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| Reckoner |
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| A user-friendly
reference page for detailed explanations and
meanings of commonly sought real estate information. |
| |
| Income Tax
Rules |
| An overview
of Income Tax Rules pertaining to properties
is as under: |
SECTION
24 (2): Interest Deductions
- The budget presented by the Finance
Minister for the year 2001-2002, has
increased the ceiling on the amount
of deductions from Rs. 1,00,000/-
up to Rs.1,50,000/- from an individual's
income if it is self-occupied for
the interest paid for a home loan. |
| SECTION
54 F: The income tax act
gives a person who does not own a
residential house a concession to
purchase one when they sell a capital
asset. If you sell a capital asset,
normally, you are required to pay
tax on the gain in the value of the
asset after indexation of the cost.
If however you do not own a residential
house, you can reinvest the net consideration
you received from the sale of the
capital asset in a house property
and not pay any income tax on the
gain from the sale of the capital
asset. There is however a time frame
within which to reinvest the funds
from the gain of the sale of the capital
asset. |
| SECTION
54: Reinvestment of House
Property - An individual or HUF reinvesting
the net proceeds from the sale of
a house in another residential house
is exempted from Capital Gains Tax
u/s 54, provided the new house is
purchased within 2 years after or
one year prior to the date of transaction. |
| SECTION
139 (1): All persons whose
income is below taxable limits in
occupation of immovable property exceeding
800 sq.ft. Residential Property or
125 sq.ft. Commercial Property, are
required to file Form 2(C ) with the
income tax (for Pune city). |
| SECTION
88: Repayment of the principal
of a home loan up to Rs. 20,000/-
is eligible for deduction under Section
88 whereby 20% (i.e. Rs.4,000) can
be deducted from the total amount
of tax payable. |
| Top |
|
| Registration |
| |
| Q |
What
should the parties do if the Registrar
refuses to register the document/s? |
| A |
On
refusal to register the document by
the Registrar, the parties or their
representative/s u/s. 72 & 73
of the Indian Registration Act, 1908
can within 30 days from the date of
order or refusal, institute proceedings
in the Civil Court in whose jurisdiction
the office of the Registrar is situated. |
| Q |
Is
it advisable to register the document/s
at the time of purchase of immovable
property? |
| A |
Yes,
it is always advisable to register
the document/s at the time of purchase
of immovable property. In some cases
it is compulsory to register the document/s.
Even in cases where it is not compulsory
to register the document/s then also
registration of document/s is strongly
recommended because:- |
| |
| 1) |
The
title gets additionally secured |
| 2) |
If
you propose to obtain a loan
in future then at that time
banks or financial institutions
might insist for registration
of documents/s |
| 3) |
Even
if you propose to register the
document/s in future there is
a possibility that the seller
may not co-operate with you. |
| 4) |
The
certified true copy of the document/s
can be obtained from the registering
authorities after completion
of index and at any point of
time and even if you loose the
document/s you can still establish
your bonafide to the property. |
|
| Q |
At
the time of registration should the
area in the agreement be mentioned as
carpet area, built-up area of super
built-up area? |
| A |
The Registering Authorities
insist that the area must be mentioned
as built up area. If the vendor
has mentioned the area as carpet
area then the registering authorities
compel the persons to mention the
area on built-up basis on the rubber
stamp which is affixed by them at
the time of registration of the
information insisted upon by the
registering authorities before registering
the document/s is as under:-
|
| |
a) Number Of Floors
(b) Built-up Area (c) City Survey
No. (for the city of Mumbai) C.S.No.
(for suburbs in Mumbai) (d) Ward
(e) Village & (f) Taluq.
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|
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| Before You
Buy |
| |
| 1. The
Title Report |
| Colloquially
known as the ‘property card’
or in some places ‘saat-bara’,
this is an investigation into the
title of the land over a period of
30 years. It ensures the marketability
of the land in the hands of the original
owner. Ask for the detailed report,
not merely an abbreviated certificate.
This should be prepared for the seller
by his lawyer & should be checked
by your lawyer. If the title is not
clear you can be evicted from the
property at a later date. |
|
| 2. Property
under construction |
| If
you are buying a new house, ask for
an Allotment Letter or Development
Agreement detailing the agreed price,
payment & construction schedule,
house plans, delivery date & builder’s
liability in case of late completion
or problems after possession. Make
sure that the developer has clear
title to the land, & that the
relevant local authorities have approved
the building plans. Once construction
is over, ask for the completion &
occupation certificates, which indicate
that the building has adhered to municipal
requirements. Some other costs you
will incur: society formation charge,
transfer charge, deposit for electricity
meter, charge for registration of
agreement. |
|
| 3. Constructed
property |
Make sure that the
seller has the title & possession
of the property as well as the right
to transfer the property. Check
that the relevant approvals, if
any, have been obtained from the
land development/planning authority
& the Income tax department.
Ensure that there are no tenants
& get a declaration that the
property was purchased from the
seller’s funds & is not
mortgaged. Place a notice in the
newspapers about the proposed purchase.
Get a No Objection Certificate from
the builder or society. Check that
dues such as property tax, society,
water & electricity bills etc.
have been paid in full. Decide who
will pay society transfer charges.
Take possession of all relevant
documents & also the original
allotment letter, completion certificate,
occupation certificate and all other
documents given by the original
builder.
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| Top
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| Valuation |
| |
| It
is an important aspect to arrive at
a bargain while deciding to purchase
an immovable property. Besides making
own assessment from the market, assistance
of Government approved valuers may
also be sought. A comprehensive valuation
report indicating value of each of
major assets and also the basis and
manner of valuation must be obtained
from approved valuer against payment
of his fee. Reputed approved valuers
have set up their offices in all the
important cities in India. In case
of plantation, valuation report may
also be obtained from recognised private
valuers. |
| Top |
|
| |
| Verification
of the Title of the vendor |
| |
| This
is the most important aspect of a
purchase transaction of an immovable
property and may be competently handled
by a reputed lawyer/solicitor/chartered
accountant etc. The verification is
necessary from following two angles: |
| i) |
Validity
of Title: The vendor must have
a clear, valid and marketable
title over the immovable property
which is the subject matter
of transaction. This would require
a close scrutiny of documents
of title produced by the vendor.
The document must be a registered
document. |
| ii) |
Obtaining
of Non-encumbrances certificate. |
|
EXECUTION
OF "AGREEMENT TO SELL":
An "Agreement to Sell" may
be executed once the contract for
purchase of immovable property has
been finalised. Besides that, value
of the property, the "Agreement
to Sell" must provide about the
payment of transfer fees, stamp duty
and registration fee which differs
from state to state and is quite substantial.
This may either be payable by vendor
or the buyer or may be shared equally
by the two as per the agreement. The
final sale would however, be subject
to buyer obtaining permission from
Reserve Bank, where necessary, and
seller obtaining permission of competent
authority under Urban Land (Ceiling
& Regulation) Act, 1976 where
necessary. The 'Agreement to Sell'
does not require compulsory registration
even if it contains recital of the
payment of a part or whole of the
purchase money. |
| Top |
|
| Permissions
under Urban Land (Ceiling & Regulations)
Act, 1976: |
| |
| A
ceiling on holding of urban vacant
land has been imposed under the above
Act. The limit depends upon the category
of urban agglomeration and between
five hundred square meters to two
thousand square meters. The limit
in cities like Delhi, Mumbai, Kolkata
& Chennai is 500 square meters.
Section 26 of Urban Land (Ceiling
& Regulations) Act 1976 requires
a notice to be given to the competent
authority as prescribed under the
Act before transfer of any land within
the ceiling limit by way of sale,
gift, mortgage or lease. The competent
authority may exercise an option to
purchase the land for the Government
and the sale can be effected only
if no such option is exercised within
60 days from the receipt of notice. |
The
central government and many state
governments (Delhi, Karnataka, Haryana,
Punjab, Uttar Pradesh, Gujarat, Chandigarh
and Pondicherry) have repealed the
act. Some states such as Maharashtra
have not yet repealed the act. |
| Top
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| Housing Finance
Page |
| |
What are the types of Home Loans available?
|
There
are a variety of home loans available
in India, offered by various financial
institutions like Banks and Housing
Finance Companies. They are :- |
| 1) |
Home
Purchase Loan |
| 2) |
Obtaining
of Non-encumbrances certificate. |
| 3) |
Home
Construction Loan |
| 4) |
Home
Extension Loans |
| 5) |
Home
Conversion Loans |
| 6) |
Land
Purchase Loans |
| 7) |
Bridge
Loans |
| 8) |
Balance
Transfer Loans |
| 9) |
Refinance
Loans |
| 10) |
Stamp
Duty Loans |
| 11) |
Loans
to NRIs |
|
Home
Purchase Loans: There are
the basic home loans for the purchase
of a new home. |
Home
Improvement Loans: These
loans are given for implementing repair
works and renovations in a home that
has already been purchased by you. |
Home
Construction Loans: These
loans are available for the construction
of a new home. |
Home
Extension Loans: Are given
for expanding or extending an existing
home. For example addition of an extra
room, etc. |
Home
Conversion Loans: Are available
for those who have financed the present
home with a Home Loan and wish to
purchase and move to another home
for which some extra funds are required.
Through a Home Conversion Loan, the
existing loan is transferred to the
new home including the extra amount
required, eliminating the need for
pre-payment of the previous loan. |
Land
Purchase Loans: These loans
are available for purchase of land
for both home construction or investment
purposes. |
Bridge
Loans: Bridge Loans are designed
for people who wish to sell the existing
home and purchase another. The bridge
loan helps finance the new home, until
a buyer is found for the old home. |
Balance
Transfer: Balance Transfer
loans help you to pay off an existing
home loan and avail the option of
a loan with a lower rate of interest. |
Refinance
Loans: These loans help you
pay off the debt you have incurred
from private sources such as relatives
and friends, for the purchase of your
present home. |
Stamp
Duty Loans: These loans are
sanctioned to pay the stamp duty amount
that needs to be paid on the purchase
of property. |
Loans
To NRIs: Are tailored for
the requirements of NRIs wishing to
build or buy a home in India. |
| Top |
|
| |
| EMI |
EMI
is the Equated Monthly Installment
payable till the loan is paid back
in full. It consists of a portion
of the interest as well as the principal. |
| Some
of the Incentives Offered Lending
Institutions |
| a) |
Some
companies sanction the loan
without requiring you to identify
a property as a prerequisite
for eligibility. |
| b) |
Free
accident insurance |
| c) |
Discounts |
| d) |
Waiving
of pre payment penalty |
| e) |
Waiving
of processing fee |
| f) |
Free
property insurance |
|
| Top |
|
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| Handy Tips
On Home Loans |
| |
Rate
of Interest:
|
| Interest
rates are different from institution
to institution and generally range
from about 12.5% to around 16%. The
interest on home loans in India is
usually calculated either on monthly
reducing or yearly reducing balance. |
| Monthly
reducing: |
In
this system the principal on which
you pay interest reduces every month
as you pay your EMI. |
| Annual
reducing: |
In
this system the principal is reduced
at the end of the year, thus you continue
to pay interest on a certain portion
of the principal which you have actually
paid back to the lender. Which means
the EMI for the monthly reducing system
is effectively lesser than the second
system of calculating interest. |
The
best way to select the cheapest Home
Loan is to keep the loan period constant
and calculate the total amount paid
for the home through the different
loan options available. |
What
are the repayment period
options?
|
|
Repayment
period options range generally
from 5 to 15 years. |
| What
is fixed rate of interest? |
Some
institutions have a fixed
rate of interest which means
the rate of interest remains
unchanged for the entire duration
of the loan. This means you
do not benefit, even if rates
of interest drop in the market. |
| What
is floating rate? |
This
is the rate of interest that
fluctuates according to the
market lending rate. This
means you stand the risk of
paying more than you budgeted
for in case the lending rate
goes up. |
|
| Other
costs that usually accompany a Home
Loan: |
| Home
loans are usually accompanied by the
following extra costs: |
| a) |
Processing
Charge: it’s a fee payable
to the lender on applying for
a loan. It is either a fixed
amount not linked to the loan
or may also be a percentage
of the loan amount. The loan
amount received by you cannot
be less than the processing
fee. |
| b) |
Prepayment
Penalties: when a loan is paid
back before the end of the agreed
duration a penalty is charged
by some banks/companies, which
is usually between 1% and 2%
of the amount being pre paid. |
| c) |
Commitment
Fees: some institutions levy a
commitment fee in case the loan
is not availed of within a stipulated
period of time after it is processed
and sanctioned. |
| d) |
Miscellaneous
costs : it is quite possible that
some lenders may levy a documentation
or consultant charges. |
| e) |
Registration
of mortgage deed. |
|
| How
do HFCs decide what amount your loan
should be? |
Usually
most companies give upto a maximum
of 85% of the cost of the house. The
other 15% sometimes called ‘seed
money’ will have to be provided
by a loan applicant. Out of the 85%
the amount the applicant is eligible
for, is decided by the age, income,
no. of dependents, monthly outgoing
and repayment capacity. This varies
from case to case. |
| Securities
required: |
In
most cases the property to be purchased
itself becomes the security and is
mortgaged to the lending institution
till the entire loan is repaid. Some
institutions may ask for additional
security such as life insurance policies,
FD receipts, share or savings certificates. |
| Guarantors: |
Some
institutions ask for 1 or 2 guarantors,
others require no guarantors at all. |
| Top |
|
| |
| Applying for
Loan |
| |
Loans
may be applied for before or after selection
of property. The loan amounts are sanctioned
in principle to let buyers know what amounts
they can avail of. This helps them decide
their budgets and purchasing power. Actual
disbursements are made after satisfactory
verification of all necessary documents
and completion of specific procedures. |
| Time
required for loan application approval: |
| About 0-15
days. |
| Time required
for disbursement: |
On
an average, loans are disbursed within
3-15 days after satisfactory and complete
documentation and completion of all
relevant procedures, including proof
that 15% of the cost has been paid
up front to the seller of the property. |
| Joint
applications: |
Most
institutions are willing to consider
the joint incomes of the applicants
for deciding the loan amounts. Some
institutions do not require the co-applicants
to be co-owners of the property to
be purchased. |
| Top |
|
| |
| Documents
Required at the time of Application |
| |
| 1. |
Latest
salary slip (proof of income for salaried
individuals) |
| 2. |
Photographs |
| 3. |
Proof of
age |
| 4. |
Identity
papers |
| 5. |
Proof of
residence |
| 6. |
Bank statements
for the previous six months |
| 7. |
For
self employed, certified copies of
balance sheet, profit and loss statement
and tax challans for the previous
3 years |
| 8. |
For
partnership/private limited companies,
the Articles of Association, partnership
deed and details about the firm |
| Before
actual disbursement |
| Before
disbursement all documents pertaining
to the property, including the agreement
for sale is required to be handed
over to the lending institution. |
| Tax
benefit information |
| Both
principal as well as interest attract
tax benefits. Section 88 of the Income
Tax Act allows a 20% rebate on the
principal repaid, subject to a principal
ceiling of Rs. 10,000 per annum. For
loans availed after April 1, 1999
a deduction on interest paid with
a ceiling of Rs. 75,000 is allowed.
For loans availed before April 1999,
a deduction on interest paid with
a ceiling of Rs. 30,000 is allowed. |
Home
loans taken to repay existing home
loans are not eligible for tax benefit. |
| Top |
|
| |
| Procedure
for Transfer of flats in co-operative societies. |
| |
| Definitions: |
| 1. |
Housing
Society means a society
the object of which is to provide
its members with open plots
for housing, dwelling houses
or flats or if open Plots, the
dwelling houses or flats are
already acquired, to provide
it’s members common amenities
and services |
| 2. |
Member
means a person joining in an
application for the registration
of a co-operative Society which
is subsequently registered or
a person duly admitted to membership
of a Society after registration
and includes a nominal, associate
or sympathiser member. |
| 3. |
Associate
member means a member
who jointly holds a share of a
society with others, but whose
name does not stand first in the
Share Certificate. |
| 4. |
Nominal
member means a member
admitted to membership as such
after registration in accordance
with the bye-laws. It is noted
that a nominal member is treated
as a member of the co-operative
society as held in K.K.ADHIKAR
vs. T.G.KULKARNI and others 1980
C.T.J. 241. |
| 5. |
Society
means a co-operative society registered,
or deemed to be registered, under
this Act. It is to be noted that
a proposed society cannot be covered
under the definition as held in
CNJ 196 (Bom.) 1984 in the case
of Beed Dist. Central Co-op and
M.P. and D. Federation vs. State
of Maharashtra. |
| Top |
|
|
| |
| Formalities
to comply |
| |
| 1. |
A
member, desiring to transfer his shares
and interest in the capital/property
of the society, shall give 15 days
notice of his intention to do so to
the Secretary of the Society in the
prescribed form, along with the consent
of the proposed transferee in the
prescribed form. |
| 2. |
On
receipt of such notice, the Secretary
of the Society shall place the same
before the meeting of the Committee,
held next after the receipt of the
notice, pointing out whether the member
is prima-facie eligible to transfer
his shares and interest in the capital/property
of the society, in view of the Provisions
of Section 29(2)(1) of the Act. |
| 3. |
In event
of ineligibility of the member to transfer
his shares and interest in the capital/property
of the Society, the Committee shall
direct the Secretary of the Society
to inform the member accordingly within
3 days of the decision of the committee. |
| 4. |
If the Committee
is satisfied that the member is prima
facie eligible to transfer his/her shares
and interest in the capital/property
of the society, the Committee shall
direct the Secretary of the Society
to inform the member within 3 days of
the decision of the Committee to make
the compliance as under: |
| |
| i) |
To
submit an application for transfer
of his/her shares and interest
in the capital/property of the
society, in the prescribed form,
along with the Share Certificate
|
| ii) |
To
submit an application for membership
of the proposed transferee in
the prescribed form |
| iii) |
To
give valid reasons for the proposed
transfer |
| iv) |
To
discharge all the liabilities
of the society |
| v) |
To
pay the transfer fee of Rs. 50/-
|
| vi) |
To
remit entrance fee of Rs. 10/-
payable by the proposed transferee |
| vii) |
To
pay the amount of premium at
a rate to be fixed by the general
body meeting not exceeding 2.5
percent of the difference between
the book value of the flat and
the price realised by the transfer,
on transfer of his flat, or
Rs. 25,000/- (Rupees Twenty-five
Thousand Only) whichever is
less. No additional amount by
way of donation, etc. will be
taken unless it is paid voluntarily
by the member. |
| viii) |
To
submit No Objection Certificate
required under any law for the
time being in force or order
or sanction issued by the Government,
any financing agency or any
authority |
| ix) |
To
furnish the undertaking/declaration
in compliance with the provisions
of any law for the time being
in force, in such form as is
prescribed under these bye-laws. |
Note:
The condition at Sr. No. (vii)
above shall not apply to transfer
of Shares and interest of the
transferor in the capital/property
of the Society to the member
of his family or to his nominee
or his/her legal representative. |
| a) |
The
procedure for disposal of application
for transfer of shares and/or
interest of members in the capital/property
of the Society as laid down
under the model bye-laws No.
67 shall be followed by the
Secretary and the Committee
of the Society. |
| b) |
The
managing committee or the General
Body, as the case may be shall
not refuse any application for
admission to membership or transfer
of shares and interest in the
capital/property of the society
except on the ground of non-compliance
of the provisions of the Act,
the Rules and the bye-laws of
the society or any other law
or order issued by the Government
in exercise of the statutory
powers vested in it. |
| c) |
If
the decision of the Committee/General
body meeting as the case may
be, on the application for the
transfer of shares and/or interest
in the capital/property of the
society is not communicated
to the applicant within 3 months
of its receipt, the transfer
application shall be deemed
to have been accepted and the
transferee shall be deemed to
have been admitted as a member
of the society as provided under
Section 22(2) of the Act. |
| d) |
Any
transfer made in contravention
of the Act, Rules or the bye-laws
will be void and will not be
effective against the society. |
The
transferee shall be eligible
to exercise the rights of membership
on receipt of the letter in
the prescribed form from the
society. |
|
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|
| |
| Minding The
Tenants You Keep |
| |
| Property
owners often worry that tenants will
be like the camel that asked the Arab
for shelter only to nudge him out
of his tent by morning.
With various state rent control laws
yet to be amended in order to be more
equitable for property owners, an
extra dose of caution is called for
before handing over the keys. In the
light of innumerable instances of
tenants' sub-letting premises, using
the pugree system or going to court
to take advantage of long-winded litigation
procedures, here are some pointers
to make sure that rent income does
not insidiously change to cost. Here,
the rules of the game partially depend
on who the other side is - a company
lessor or individual tenant. |
Vet
the company. No point leasing to a
company that is broke. Big names do
not automatically imply a model tenant.
Sniff around for a good track record
of timely payments. |
Draw
up a daunting contract. Wherever possible,
set the security deposit at a third
of the flat's cost and collect six
months rent in advance. Include a
clause, which quadruples rent if the
company does not vacate once the contract
ends. |
The
company's nominee occupant should
be named. If the employee quits during
the lease period, the flat should
revert promptly to the owner. |
Push for a copy of
the occupant's employment contract,
which specifies the contract period.
|
The Company must give
a corporate guarantee from its head
office ensuring that the flat is
handed over at the end of the lease.
In case, the guarantee is not available
take a letter of comfort from the
concerned branch office, which will
act as proof that the company has
rented the house.
|
Sound legalese in
drawing up the contract is a must.
|
Specify
that subletting is prohibited irrespective
of whether it is a company or individual
lease. |
While
big corporates may prefer a three-five
year lease, residence owners usually
prefer the relative safety of a leave-and-license
agreement, which ensures periodic
renewal of the terms. The eleven-month
agreement is usually popular as these
pre-empt the rent control laws, which
apply after 12 months. Rent control
laws, as said earlier, weigh in favor
of tenants. |
| Specify
the notice period for either side. |
Property,
where rent is over Rs. 3,500 is subject
to the Transfer of Property Act (TPA)
and not the rent control laws of the
various states and metros. The TPA
comes under the civil court while
| | | | | | |
