5 Mistakes People Make When Buying Their First Property

Buying your first property in one of the biggest financial decisions of your life. It's exciting but also overwhelming, there are legal, financial, and lifestyle factors to consider. Many first-time buyers rush into the process without understanding the full picture, which can lead to costly mistakes.

Here are the five most common mistakes people make when buying their first property, and how to avoid them.

Mistake 1: House Hunting before Underwriting

The Mistake:

Starting with listings, not your lending limits. Buyers skip mortgage pre-approval, don't stress-test EMIs, and assume banks will finance most of the price.

Why it hurts?:

Your budget isn't just "price minus down payment", it is governed by RBI loan-to-value (LTV) caps and your Income-to-EMI ratio. Banks typically keep fixed-obligation-income (FOIR) around 40-50%. RBI caps LTV roughly at 90% for ≤ ₹20 lakh, 80% for > ₹20–₹75 lakh, and 75% above ₹75 lakh; the balance must come from your own funds. If you find out late that your maximum loan is smaller than expected, you either scramble for cash or lose the property.

How to fix it:

• Get a pre-approval and test for rate shocks (e.g., +150 bps) to see if the EMI still fits FOIR.
• Budget cash for down payment per LTV and for closing costs (see Mistake #2).
• Prefer floating-rate loans only after stress-testing; fixed can cap risk but may carry re-pricing clauses, read the sanction letter.

Mistake 2: Underestimating the all-in cost of ownership

The Mistake:

Pricing only the headline "basic cost" and forgetting statutory charges, taxes, deposits, and on-going costs.

The Unavoidable bits:

--> Stamp duty & registration: Commonly 5–7% duty plus ~1% registration (state-specific). For example, Maharashtra: 5% stamp duty (women buyers often get 1% concession) + 1% registration; Karnataka uses slabs by value. These single items can add lakhs.

--> GST: Only on under-construction units - 1% for “affordable” housing and 5% for other residential units, without ITC.

--> TDS compliance: If the seller is resident, buyer must deduct 1% under Sec. 194-IA when consideration or stamp-duty value is ≥ ₹50 lakh (deduct on the higher of the two). For NRI sellers, TDS is under Sec. 195 at applicable capital-gains rates, materially higher and far more paperwork. Missing this invites penalties.

--> Developer extras & move-in costs: Amenities, parking, floor rise, meter charges, maintenance deposit, home insurance, and interiors (5–10%+ of price for a functional setup).

How to fix it:

Build a line-item sheet before booking, stamp duty, registration, GST (if applicable), TDS steps, developer charges, brokerage (if any), first-year maintenance, insurance, and an emergency reserve of 6 EMIs.

Mistake 3: Weak Legal & Regulatory Diligence

The Mistake:

Trusting brochures. Buyers skip hard checks: title encumbrances, approvals, RERA status, and handover documents.

What proper diligence looks like:

--> RERA Registration:

Verify project on your state RERAv portal. Under RERA, 70% of amounts collected must sit in a separate bank account to be used only for land/construction, this reduces diversion risk. Also check uploaded approvals, land title/encumbrance details, quarterly progress, and sanctioned plans.

--> Approvals & Certificated:

For ready units, insist on Occupation Certificate (OC) from the competent authority; without OC you may face higher property tax, utility issues, and compliance risk.

--> Title & Encumbrances:

Have a property lawyer review the title chain, Encumbrance certificate, layout plan, and society documents.

--> Contract fine print

Look for clear possession dates, delay compensation, defect liability, and usage/alteration rules.

How to fix it:

Treat RERA data and the agreement for sale as primary sources, not marketing material. Walk away if title or approvals are fuzzy.

Mistake 4: Buying the story, not the fundamentals

The Mistake:

Prioritising glossy amenities and future hype over rentability, yield, and supply/demand in the micro-market.

Reality check:

Indian residential rental yields remain modest; recent reports peg prime-city yields in the low-single digits (often 2-4%), improving in select micro-markets but still far from Western norms. Capital appreciation depends on employment hubs, infrastructure that actually opens, and tight supply, not announcements. Overpaying in an oversupplied corridor can lock in years of flat returns.

How to fix it:

1. Benchmark the rent-to-price yield. (annual rent / All - in cost)
2. Study inventory overhand, historical absorption and upcoming supply for the exact pin-code, not the city headline.
3. If investing (not self-use), favour layouts and sizes, with the widest tenant pool and easy exit. Corner penthouses are beautiful; 2 BHK near job nodes resell faster.

Mistake 5: Sloppy execution at possession and beyond

The Mistake:

Skipping independent home inspection, taking possession without a snag list, and ignoring on-going governance and compliance.

Why inspection matter:

Independent checks catch leaks, damp, electrical, plumbing, and finishing defects that are expensive later. Professional inspections in India are now common and cost roughly ₹2,500 - ₹25,000 depending on the size; you can use the report to demand rectification or price adjustment.

Post-possession blind spots:

1. Not registering the sale deed promptly or missing mutation/property tax set up invites fines.
2. Neglecting society governance, sinking fund norms, and insurance leaves you exposed.
3. Not tracking TDS/Form 26QB (where applicable) can lead to penalties.

Quick Buyer's Checklist:

1. Pre-approval in hand: EMI-stress tested against FOIR and RBI LTV rules.
2. All-in budget mapped: Stamp duty, registration, GST (if under-construction), developer charges, interiors, TDS steps, emergency reserve.
3. RERA & Legal: State portal verified, title and encumbrance checked, OC/CC (for ready) validated, agreement clauses negotiated.
4. Market fundamentals: Yield math, supply pipeline, rentability for the exact micro-market.
5. Snag & Compliance: Pre-handover inspection, possession memo with punch-list, TDS/26QB (if applicable), deed registration, mutation, insurance.

Frequently Asked Questions (FAQs)