Some important guidelines for Buying a Home
Making the decision to buy a home, identifying the desired location and property is just the first and most simple step in your home buying journey. The real efforts start after this point. Let's find out more about the key aspects that need to be covered during a home purchase.
What are the important documents to be checked before buying a home/property?
Once you have zeroed in on the home of your choice it is necessary to check up on some important documents closely before proceeding further. Carry out a thorough search and check out the approved layout plan, the building plan, ownership documents, etc. It is advisable to get professional legal help to help you verify the validity of the documents.
What precautions need to be taken while buying an under construction flat?
Opting to buy an under construction flat has its advantages as you obviously pay less than for a ready possession one. But be vigilant and ask the builder to furnish all the relevant papers and permissions to ascertain the genuineness of the project.
Approved plan of the building along with the number of floors; make sure that the floor where you have booked your flat has been approved. Check if the land on which the builder is building is his or he has undertaken an agreement with a landlord. If so, check that the title of land ownership is free and clear. Check the building byelaws as applicable in the area to make sure that there are no violations of front setback, side setbacks, height, etc. Check specifications given in the agreement to sell to ascertain whether the builder is providing the same as promised. Conduct a thorough background check of the builder and his reputation. Ensure that NOCs for Ensure that urban land ceiling NOC (if applicable) as well as NOCs from the electricity, water and lift authorities has been obtained. What exactly is built up area, super built up area, and carpet area and what is the difference between them?
Carpet Area is the area of the flat which does not include the area of the walls.
Built up Area includes the area of the walls
Super Built up Area is generally applicable in multi storied units and includes the built up area along with the area under common spaces such as the lobby, lifts, stairs, etc.
Now this is a crucial point to be covered before deciding to buy the flat. Often only the super built up area is mentioned so that the flat area seems larger than it actually is. It is prudent to know the exact carpet area to get the true size of your flat.
What is meant by the market value of the property?
Market value means the price at which you can buy a home/property in the open market on the specified date of execution.
Where can you find the true prevailing market value of the property?
The Sub-Registrar of the area, in whose jurisdiction the property is located, is the person most apt to for finding the market value of the property.
Who should pay Stamp Duty - the buyer or the seller?
The buyer, as the liability of paying stamp duty is that of the buyer, unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.
Is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement?
The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.
On what legal documents is a stamp duty levied?
Significant legal documents required in property transactions such as Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty calculated as per the market value of the property.
Important Legal Documents necessary for property transactions
Owning your own house is more than just a financial decision, it's also an emotional one. So, don't rush your decisions, be careful, vigilant and get yourself updated on the various technicalities while conducting your property search, while identifying your choice of a home and even while finalizing the deal. Importantly make sure that the legal status of the home is clear and without conflict. This cautiousness will help you avoid a lot of unnecessary legal hassles in the future. Let us find out more about all the various legal documents necessary for home buying transactions.
What is a Title Deed?
A title deed is an investigation into the title of the land, over a period of 30 years, to ascertain whether the property is unencumbered and has a clear and marketable title.
Always insist on checking the original title deed instead of just a photocopy.
Confirm that the seller is indeed the owner of the property.
Ideally you should get the title deed verified from legal experts to be on the safer side.
If the title deed is not clear and marketable, getting finance from recognized financial institutions will become extremely difficult; get in touch with a financial institution to check if they would provide a loan for that particular property.
What documents are necessary while buying an under construction home?
While buying an under construction home an allotment letter and development agreement are the vital documents.
The allotment letter contains details regarding the agreed price, payment and construction schedule, house plans, delivery date and builder's liability in case of late completion or problems after possession. It is issued to the buyer upon payment of the 15% of the property value to the developer.
The development agreement is inked between the builder and the landowner and contains details regarding the terms and conditions on which the landowner has permitted development of his property.
What documents are necessary while buying a constructed home?
While purchasing an already constructed property it is important to check that the seller has the title and possession of the property as well as the right to transfer the property.
That the property adheres to municipal, planning authority requirements
That there are no tenant and that the property is not mortgaged
Whether property tax, society tax, electricity, water bills etc have been paid in full
That you are in possession of original documents of all the necessary documents - allotment letter, completion certificate, occupation certificate and all other documents, given by the original builder
What is Stamp Duty and Sale Deed?
Stamp duty is usually a percentage of the transaction value levied by the state government, on every registered sale. The agreement to sell clearly states the stamp duty, which is usually paid by the buyer, and he gets his name registered in the land revenue records. The final sale deed should be stamped and registered at the appropriate local area office. Both the developer/seller and the purchaser need to be present at the sub-registrars office, for registering the agreement.
Home Loan Processing
When you decide to buy a home, the first question that comes to mind is how to finance it? After all purchasing a house is a major financial consideration. Surely one does not buy a house by making the entire payment at one go. There are multiple home loan options that are available to a buyer. Of course, acquiring a home loan is a long process involving many stages. So let's acquaint with the various steps involved in the home loan procedure.
Formal loan application
The primary step is to fill out a loan application form for the financial institution/bank that you have chosen to get the loan from. The application form requires basic information regarding personal, residential, income, professional, educational details. It also includes details about the house, estimated costs as well as your means of financing the property.
In addition, the banks will require adequate proof in the form of valid documents such as income proof, address proof, identity proof, bank statements, education qualifications, property details etc. to support your loan request. The banks ask for such detailed documentation to basically ascertain your suitability financially and your ability to repay the loan amount.
All banks that offer home loan facilities charge processing fees which are generally non-refundable. The fees may vary from bank to bank but it is normally 0.25%-0.5% of the loan amount applied for. The fees are used by banks to start and maintain the home loan process including completing the various formalities during the entire period.
Evaluation & verification of the applicant
Upon successful application for a home loan and submitting the processing fees, your application is evaluated by the bank. During an evaluation the bank will request a personal meeting with the applicant to ascertain his financial health and repayment capacity.
On through evaluation, the loan application moves to the verification stage where the bank cross checks all the facts provided by you in the application including a field investigation process by the bank loan executives for re-checking the facts to confirm their validity.
The most important part of any home loan process, the verification of the applicant's repayment capacity is checked thoroughly. The final outcome of your getting a home loan rests on this stage. If the bank finds that you might be unable to repay the loan they may reject your application altogether. On the other hand, if the bank, based on their evaluation, finds that your financial health is sound enough, it may sanction the loan. However,, the loan may be a conditional sanction or an unconditional sanction based on the bank's evaluation of your financial strength. If the sanction is conditional, you'll have to fulfill the conditions imposed before the loan is disbursed.
Offer letter for home loan from the Bank
Your loan processing is on its way. The bank issues an offer letter which contains all the pertinent details about your home loan including loan amount sanctioned, interest rates applicable, type of interest - floating or fixed, loan period, repayment mode, as well as all the terms and conditions associated with a home loan.
If the terms stated by the bank and all the other details are acceptable to you, you send in an acceptance copy to the bank, which is maintained in their records. If the bank charges any Administrative fee, it will have to be submitted at this stage.
Think you are home free? Not quite... after thoroughly evaluating you, the bank will verify the property. The reason is that a home loan is a secured loan where the property is used as collateral. The bank will keep all the original documents related to the property, title, NOC etc. with them until the loan is repaid. The banks then conduct a legal check of the property to ensure that it has a clear title. Banks don't lend in cases of disputed properties and unclear title deeds.
In addition banks also conduct a technical evaluation of the property by sending in qualified valuators who assess the property on various parameters.
Home loan disbursement
After going through the lengthy period of application, evaluation and verification your loan request is at last in the final stage. On completion of bank formalities, the registration process begins. The legal documents are prepared on stamp papers approved by the bank. The applicant signs the agreement and submits post dated cheques for the agreed term. Once the agreement is complete the home laon is disbursed as per the agreed mode of disbursal (lump sum or in stages).
Purchasing a home is a big financial decision. Let's find out if there are any tax benefits that can be availed of against buying a house.
Are there any income tax benefits for property purchase?
If you are getting your house purchase financed via a bank or a financial institution then as per Section 88 of the income tax you can claim benefit for the principle repayment, interest on loan is deductible u/s 24 from income from House Property. But these benefits are available only for residential properties and not for commercial properties.
Should I pay tax if I sell off any residential or commercial property?
Yes, you are liable to pay Capital gains tax on profit arising from sale of a house property.
Can I claim tax exemption on capital gain?
In fact you can. The Income Tax act has made provision u/s 54 & 54A--G of the act whereby you can claim exemption from tax on capital gains.
NRI Home Buying Guide
With a lot of well settled NRIs looking to have a home or an investment in real estate back in their country of birth, the volumes of NRI inquiries for home purchases in India have been on a upswing. Some vital tips for Non Resident Indians for purchasing property in India.
What is the eligibility for Indian Citizens, Foreign Passport Holder or PIO Card Holders for buying property in India?
Persons of Indian Origin and holding an Indian Passport are entitled to buy any property in India.
People holding overseas passports, such as British or American, need to apply for a PIO Card (Person of Indian Origin) at the Indian Embassy or consulate in their country of residence, before purchasing property in India.
Are any specific government permissions required before buying property in India?
Persons of Indian Origin do not need any approval by the Government of India to buy immovable properties.
Non Resident Indian buying a property through their NRE (Non-resident External) Accounts can repatriate sale proceeds and rental income to their foreign account after deduction of Income Tax and Capital Gains on the Sale proceeds as applicable.
Non Resident Indian need to have an operational NRE and NRO (NRO Non resident Ordinary Rupee Account) Bank accounts set up. NRE accounts are used for pay outs whereas the NRO accounts can be used for depositing funds which can be transferred to the NRE for repatriation as required.
Home Buying Processes for NRIs
If you are an NRI, while conducting property buying transactions for, it is advisable to remit funds from your bank in your country of residence to the Indian bank where the NRE account is set up. If you buy the property through the NRE account, then the source of funds is not required to be disclosed usually to any one as this is your inwards remittance. It is also advisable to remit a certain percentage of the property amount in your Indian bank account prior to leaving India, which can be a down payment with the builder or property owner.
Power of Attorney (POA)
Non Resident Indian who come to India once in few years, need to give power f attorney to a person living in India so that required home buying processes such as registration, possession, execution of agreement for sale, agreement of leave and license etc, can be taken care of with ease.
NRI Home Loans
Non Resident Indians (NRIs) can buy property in India with a home loan. Normally they can get a loan of around 85-90% of the property amount. Personal documents required for the home loan pre-approval only. Loan disbursement happens only when the property is purchased.
Documents needed to be submitted by salaried Non Resident Indian for home loans
Loan application form duly filled and signed
Two photographs of both the applicant and the co-applicant with signature on front and back
Copy of passport - Along with latest visa stamp and date of entry stamp
Proof of residence in India - Electricity bill, Telephone bill, Ration card, Driving License etc
Copy of credit card - Last six months bank statements of all the NRE / NRO account in India
Last six months bank statements of bank account held abroad where salary is credited - Copy of Contract / Employment Certificate Copy of Annual Salary Certificate specifying the mode of payment (If payment is fully or partly received in cash) Salary Slips for the immediately past 6 months.
Documents relating to income/ salary need to be attested as true by the employer
Copies of Sanction Letter of Loans availed in India and abroad
Self Declaration of Residential Status
All documents in foreign language to be translated in English.
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