The acquisition of property always follows a great deal of deliberation. It helps to know that you have covered all bases, and there will be no surprises later. First, check the credentials of the builder. An established company with a history of sound construction and above-board policies would be the right place to start. The next step is to ascertain the delivery record of the company. Consider the time taken for completion of the company’s projects. If there are delays, look for a pattern to these delays.
Finally, ascertain whether there are litigations in any court in India against the builder and if there are any criminal cases against any of the directors of the company. Once you are assured of the reputation of the company, it is time to look through the specifics of the project of your choice.
List out the amenities that you require in an apartment. Match these to the specifications of the project at hand. There is a lot more to consider besides the specifications of the apartment itself.
Most quality projects come with a built-in set of amenities like swimming pool, gym and common recreation areas. There may be other amenities that can be added at a cost. Look for features that are taken for granted, like pre-connected telephone, TV and Internet cables, security systems, interior design etc.
Besides the amenities, familiarize yourself with the actual measurements of the project. Understand the ratio between carpet and the built-up area.Balconies are usually included as part of the carpet area. Analyze the plans to understand how much of the carpet area is being taken up by spaces that are unroofed. Also, understand the common areas that are shared between apartments and regulations regarding their use.
Title the property
Obtain a title report by the solicitor of the property and put it through a close inspection. Make sure that there are no encroachments of any kind, or specific reservations by the state government.
If the construction is near a seafront, you may need to check for a Coastal Regulation Zone clearance. This is an environmental regulation body. If the construction is being constructed over or in the vicinity of a heritage building, there may be issues with the Heritage Department. Check for any heritage reservations for the premises.
Inspection of plans and Permissions
Several legal requirements must be met before a construction can get underway. Without the clearances, the construction may come under litigation. Here is a checklist of documents and approvals that are necessary for all building work in
Development Agreement, IOD and CC of the project, Approved building plan, ULC order, Completion/Occupation Certificate Municipal tax dues.
A condominium must be formed as per the provisions of the state government. A Deed of Apartment would be executed in respect of each flat in favor of its purchaser. The bye-laws of the condominium are created for the protection of rights of flat owners. Every flat-owner should abide by them.
Some projects may be reserved for a specific community. Also, certain areas have specific commercial or residential reservations. Make sure you have all the details before you commit to a purchase.
When making the decision of buying your dream house, the one aspect that plays the most dominating role is finance. The important issues that are to be considered include modes of arranging finance and its implication on taxation.
Using your own Funds
If the house is being acquired out of the sales proceeds of an earlier house, the exemption from the long-term capital gain tax on the sale of the earlier house can be claimed. To claim this benefit, the new property should be acquired one year prior to selling or two years after the date on which the transfer of the earlier house takes place.
If the new house could not be acquired within a period of one year from the sale of the earlier house, the sales proceeds should be deposited in a bank or institution, which runs Capital Gain Accounts Scheme approved for this purpose.
Other issues also need to be considered like if the person acquiring a house already holds another house, then every year, one of the two house property would be deemed to be let out of income tax act and the let-out value shall be treated as income. Hence, appropriate tax planning should be considered.
Taking a bank loan
Interest paid on housing loan can be claimed as deduction to the maximum extent of Rs. 1,50,000 per year. Such limit is per person and not for one property. Hence, a loan can be taken in two joint names for one house to claim deduction of Rs. 1.5 lakhs each for both the persons repaying the loan.
Repayment of the principal amount of housing loan is also eligible for the rebate subject to a maximum sum of Rs. 20,000/- per year.
In taking a housing loan, the following issues need to be considered:
1) Bank or financial institution offering loan: It is generally safe to take a loan from one of the leading financial institutions.
2) Rate of Interest: The rate of interest on housing loans depends on the tenure of the loan, fixed/floating rate, credit profile of the borrower etc.
3) Fixed/floating: You can either opt for a fixed or floating rate of interest. The fixed rate is generally 50-75 basis points higher than the floating rate. The floating rate is linked to the PLR of the lending institution.
4) Processing fees: A processing fee is charged by financial institutions for verifying the title report, financial performance, valuation of flat and so on. This fee can be up to 1% of the loan amount. During special periods like property exhibitions, banks and financial institutions offer special interest rates and waivers/concessions in processing fees, so buyers can benefit from such offers.
5) Tenure of the loan: The tenure of the loan should be decided by the buyer after taking into consideration various things like repayment capacity per month, earning potential over the next few years, other financial commitments like weddings, children’s education etc. The expected outflow on property maintenance should also be considered.
6) Other aspects: Consider the percentage of the cost of house that is available as loan etc. Some banks offer up to 95% cost of the house by way of loan. Another important factor is financing for the interior work, furniture etc. Some institutions have started providing a composite loan that extends over the cost of interiors and design.
Different banks require different sets of documents for processing a housing loan. Broadly, following documents are required by the banks:
1) Proof of Income
a. Copies of balance sheet, profit and loss accounts, computation of income and income tax returns for last 3 years
b .Salary certificates and form No. 16 for last three years
c .TDS certificate for last 3 years
d .Bank statements showing credit entries for salary/ professional fees received for past 12 months
e .Professional qualification certificates etc.
2) Title of the flat
a. Copy of the flat sale deed
b. Title report by a solicitor
c. Valuation report
d. NOC from the builder/condominium/society
e. Amenities agreement, if any
3) Other Documents
a. Proof of age – copy of passport, driving license etc.
b .Proof of residence – Copy of ration card, passport, society letter etc.
c. Photographs with signature.
d. Documentation required for guarantor, if any.
A 5% Stamp Duty must be paid as per rule. The purchaser of the flat must pay this duty.
The stamp duty paid document has to be registered under the Indian Registration Act with the sub-registar of Assurances, of that particular area where the property is situated.
Post Ownership Payments
Once you move into the apartment, there would be one time payments towards deposits. Please make sure what these deposits entail. Besides these, there would be monthly payments towards maintenance and municipal taxes.
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