Buyer’s Guide

Home Loan

Eligibility

Home Loan

You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 65 years of age. You must be employed or self-employed with a regular source of income.

Office premise loan

You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 65 years of age. You must be self-employed with a regular source of income. The loan can be for the purchase / construction / extension of a non-residential property. A loan for renovation or improvement will be given only at the time of acquisition of property. Professionally qualified and self-employed individuals can apply. A minimum of 3 year's work experience is a must.

Loan Amount

A number of factors such as your income, age, number of dependants, qualifications, assets and liabilities, income stability/ continuity of your employment / business etc. are taken into account when assessing your repayment capacity.

However, there are ways by which you can enhance your eligibility: If your spouse is earning, add him/her as a co-applicant. The additional income shall be included to enhance your loan amount. Incidentally, if there are any co-owners they must necessarily be co-applicants. Did you know that your fiancée's income could also be considered for sanctioning the loan on your combined income? The disbursement of the loan, however, is done only after you submit proof of your marriage. Providing additional security like bonds, fixed deposits and LIC policies may also help to enhance eligibility. While there is no need for a guarantor, having one might enhance your credibility with us. If so, our loan officer would provide you with the necessary details. However, the final amount to be sanctioned will depend on your repayment capacity. In the total cost, registration charges, transfer charges and stamp duty costs are included.

Agreement For Sale

Once you have found the property you want to buy, you must ensure that the vendor cannot sell the property to another purchaser. To cover this potential problem you and the vendor must sign a contract that binds the vendor to sell and you to buy. It also allows time for you to finance the purchase and collect the documents needed for the final deed.

Considering the importance of this contract, it is advisable to ask a professional to draft this agreement. His/her professional experience will serve as the best guarantee against any loophole.

Stamp Duty & Registration

As per Maharashtra stamp act,1958, the purchaser must pay a 5% stamp duty on the purchase of any flat within the jurisdicary limits of Municipal corporation act of greater Mumbai and 6% for within the limit of TMC. Without the payment of this stamp duty, your solicitor will not be able to officially register your new house in your name, even when the house is transferred within the family.

The rate of stamp duty for shops/galas/office premises and garage even if just used for car parking is 5% in Mumbai.

• Procedure for Stamp Duty

When the flat purchaser desires to enter into an agreement, the stamp duty amount is calculated for him/her as per the agreement value or market value, whichever is higher. Once the stamp duty amount is given to the flat purchasers, they need to get the pay-order, which will be addressed in favour of "SUPERINTENDENT OF STAMPS, Mumbai". The pay-order is given for franking of the agreement. Later, the said agreement is duly filled and signed by the respective parties.

(The Thane stamp office is open on Tuesdays and Fridays only and is closed on the 18th of each month for accounts. If the 18th happens to be Tuesday or Friday, the office is opened on the next working day.)

Registration

The stamp duty paid document has to be registered under the Indian Registration Act with the sub-registrar of Assurances, of the jurisdiction where the property is situated. The basic purpose of registration is to record the ownership of the flat. Until the title deeds in your name are registered or recorded, you are not officially the legal owner of the house.

Compulsory Registration of Documents - Section 17 of the Registration Act, 1908

• Registration Procedure

For registration, the original document printed on one side along with two photocopies of the original; have to be submitted to the registering officer. The registration procedure also requires the presence of two witnesses and the payment of the appropriate registration fees.

• On Completion of Procedure

A receipt bearing a distinct serial number is issued. The following requirements for completing the registration are usually stated on the receipt:

• Market value of the property
• Income-tax clearance; i.e., N.O.C. under Section 269 UL (3) issued by the appropriate authority constituted under chapter XX-C of the Income Tax Act, 1961, if the same is applicable
• Registration Fee

The registration fee currently fixed for registering documents relating to property transactions is approximately 1% of the market value or agreement value, whichever is higher, subject to Maximum of Rs.30,000/-. The registration fee for the following immovable property transactions is levied on the market value of property on which stamp duty is charged:

1. Conveyance
2. Exchange
3. Gift
4. Partition
5. Transfer of lease by way of assignment
6. Sale
7. Power of attorney given for consideration
8. Authorization to the attorney to sell the property

Tax Benefits

The benefits that income tax authorities provide, as a result of servicing a housing loan from specified financial institutions, is documented over several sources. The following provides for some direction:

Let's start with Section 24 of the Income Tax Act.

This section deals with deduction available on Interest paid on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of property. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.

So, should you borrow money to purchase or construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh on interest paid. The criteria being: the property has to be acquired or constructed within 3 years from the end of financial year in which the capital was borrowed and be self - occupied.When put in figures, this is quite an amount:

• Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.
• Assume interest payment during the first financial year is Rs 1.60 lakh
• Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit)
• Total tax amounts to Rs 24,720 (tax of Rs 24,000 + Education Cess Rs 480+ SHEC Rs. 240)
• Tax saved is Rs 46,350 (tax @30% on Rs 1.5 lakh plus 2% EC+ 1% SHEC as purchaser is in the highest tax bracket)

That brings us to Section 80C of the Income Tax Act.

A deduction u/s 80C (2) (xviii) is available on repayment of principal during a financial year up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs 1 lakh specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is from Gross Total Income.

NRI Buyers

1. Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes as section 31 of FERA 1973 is not applicable to them.
2. Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO/ NRE/ FCNR account.
3. Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 17. The following documents must be submitted along with the declaration.
   A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name.
   Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from the declarant's NRE/FCNR account/ FCNR Special Deposit Account and payment of consideration for the property out of those funds.
4. Where a Foreign Citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in Form IPI 1.
5. Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.
   Under Section 29 of the Foreign Exchange Regulation Act 1973, the Reserve Bank of India has granted General Permission to Foreign Citizens of Indian origin and Indian citizens residing outside India to let out their immovable properties (Commercial / Residential). The rental income or proceeds of any investments out of such income shall be repatriable outside India subject to Income tax being paid.