Legal Top
Get a copy of the title report by the solicitor of the property. Make sure that there are no conditions written in fine print and that there are no specific reservations by the state government.
Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in the close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you do not get stuck with a property that is or may get caught in any sort of disputes. Lack of clearance of titles also means that you will not be able to avail home loans.
Permission and Approvals
Before a construction can begin, the builder must seek several permissions and approvals from relevant bodies. Without these clearances, the construction may come under litigation. Here is a list of documents and approvals that the builder must possess for all building work to commence in Mumbai:
- ULC order (in specific cases)
- IOD and CC of the project
- MCGM approved plans
Home Loan Top
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.
SANCTIONING
Documents required for applying for a home loan (for self-employed professionals and businessmen)
General Documents:
- Updated bank passbook or a Xerox of the statement of accounts for the last 6 months
- Age proof: PAN card, Voters ID, Passport and License Xerox of ration card Business profile with details on the nature of business, list of clients, suppliers, staff strength, geographical spread, etc.
- Xerox of education qualifications certificate and proof of business existence
- Xerox of last 3 years Income Tax returns Last 3 years profit /loss and balance sheet Processing fees cheque
- Documents required for applying for a home loan (for employed professionals)
- Latest salary certificate / slip in original
- Age proof: PAN card, voters ID, passport, license
- Xerox of Form no.16 A (TDS Form) from employer. Certificate in original from employer for any other allowances, which are not reflected in salary slip
- Updated bank pass book / Xerox of statement of accounts for last 6 months
- Xerox of your company's ID or ration card
- Passport size photographs of applicant and co-applicant
- Processing fees cheque
- You may be asked to submit further legal documents if required by the bank or its approved lawyers. Retain photocopies of all the documents being submitted by you.
DISBURSEMENT
Your loan will be disbursed after you identify and select the property that you are purchasing and submit the requisite legal documents. Each and every single document asked for will be verified and checked for your safety. This may take some time but we want to ensure a clear title by completing all the legal and technical verifications so that you have full rights to your home. The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. On satisfactory completion of the above, registration of the conveyance deed and investment of your own contribution, the loan amount (as warranted by the stage of construction) will be disbursed by Bank. The disbursement will be in favour of the builder/seller.
List of documents for disbursement
- Loan Agreements
- Disbursement Requests
- Post-dated cheques
- Personal guarantors documents, as the case may be
- Self Contribution Proof
- NOC from Builder if applicable
Agreement for Sale Top
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 Top
As per the Bombay Stamp Act, 1958, the purchaser must pay a 5% stamp duty on the purchase of any flat. 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.
Stamp Duty for Flats -
- The current stamp duty rates for residential properties in Maharashtra are 7,600/- for the first 5 Lakhs and 5% of the balance Agreement value or Market Value, whichever is higher.
- Under stamp duty for galas etc it is 5% of the Agreement Value or Market Value whichever is higher in Maharashtra.
- For Bungalows, Pent Houses, Duplexes and Row Houses, the assessment value will vary as per the nature of the property.
Stamp Duty for Shops/ Galas/ Office Premises and Garage - 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.
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:
- Conveyance
- Exchange
- Gift
- Partition
- Transfer of lease by way of assignment
- Sale
- Power of attorney given for consideration
- Authorization to the attorney to sell the property
Tax Benefits Top
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.
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