a property you must not only consider the price quoted by the seller but also any additional costs you might incur by way of parking, renovation, major repairs, etc. to the final cost. The payment terms, payment duration and cash component if any should also be taken into consideration. It is sensible to first identify the right value for money (VFM) price and then negotiation to get the best deal in the pertaining market conditions.

For any real estate investment, the technical, legal and commercial aspects must be thoroughly understood before arriving at a decision. While it is not impossible to assess and analyse independently, it will always be preferable to use the services of a professional. A structural consultant should be engaged to assess the current strength and potential weaknesses, especially in the case of re-sale properties. A lawyer can conduct a thorough title search, validate information and guide you on the pitfalls of the encumbrances attached to the property if any. A financial advisor can help you ascertain which investment best meets your current and future needs while considering your financial limitations and risk appetite. A broker can then help you negotiate for the best price and ensure all your terms and conditions are met.

In India it is common to pay a real estate broker between 1 to 2 per cent as commission for closing a deal. For less than 1 per cent more, it is possible to engage the services for consultants, lawyers and financial advisors to assist. Research and due diligence is a necessity, not an indulgence. When you you undermine its importance you not only risk your present but also the future of those inheriting your investment.