Gone are the days when you would have to depend on your relatives, friends and Newspaper classifieds to find you your ideal home. In this era of internet, almost all of the major properties are just a google search away. There are a number of property portals such as Magicbricks, 99Acres, Commonfloor, etc. where you can find thousands and thousands of properties with full details. You can search for your property as per your needs. Refine them depending on your location, budget, size and there you go, select the one you want. It is good to do your research before hand and then only contact the marketing agencies / developers. When you call and enquire with them they will push you to visit their properties but ask for the complete details first. Visit their offices, do site visits only if the property matches your needs. Conserve your time and energy for the better ones.
Different buyers have different needs. Be specific about what you want. Here are a few things you should be looking for in your home.
- Location- Don’t compromise on location because at the end of the day this is what is going to matter the most. Apart from searching properties try to do some research on the upcoming infrastructure in the city. What might be very far, distant and in the middle of nowhere right now could be well connected and one of the sought after locales in the coming future. Road extensions, metro line extensions can be a game changer in the property market.
- Budget- Don’t be over optimistic on negotiations and bargains as the prices set by builders is to attract customers and not to chase them away. Choose and spend time on properties that are within your budget.
- Amenities & Specifications- Do not be blown away by the flowery brochures, walkthrough videos and what not. Beneath the layers of the beautiful artistic impressions and virtual tours try to read the fine prints in the literature that is given to you. Be sure about the amenities, fittings, brands of fittings that are given with your flat.
- Builder- Not undermining any one, but it is usually safer to book in projects by reputed developers. After all you do not change homes every season.
- Flat Size / Layouts- You know your family size so you know how many bedrooms you need. Be futuristic and think 10-15 years ahead before deciding on number of bedrooms, surely if your budget permits then only. Most of the projects today have brochures wherein you get the floor plans. Do check the dimensions of the rooms and its size in the floor plans. This will give you an idea of the livable space in your home.
- Vastu- Depending from person to person, if you are peculiar about Vastu then it is better to consult a specialist.
- There are a whole lot of other things like the view from your home, open ness of the flat and what direction it is facing, the immediate neighbourhood, etc. Keep this thing in mind that you will never be able to tick all the check boxes so prioritize your needs accordingly.
First thing first. Most of the organized and reputed brokers do not charge brokerage from the buyers. They receive the commission from the builders only. So price wise it does not make any difference to you whether you contact a broker or a builder directly. On one hand a broker will give you better pre sales service and show you more options from different builders but on the other hand contacting a builder can be tire some as you will have to contact different people for different properties but you will get all the true information regarding the project from their end and you can expect some favours from them as selling the unit to you directly will save them the commission which they would have to pay in case you contacted them through a broker.
What exactly to focus on during Site Visits?
- You have chosen a few projects and now it’s time to physically visit them and see everything for yourself. For most of us taking time out on weekdays is a bit difficult but that is not a problem as the builders know it as well almost all of them work on weekends. So choose the day and time as per your convenience. Be rest assured, they are open on holidays but make your first visit only in day light.
A ready project and an under-construction project are two very different things, so we will be discussing them one by one.
Visiting a Ready to move Project- Try to visit projects at day time only as most of the flats do not have electrical fittings. It’s actually easier to decide on a Ready to move project than an Under Construction one since you can physically verify what you are buying rather than depending on 3D visualizations and literature. Check the overall construction quality, walls, brands used by the builder in toilet fittings, etc., flooring, actual amenities, open area. Also if possible ask for the brochure of the project as well and see if the builder has delivered what it had promised in the literature. However, match or no match, what you are seeing is what you are getting. Check for natural lights, airiness of the flat, view from the unit, try to imagine your furniture and livability in the unit. Do keep in mind that no question is lame. If it pops in your mind ask it to the person showing you the property. Be sure about everything and leave the project with no doubts or confusion in your mind. Keep it in mind they might not show it to you but are far more eager to sell than you are to buy.
Visiting an Under-Construction Project- Be sure about what you want. Sometimes more options can confuse you. Although you are getting a lot more options here but you can not exactly see the flat. You have to imagine and decide after seeing the floor plans. In some big projects you do have model flats as an indication of the livability quotient of the flat but try to focus on what you want to see in them. To attract buyers builders tend to make them plush with beautiful furnitures, paints, wallpapers and what not which are not the part of the actual specifications. Be specific and ask what out of all of them are a part of the actual specification which you are supposed to receive and check its quality and brand. Also check the room sizes for having an idea of your selected home. To give an idea of the projects amenities and landscaping builders show you video walkthroughs. These video are again a bit exaggerated but will still give you an idea about the look and feel of the project and the amenities and open areas.
One more thing, be careful when visiting a construction site, visit only during day light and avoid rainy days and last but not the least, wear proper safety gear as advised by the site-in-charge.
A lot of buyers get confused between these terms- Carpet Area, Built Up Area and Super Built up Area. Most of the ongoing projects charge you on the basis of Super Built up Area. With the advent of RERA however things will change and builders around the country will now be calculating prices based on Carpet Area.
Now just defining these three in simple language for you.
- Carpet Area– As the name suggests, this is the area where you can actually lay a carpet in your flat. This is the actual live able area you are going to receive from the builder.
- Built-Up Area– This area includes the Carpet Area and shared wall area with adjoining flat / common area.
- Super or Standard Built-Up Area– This area includes the Built-up area plus the area of staircase, lift lobby and other common areas divided in the proportionate ratio.
With the ever-increasing demand in the property market in the last decade or so most of the buyers buy the homes during the construction stages and in cases even before the construction commences. It depends on the buyers needs and mindsets however keep these things in mind before deciding on any one of them-
- The good thing about booking a flat early is that you get the cream of the inventory available in a certain project since more number of flats are available for you to choose from.
- Generally speaking, the price of a property tends to increase after the project is complete. So, it’s a good idea to buy early if you want to save some of your hard-earned money.
- When you buy in an under-construction project, the total payment is usually broken down to smaller fragments so it’s easier to pay and the you get 2-3 years of time to make the payment.
- Nothing is 100% perfect and the same may be the case with the flat that you have chosen out of hundreds of other. Everything is nice about it but you just feel if you could turn the door the other way around or may be you wanted an extra basin in the living area or change the color of tiles of your toilet, and so on. These are possible up to an extent in an under-construction project. These are subject to some extra costs but if it’s worth it then you do have the option to go for it.
- It is not rare in the market where the builder promises a lot of thing initially but delivers below par project, be it the quality of construction or the fittings provided in the unit or in cases the amenities provided with the project. A good way to identify the sincerity of the builder is to research a bit about the builder’s history and if possible do try to give some time to visit some of its recently completed projects. In this industry the builder’s brand and goodwill is of utmost importance.
- Under Construction projects are taxable under GST so it adds a good chunk of money to the final price.
- Be very sure about what is the final price of the flat you are buying. There are many other charges, deposits and taxes added to the flat cost which you need to know before booking. Be 100% sure about the exact amount you need to shell out of your pocket except the applicable taxes as these are subject to change.
- There are many instances when the projects are delayed by the builders. It affects home buyers and their financial plannings badly, specially those who stay in rented apartments and eagerly want to shift to their own home. Be careful about the inclusion of delay and its penalty clause in the agreement for sale.
- You get what you see. When you buy a flat in a ready project you just throw speculations and promises out of the window. Visit the property, see everything first hand and if you like it go for it.
- Currently the flat cost in a ready to move project is not taxable under GST, so it will save you some money.
- It’s difficult to find a flat of your choice in a ready to move project as the better ones are sold early during the construction stages.
- The prices rise after the project is completed, so a bit of extra pressure on your pocket.
- When you book a ready to move property you have to make all the payments upfront and get very little time to do so. It can be difficult for some.
- Although you like the flat but if you just wanted to shift a door or do some small change in the flat, it is difficult and even if you insist on doing it, it will cost you a huge amount and the developer will be reluctant to do so.
Once you have zeroed in on a project and have chosen your dream home, first thing you need to do is get the total amount to be paid for the unit including everything and the terms of payment. Now you need to manage your finances. If everything falls in to place then go ahead with the booking. Usually, you book the flat with a token amount that can range from Rs. 50,000 to Rs. 10 Lacs depending on the project you choose. Once the booking is done insist the developer to execute the Agreement for Sale as all the future rights and liabilities of both the developer and the buyer will pertain to the terms and conditions mentioned in this agreement. You need to pay a percentage of the flat value during this agreement say 20% of the total flat value. The balance amount is to be paid as per the payment terms agreed upon in the agreement for sale with the last installment payable at the time of possession.
The payment terms are usually construction linked with stages of payments linked to different construction phases.
Once the full payment is done and the project is complete, insist on doing the registration asap. When done you can take the keys and inspect the flat thoroughly before moving in. if there are any issues you have regarding the flat get it cleared then and there. It’s the builder’s responsibility to hand over the flat in perfect condition.
Most of the process is same the only difference being the payment term where in you need to make the full payment upfront. In case you intent to go for a Home Loan then the agreement for sale may be required.
You have found your dream home, struck a good deal with the seller and are about to finalize it. But before paying any money be sure about where you are putting your hard earned money. Properties, projects and lands have many legal strings attached to it and is usually impossible for us to research on it on our own. There are a lot of facts the developer might hide from you at the time of booking. So how actually you can be sure about a project,it’s builder and it’s genuineness?
One simple measure is to buy property from reputed developers only because they usually won’t put their good will on the line for selling one flat.
Another indicative of the authenticity of a project is to check whether the project is approved by any nationalized bank or not. Banks have their own teams which thoroughly verifies each and every detail of the project before approving it. So if a nationalized bank has approved a project and is ready to give loans to the buyers of a particular project you can be sure that you are putting your hard earned money in the right place.
It may happen that although you liked the property but have found something better or may be due to any other reason, do not want to continue with the booking. You can definitely withdraw your booking and ask for a refund of the payments made by you from the developer. The developer on the other hand may or may not charge a cancellation fee for this depending on the terms and conditions entered in to by the parties at the time of booking / agreement for sale.
The quantum of such fee will depend upon the agreement terms, the stage of construction the property is in, etc. Applicable taxes will be deducted and from the refund amount. Usually a good chunk of money is charged by the developers so, take this decision if it’s the only option left for you.
Yes. You surely can. If for some reason you want to sell off the property midway, you can do this by transferring the booking to an intending buyer through a nomination agreement. The charges and process vary from developer to developer and from project to project.
If you do not have a big amount ready for buying a flat but do have a stable source of income, then you can go for a Home Loan for owning your home. But the Home Loan won’t cover the entire property cost. Generally the bank pays up to 80% of the entire cost and the rest will have to borne by you.
Your eligibility will be directly proportional to your income. There are some other factors like your previous credit history, proper documentation, proper IT returns, etc.
So it is better to keep all your documents in order before going out to buy your home as availing a home loan without proper documentation can be a really cumbersome task and you might end up getting loans at higher interest rates. You can use this simple tool to check your Home Loan eligibility.
Your bank will assess your repayment capacity while deciding the home loan eligibility. Repayment capacity is based on your monthly disposable / surplus income, (which in turn is based on factors such as total monthly income / surplus less monthly expenses) and other factors like spouse’s income, assets, liabilities, stability of income etc. The main concern of the bank is to make sure that you comfortably repay the loan on time and ensure end use. The higher the monthly disposable income, higher will be the amount you will be eligible for loan. Typically, a bank assumes that about 55-60 % of your monthly disposable / surplus income is available for repayment of loan. However, some banks calculate the income available for EMI payments based on an individual’s gross income and not on his disposable income.
The amount of the loan depends on the tenure of the loan and the rate of interest also as these variables determine your monthly outgo / outflow which in turn depends on your disposable income. Banks generally fix an upper age limit for home loan applicants.
Once you have executed the Agreement for sale with the developer you can apply for the loan. It is better to apply to one of the banks which has already approved the project and will save you and the developer a lot of time and effort. For the developers it’s a part of their daily routine, so they have good relationships with the banks. You can ask for favors from them and they will happily set up an appointment for you with the concerned bank’s representative. If everything falls in to place, your loan will be sanctioned within a matter of 1-2 weeks. A few more papers to sign and there you go. Now you need not worry about the future payments to the developer.
The quantum of home loan will strictly depends on the borrowers income and its previous credit history. It’s a good idea to add your family members as co-applicants so as to increase your eligibility.
You repay the loan in Equated Monthly Installments (EMIs) comprising both principal and interest. Repayment by way of EMI starts from the month following the month in which you take the disbursement.
In addition to all legal documents relating to the house being bought, banks will also ask you to submit Identity and Residence Proof, latest salary slip ( authenticated by the employer and self attested for employees ) and Form 16 ( for business persons/ self-employed ) and last 6 months bank statements / Balance Sheet, as applicable . You also need to submit the completed application form along with your photograph. Loan applications form would give a checklist of documents to be attached with the application.
Do not be in a hurry to seal the deal quickly.
Please do discuss and seek more information on any waivers in terms and conditions provided by the commercial bank in this regard. For example some banks insist on submission of Life Insurance Policies of the borrower / guarantor equal to the loan amount assigned in favour of the commercial bank. There are usually amount ceilings for this condition which can also be waived by appropriate authority. Please read the fine print of the bank’s scheme carefully and seek clarifications.
Banks generally offer either of the following loan options: Floating Rate Home Loans and Fixed Rate Home Loans. For a Fixed Rate Loan, the rate of interest is fixed either for the entire tenure of the loan or a certain part of the tenure of the loan. In case of a pure fixed loan, the EMI due to the bank remains constant. If a bank offers a Loan which is fixed only for a certain period of the tenure of the loan, please try to elicit information from the bank whether the rates may be raised after the period (reset clause). You may try to negotiate a lock-in that should include the rate that you have agreed upon initially and the period the lock-in lasts.
Hence, the EMI of a fixed rate loan is known in advance. This is the cash outflow that can be planned for at the outset of the loan. If the inflation and the interest rate in the economy move up over the years, a fixed EMI is attractively stagnant and is easier to plan for. However, if you have fixed EMI, any reduction in interest rates in the market, will not benefit you.
Some banks also offer their customers flexible repayment options. Here the EMIs are unequal. In step-up loans, the EMI is low initially and increases as years roll by (balloon repayment). In step-down loans, EMI is high initially and decreases as years roll by.
Step-up option is convenient for borrowers who are in the beginning of their careers. Step-down loan option is useful for borrowers who are close to their retirement years and currently make good money.
There are also subvention schemes offered by some developers in partnership with the banks for particular projects wherein the EMI payment starts after the possession. But it is a kind of offer given by some developers on selected projects and is not applicable in all cases.
Yes, most banks allow you to repay the loan ahead of schedule by making lump sum payments. However, some banks charge early repayment penalties up to 2-3% of the principal amount outstanding. Prepayment penalty may vary according to the reasons and source of funds – if you obtain a loan from another bank for pre-payment the charges are usually higher than when you pay from your own sources. However, you may credit more than your EMI amount into your loan account on a periodic basis and bring down your interest burden as and when funds are available with you. Most banks do not charge a pre-payment penalty if you deposit more than your EMI payable on a periodic basis. Please check such stipulations while availing the loan.
When other banks reduce the interest rate, you may prefer to close your account with the bank with whom you are banking, to avail of the loan from the bank offering reduced rates of interest. You have to pay pre-payment charges for doing so. In order to ensure that their customers do not approach other banks for availing reduced interest rates, banks allow customers to switch over from a higher interest loan to a lower interest loan by paying a switch over fees which is lesser than the pre-payment charges. Generally switchover fee is taken as percentage of the outstanding loan amount.
Keep up-dating yourself on various changes in the home loan market. Visit the branch, discuss with the officials to get the best out of any changes in the home loan scenario.
Yes. Resident Indians are eligible for certain tax benefits on both principal and interest components of a loan under the Income Tax Act, 1961. Under the current laws, you are entitled to an income tax rebate for interest repayment up to Rs. 1,50,000 /- per annum. Moreover, you can get added tax benefits under Section 80 C on repayment of principal amount up to Rs. 1,00,000 /- per annum.
Give yourself comfortable time. Do not hurry your purchase or loan in any case. Shopping around for a home loan will help you to get the best financing deal. Shopping, comparing, seeking clarification and negotiating with banks may save you thousands of rupees. a) Obtain information from several banks
Home loans are available from mainly two types of lenders–commercial banks and housing finance companies. Different lenders may quote you different rates of interest and other terms and conditions, so you should contact several lenders to make sure you’re getting the best value for money.
Find out how much of a down payment you are required to pay, and find out all the costs involved in the loan (including processing fees, administrative charges and prepayment charges levied by banks). Knowing just the amount of the EMI or the interest rate is not good enough. Similarly, ask for information on loan amount, loan term, and type of loan (fixed or floating) so that you can compare the information and take an informed decision.
The following is some important information that you will require.
Ask your lender about its current home loan interest rates and whether the rate is fixed or floating. Remember that when interest rates in the economy go up so does the floating rates and hence the monthly re-payment.
If the rate quoted is a floating rate, ask how your rate and loan payment will vary, including the extent to which your loan payment will be reduced when rates go down by a certain percentage. Ask your lender to what index your floating home loan is referenced / linked and the periodicity of updation of that index. Also ask your bank whether the index is internal or external and how and where it is published.
Ask about the loan’s annual percentage rates (APR). The APR takes into account not only the interest rate but also fees and certain other charges that you may be required to pay, expressed as a yearly rate. Banks are obliged to reveal the APR if requested for by the customer.
ii) Reset Clause
Check the reset clause, especially in the case of fixed interest rate loan as the rates will not be fixed throughout the tenure of the loan.
iii) Spread/Mark up
Check if the margin in the case of the floating rate is fixed or variable. The rate of interest you have to pay will vary accordingly.
A home loan often requires payment of various fees, such as loan origination or processing charges, administrative charges, documentation, late payment, changing the loan tenure, switching to different loan package during the loan tenure, restructuring of loan, changing from fixed to floating interest rate loan and vice versa, legal fee, technical inspection fee, recurring annual service fee, document retrieval charges and pre-payment charges, if you want to prepay the loan. Every lender should be able to give you an estimate of its fees. Many of these fees are negotiable / can be waived also.
Ask what each fee includes. Sometimes several components are lumped into one fee. Ask for an explanation of any fee you do not understand. Also, remember that most of these fees are perhaps negotiable! Do negotiate with your bank before agreeing to a particular fee. See how the all inclusive rate compares with the all inclusive rates offered by other banks. While planning your finances, don’t forget to include the costs of stamp duty and registration.
v) Down Payments / Margin
Some lenders require 20/30 percent of the home’s purchase price as a down payment from you. However, many lenders also offer loans that require less than 20/30 percent down payment, sometimes as little as 5 percent .Ask about the lender’s requirements for a down payment and also negotiate with him to reduce the down payments.
b) Obtain the best deal
Once you know what each bank has to offer in terms of rates, fees and down payments, negotiate for the best deal. Ask the lender to write down all the costs associated with the loan. Then ask if the bank will waive or reduce one or more of its fees or agree to a lower rate. Do make sure that the bank is not agreeing to lower one fee while raising another or to lower the rate while raising the fees. Ask for clarification in case you do not understand any particular term. All banks are obliged to explain the most important terms and conditions of the home loan in detail.
Once you are satisfied with the terms you have negotiated, please do obtain a written offer letter from the lender and keep a copy with you. Read the offer letter carefully before signing.
A person holding an Indian passport, who is currently located anywhere else in the world and stayed there continuously for more than 180 days is considered as an NRI (Non-resident Indian).
Other than an NRI-s who holds an Indian passport, any Person of Indian origin(PIO) who is currently holding a passport of a different country, but was himself an Indian citizen earlier or whose ancestors have been Indians upto the fourth generation(great grandparents), is considered a PIO. The current country of residence can be any except Afghanistan, Bangladesh, Bhutan, China, Iran, Nepal, Pakistan & Sri Lanka. He will have a free passage to India without a visa.
Overseas citizen of India (OCI) on the other hand has a lot of misconceptions around it. People think that it is a dual-citizenship card. Please understand that there is no such thing, as India does not allow any citizen of other country to hold an Indian citizenship. An OCI has no voting rights in India and he cannot have a government job or hold any legislative position in India. Simply put, he is not an Indian citizen.
In fact, the Government of India has announced vide Gazette Notification No.26011/01/2014-F.I dated 09.01.2015, that all PIO cards issued till 09.01.2015 are deemed to be OCI card. The scheme has been withdrawn now.
Henceforth, applicants may apply for OCI card only, as PIO card scheme is no longer in existence. Transfer of PIO Card to OCI card is optional. One can apply for OCI card in lieu of valid PIO card free of any charges.
All NRI, PIO and OCI can buy residential or commercial properties in India.
They cannot buy an agricultural or farmland or plantation property. However, they can inherit them.
What documents are required from them to make a property purchase in India? Does it require RBI permission?
No permission from RBI is required. They should hold valid passport with PIO/OCI card (wherever applicable), address proof, PAN (permanent account number in India) and photograph to buy a residential or commercial property in India.
Overseas currency can be brought to India through legitimate banking channels to make such purchase, or if the NRI holds a non-resident external(NRE) or non-resident ordinary(NRO) rupee account in India, which holds the fund, then by issuing a cheque from that account can do. If the NRI has any deposits in his foreign currency non-resident(FCNR) account, that fund can also be used to make the purchase.
If the NRI does not want to travel to India for registering the property in his own name, then he can execute a power of attorney (POA) from abroad to a close relative residing in India to sign on his behalf, on the purchase contract and register the property in his absence. The POA has to be signed by the principal (who is giving the power) in presence of the consulate officer or notary abroad, and will have to be attested by them.
The POA issued abroad will have to be sent to India and the POA-holder will have to sign and adjudicate it, within 3 months from the date of assigning the power, in India at the registrar’s office. Only after this the POA will be considered ‘given’.
Repatriation of funds is the transfer of the sale proceed of the property from India to abroad. It gets transferred from Indian rupee to a foreign currency.
As per Indian Income Tax laws, just ownership of a property in India does not make you pay for any taxes, unless you have rental income coming from it. Upon selling the property, however, one is exposed to the short term or long term capital gains tax.
Short Term Capital Gain (STCG) tax is when the property is sold for a profit within 3 years of purchasing it. The profit then is taxable under the income tax slab in which the seller falls in. For example, if you bought a property worth Rs 60 lakh in 2012 and sold it in 2014 for Rs 80 lakh, then income tax on the profit of Rs 20 lakh will be levied on the tax slab you fall in India.
Long term capital gains(LTCG) tax is when you sell the property after 3 years of purchasing it. You get the benefit of indexation. Also the profit so arrived at after availing indexation is taxed at 20.6%.
However, if you reinvest the profit, in Section 54EC bonds issued by REC or NHAI (within 6 months of the sale) or buy another property with it within next specific number of years, then the tax gets waived off.
If there is a rental income in India, then tax papers need to be filed in India mentioning the PAN and tax to be paid. Also to note, that though holding one property in India is considered as ‘self-owned’, a second property, even if it is not on rent, is considered ‘deemed rented’ and tax needs to be paid for that. You can, however, show 30% of the deemed rental as ‘maintenance cost’. There is no tax to be paid abroad (say, USA) on ‘deemed’ income, but declaring it is important as during repatriation of funds from India, it should not cause any issue.
Home loan is easily available for all three categories in India. Some multinational banks have special schemes and easy paperwork too. They do not seek a POA for extending home loan to NRI-s. However, there are plenty country restrictions with different lenders. So, getting an advisor on your side will be an intelligent move.
According to section 24 of the Income Tax Act, the interest on a home loan is deductible from the income gained from house property to the extent of Rs 2 lakh per annum for self occupied property. For other than self occupied property, you can claim actual interest paid. Moreover, up to Rs 1.5 lakh of the principal repayment can be deducted under section 80C (subject to an overall limit of Rs 1.5 lakh of that section including other investment options which allow grant under the same section).
There are specific POA given to the person here in India, which if authorised to do such transactions on behalf of the owner, it can be done. Proper stamp charges to be paid at the registrar’s office during execution of such POA, so that after many years also it can be traced in the record during such transactions.