Buyers Guide

What are the types of housing loans available?

Various varieties of housing loans are offered by different financial institutions. Prominent among these are:

• Home Loans
  This is the basic housing loan for the purchase of a new home, which covers the cost of the flat, deposits and charges, stamp duty and registration charges.
• Home Improvement / Extension Loans
  These are for the purpose of undertaking repair works and renovations in a home that is already owned by you.
• Bridge Loans
  Bridge loans are for people who wish to sell their existing house and purchase another one and need finance for the new house until a buyer is found for the old one.
• Balance Transfer
  A balance transfer indicates the paying off of an existing housing loan and availing of a loan with a lower rate of interest.
  
• Refinance Loans
  Refinance loans are taken to pay off the debt incurred from private sources such as relatives and friends, for the purchase of your present house.
  
• Loans To NRIs
  These loans are designed as per the requirements of NRIs who want to buy a house in India.

Who can apply for a housing loan?

Any Indian citizen, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.

Can a Non Resident Indian avail of housing loans?

Yes, depending upon the eligibility criteria and policy of the bank

How much can a person borrow?

Loans are generally disbursed between 70%-80% of the cost of the flat. The balance money is to be funded by the flat purchaser from his own contribution. The percentage of loan would vary from bank to bank.

How does Vibrant Group assist a flat purchaser in procuring Housing Finance?

All projects at Vibrant Group are preapproved for the grant of home loans by leading housing finance companies and banks. The Vibrant Group sales team liaises with the all leading Housing Finance Institutions for project approvals, processing the loan, documentation and disbursement of loans.

What is an EMI?

Equated Monthly Installment ("EMI") is the amount comprising a portion of the interest and the principal loan amount, which is payable by a borrower to the lender every month.

How is the rate of interest calculated in India?

Interest rates vary from time to time and from institution to institution. The interest is calculated either on a daily or monthly reducing or yearly reducing balances.

What is a floating-rate housing loan?

A floating interest rate loan is a loan where the interest rate payable is linked to the bank’s internal prime lending rate (PLR) such as the base rate which rises and falls as per banks policy.

What are the repayment period options?

Repayment period options range generally from 5 to 20 years. Some of the banks may give loans up to 25 years also.

What are the charges for availing a housing loan?

• Processing Fees are payable to the lender on applying for a loan and can either be a fixed amount not linked to the loan or may also be a percentage of the loan amount.
• Prepayment Penalty between 1% and 2% of the amount being prepaid is charged by some institutions when a loan is paid back before the end of the agreed duration. Many banks now don’t levy penalty on partial prepayment.
• Franking Charges as per prevailing rate of Government Authority.

What security is required for a housing loan?

The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

Do lending companies require a guarantor?

Yes. Many lending companies require 1 guarantor or a co-applican

What is the time required for approval of a loan application?

Varies from bank to bank but usually it is 15 - 20 days for a salaried person and 20 - 30 days for a self employed person depending on the applicant’s documents.

What is the time required for disbursement of loan?

Usually loans are disbursed within 10 - 15 days after completion of verification by the institution, documentation (original agreement for sale / lodging receipt) and completion of all relevant procedures. Submission of proof that the borrower’s own contribution has been paid by him to the vendor / builder / developer is also an important aspect.

Do institutions accept joint loan applications?

Yes, but this policy varies from bank to bank.

What are the documents required at the time of applying for a housing loan?

The standard list of documents required of all loan applicants is as follows:

• Photographs
• Proof of age
• Proof of age
• Proof of residence


• For salaried individuals:
• Latest salary slip
• Last 2 years form 16 or equivalent
• Bank statements reflecting salary credits for the previous six months


• For self-employed individuals:
• Certified copies of balance sheet
• Profit and loss statement
• Tax challans / tax returns for the previous 3 years


• For partnership/private limited companies:
• The Articles of Association
• Partnership deed and details about the firm


• For NRIs
• Latest salary certificate specifying, name (as it appears in the passport)
• Date of joining
• Passport number
• Designation Perquisites and salary
• Photocopy of labour card/identity card
• Photocopy of valid resident visa stamped on the passport
• Photocopy of monthly statement of local bank account
• Property related documents

What are the tax benefits that are available to a home loan applicant?

Deduction of interest on housing loan:

In the case of self-occupied property acquired or constructed out of borrowed funds, the deduction available for interest on capital borrowed is Rs. 1,50,000/-. In case of a rented property, the whole of the interest amount is allowed as deduction. The interest on borrowed funds in pre-construction period is allowed over a 5-year period commencing from the previous year in which the house is acquired or constructed. Limit of repayment of housing loan (principal):

The limit of repayment of housing loan qualifying for deduction u/s 80C is Rs. 1,00,000/- (including Stamp Duty, Registration Fee incurred for the purpose of transfer of such residential house property).

Is there any relief from tax arising on transfer of long-term capital assets under the Income Tax Act, 1961?

Long term capital gains on sale of property used for residence:

Section 54 of the Income Tax Act provides relief to an individual or Hindu Undivided Family from capital gains arising from transfer of a residential house held by the assessee at least for a period of 36 months. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54. If the amount of capital gains is proposed to be utilised, but is not so utilised up to the due date for filing of return then, the amount of unutilised capital gain is required to be deposited in the “Capital Gains Account Scheme, 1988”.
Capital gains on transfer of capital assets other than a residential house:

Section 54F of the Income Tax Act exempts long term capital gains arising from transfer of any long term capital asset other than a residential house. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54F. To be entitled to this exemption the assessee should not own more than one residential house other than the house sold as on the date of transfer. The provisions of depositing the unutilised capital gain in the “Capital Gains Account Scheme, 1988” as explained above is also applicable.
Capital gains not to be charged on investment in specified assets:

Section 54EC of the Income Tax Act provides relief from capital gains arising from transfer of any capital asset on or after 1st April 2000 shall be exempt to the extent such capital gain is invested within a period of 6 months after the date of such transfer in the long term specified asset provided such specified asset is not transferred or converted into money within a period of 3 years from the date of its acquisition. However, the investment made on or after 1st April 2007 in the long term specified asset by assessee during any financial year cannot exceed Rs. 50 lakh. For claiming this exemption, the capital gains have to be invested (investment not to exceed Rs. 50 lakh) within 6 months of the date of transfer in notified bonds issued by:

What are the tax benefits that are available to a home loan applicant?

Deduction of interest on housing loan:

In the case of self-occupied property acquired or constructed out of borrowed funds, the deduction available for interest on capital borrowed is Rs. 1,50,000/-. In case of a rented property, the whole of the interest amount is allowed as deduction. The interest on borrowed funds in pre-construction period is allowed over a 5-year period commencing from the previous year in which the house is acquired or constructed.

Limit of repayment of housing loan (principal):

The limit of repayment of housing loan qualifying for deduction u/s 80C is Rs. 1,00,000/- (including Stamp Duty, Registration Fee incurred for the purpose of transfer of such residential house property).

Is there any relief from tax arising on transfer of long-term capital assets under the Income Tax Act, 1961?

Long term capital gains on sale of property used for residence:

Section 54 of the Income Tax Act provides relief to an individual or Hindu Undivided Family from capital gains arising from transfer of a residential house held by the assessee at least for a period of 36 months. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54. If the amount of capital gains is proposed to be utilised, but is not so utilised up to the due date for filing of return then, the amount of unutilised capital gain is required to be deposited in the “Capital Gains Account Scheme, 1988”.

Capital gains on transfer of capital assets other than a residential house:

Section 54F of the Income Tax Act exempts long term capital gains arising from transfer of any long term capital asset other than a residential house. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54F. To be entitled to this exemption the assessee should not own more than one residential house other than the house sold as on the date of transfer. The provisions of depositing the unutilised capital gain in the “Capital Gains Account Scheme, 1988” as explained above is also applicable. Capital gains not to be charged on investment in specified assets:

Section 54EC of the Income Tax Act provides relief from capital gains arising from transfer of any capital asset on or after 1st April 2000 shall be exempt to the extent such capital gain is invested within a period of 6 months after the date of such transfer in the long term specified asset provided such specified asset is not transferred or converted into money within a period of 3 years from the date of its acquisition. However, the investment made on or after 1st April 2007 in the long term specified asset by assessee during any financial year cannot exceed Rs. 50 lakh. For claiming this exemption, the capital gains have to be invested (investment not to exceed Rs. 50 lakh) within 6 months of the date of transfer in notified bonds issued by:

a) National Highways Authority of India (NHAI)
b) Rural Electrification Corporation Ltd. (REC)

The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

What is the extent of application of the Bombay Stamp Act, 1958?

The Act applies to the whole of the State of Maharashtra.

What is an “instrument” under the Act?

An “instrument” includes every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include a Bill of Exchange, cheque, Promissory Note, Bill of Lading, Letter of Credit, Policy of Insurance, Transfer of Share, debenture, proxy and receipt.

What is market value?

Market value in relation to any property which is the subject matter of an instrument means the price which such property would have fetched if sold in the open market on the date of execution of such instrument or the consideration mentioned in the instrument, whichever is higher. The price which such property would have fetched, if sold in the open market, is determined on the basis of the Ready Reckoner issued each year. Depreciation in stamp duty is available for old buildings and building without lift.

When is stamp duty payable on an instrument in Maharashtra?

All instruments are liable to be stamped before or at the time of execution of instrument or immediately thereafter on the next working day following the date of execution, when executed in the State of Maharashtra. Any instrument executed outside the state is liable to duty only on receipt of such instrument in the state, provided it relates to a property situated in the state, or a matter or thing to be done in the state. Stamp duty is not levied on a transaction, but on an instrument.

What is the rate at which stamp duty is payable?

Stamp duty is payable at the rate mentioned in the Bombay Stamp Act, 1958 and as amended from time to time.

Which documents are required to be compulsorily registered?

Documents listed in Section 17 of the Indian Registration Act, 1908 are to be registered compulsorily. Registration of documents listed in Section 18 of the Indian Registration Act, 1908 is optional. An agreement for leave and licence is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.

What are Statutory Payments?

Please click on the links below to view Statutory Payments :
Notice of Motion No. 100 of 2011 in Writ Petition No. 1456 of 2010 (Service Tax) Interim order of the Honourable Bombay High Court on Service Tax
MVAT is applicable on all residential apartments sold after 1st April, 2010 at the rate of 1% of the Market Value of the property or Agreement Value, whichever is higher.
Service tax for Bundled Services (construction service + preference location) provided @ 3.09% of Agreement Value (conditions apply).
Service tax on Society Charges @ 12.36% (conditions apply).

Signing a title report (received from the solicitor of the property) with any fine print and specific government reservations is unadvisable. Accept clearance reports that are lucid and specific. For instance, if you are interested in buying property that has been built over reclaimed land, make sure that building has been given clearance by the government. Precautionary measures will prevent you from getting embroiled in any future disputes. They will also help ensure that your home loans aren’t scrutinized.

When buying property from a developer, you are entitled to question the company for their permissions and approvals for the property in question. A builder must have a ULC Order (though not always), IOD and CC for the project and the MCGM approved plans in order to begin construction.

At Vibrant Group, we offer you three options for making the payments towards your investment.

Installment Scheme (Customer Financed):

Under this scheme, the customer initially pays a small percentage of the total price of the home, and then makes the balance payments as the construction progresses. E.g. a customer pays 20% as down payment when he books the flat and then pays 10% when the first floor is constructed, 10% when the 3rd floor is constructed and so on. The payments made by the customer are linked to the progress of the building and thereby all the payments are financed by the customers themselves.

Installment Scheme (Bank Financed):

In this scheme, the customer opts for a home loan at the time of booking and the bank makes all the payments on his behalf. The payments are linked to the progress of the building just like the previous scheme as per slap or as decided by the builder or as per project. The customer has to pay simple interest on the amount he has taken for the no of days he has used till the total amount of sanctioned is given to the builder & then the repayment to the bank starts over a longer period of time e.g. 20 years.

Installment Scheme (Bank Financed):

Advance Disbursement Facility (ADF) Scheme (Bank Financed):

Under this scheme, the bank, on the customer’s instructions, pays Vibrant Group the entire value of the apartment, upfront, when the customer makes the booking. In effect, Vibrant Group discounts all the future payments due from the customer at an interest rate that is higher than the rate of interest of the home loan. Therefore, the customer ends up getting a discount on total price of the home. Consider an example of customer booking a flat of 1000 square feet area at the rate of Rs.2700 per square foot. If he is paying entire money upfront while booking, then he gets Rs.250 as ADF discount and his costing will be Rs.2450 per square foot. So instead of Rs. 27,00,000 which is the cost of the flat, the flat cost in the ADF scheme will be Rs. 24,50,000, a saving of Rs. 2,50,000. This facility is made available by banks only to reputed builders, Vibrant Group being one of them.

Practically every developer has to form a Co-operative Society at one point of time or another. With the limited amount of options available with regard to management of the affairs of the building i.e. (a) condominium (b) Private Limited Company and (c) Co-operative Society, (excluding the unrealistic rental housing), it willnot be an exaggeration to state that in at least 90% cases particularly in Mumbai, the Promoters and / or the Builders have formed a Co-operative Society. The basic requirements for Registration of Co-operative Housing Society normally is not known to the flat purchasers. It is here that apart from the statutory obligations cast upon the builder, the builder as a friend, philosopher and guide of promoters helps in forming a Co-operative Society.

What are the different types of Housing Cooperative Societies?

There are basically four types of Co-oeprative Societies connected with the housing.
(a) Open Plot Societies
(b) Flat Owners Societies
(c) Tenant Societies
(d) Housing Board Societies. In Open Plot Societies, members purchase or take on lease a plot of land and themselves construct the building. Due to bureaucratic formalities and lack of specialized knowledge, a few societies are formed under the head of Open Plot Societies. When a builder constructs flats and sells them to Flat Owners, the Society when formed is called Flat Owners Society. When Landlord forms a Society of tenants, it is called Tenants Society. When a Society is formed by Allotters of flats and building is constructed by the Housing Board Authorities, i.e. Mumbai Housing and Development Board, then the Society so formed is of the type of Housing Board Society. The procedure that should be followed for formation of societies of the above said types is different for different types of Societies. Members who wish to form Co-operative Housing Societies are generally ignorant of the procedural aspects and as a result of the same they have to run from place to place and get entangled in bureaucratic delays.

What is the procedure for Registration of a Society?

The procedure for Registration of a Society begins with electing a Chief Promoter in a meeting of the Promoters. The builder under the Flat Owners type of Co-operative society has the first right to act as the chief promoter. The developer / flat purchasers should call for a meeting of the Promoters by issuing the notice under Agenda of the meeting giving at least 14 days notice tothe Promoters. In this meeting, a Chief Promoter is elected who can exercise such powers and carry out such functions as are mentioned in the minutes of the Promoters of the proposed Co-operative Society. After electing the Chief Promoter, the proposed name of the society has to be decided by the Promoters. Normally, the same reservation proposal should be accompanied with the signature of at least 10 Promoters who have attended the meeting. It is a common belief that the Society should consist of at least 10 members. If the number is less than 10 then special permission from Government has to be taken. In such cases, the garages / car parking may be allotted to other relatives of the promoter to reach number of 10. it would be of interest to note that the model bylaws define flat as a “Flat means a separate set and self-contained set of premises used or intended to be used for residence, or office or show-room, or shop, or godown and includes a garage, or dispensary, or consulting room, or clinic, or flour mill, the premises forming part of a building and includes an apartment”. On allotment of name and permission to open a bank account by the Registrar, the Chief Promoter has to collect Share Capital, Entrance Fees from promoters and deposit the same in the branch of the bank permitted by the Registrar. It should be noted that the amount cannot be withdrawn from the Bank till the Society is Registered or its Registration is refused, except with prior written permission of the Registrar. The Chief Promoter should submit Registration Proposal to the Registering Authority within a period of 3 months from the date of issue of Letter of Reservation in the name of the proposed society.

What are the documents required for Registration of a Society?

• The documents that are normally to be submitted to the Registering Authorities are as under :
• Application for registration of Society in Form A along with Statement A. Enclosure to application for Registration as per Rule 4(1) of Maharashtra Co-operative Societies Rules, 1961.
• Information about proposed society in Statement ‘B’ (vide Govt. Circular dated 2-5-1980)
• Information about promoter members of the proposed society in Statement ‘C’ (vide Govt. Circular dt. 2-5-1980).
• A Statement of Accounts as per Form D.
• Model Bye-Laws.
• Bank Balance Certificate.
• R.B.I./Treasury Challan for paymentt of Registration Fee of Rs. 500/-
• Title Clearance Certificate from an Advocate.
• A true copy ofthe approved Building Plan.
• Letter of Authority granting permission to commence construction work / Completion Certificate (if applicable).
• Affidavit on Rs. 20/- Stamp Paper from at least 10 promoter members to the effect that they are residing in the area of operation of the Society (Proposed), made before a Competent Authority.
• Affidavit from the Chief Promoter on Stamp Paper of Rs. 20/- executed before the Competent Authority in Form ‘Y’.
• Certified True Copy of Agreement made on Stamp Paper and Registered between the builder, promoter and purchasers of flat.
• Where the promoter members are firms/companies, a letter of authority from such firms / companies authorizing the promoter to sign on behalf of firm / company.
• In case of such proposed societies, names of 60% of the flat holders of the total number of flats constructed or proposed to be constructed as per the plan approved, must be included in Statement ‘A’ to be attached to the Registration Proposal.

What happens after submission of documents?

It is the duty of the Registrar to register the society and on registration of the society, it becomes a seperate legal entity. Thereafter, the management of the affairs of the society is carried out by the managing committee which is elected by the general body meeting of the society. It may be of interest to note that in a co-operative society, the principle is one member one vote. In a co-operative society, the right to be exercised in the general body meeting is a personal right. This is one of the reasons why even a person holding a power of attorney cannot attend the general body meeting of the society. The quantum of the capital being introduced by the member is not of much importance. Preference should be given for formation of a private limited company if one member proposes to acquire majority of the flats.

Documents to be verified before Purchase of a Flat?

The documents that are normally to be submitted to the Registering Authorities are as under : Before you purchase a flat, you have to have a title and document search conducted by a competent advocate. You cannot do it yourself. You have to use the services of a competent advocate. It is a professional job to be done with professional assistance.

What is the difference between Built up Area, Super Built up Area and Carpet Area?

Carpet Area : This is the area of the Apartment / Building which does not include the area of the walls. Built up Area : This includes the area of the walls also.
Super Built up Area : This includes the Built up Area along with the area under common spaces such as the Lobby, Lifts, Stairs etc. This term is therefore only applicable in the case of multi-dwelling units.

If you want to purchase a property, you have to look at the approved layout plan, approved building plan, ownership documents, carryout search, etc. Contact an advocate before you purchase a property so that he can advise you.

Who is liable to pay Stamp Duty to the Buyer or the Seller?

The liability of paying Stamp Duty is that of the buyer unless there is an agreement to the contrary. Section 30, of the Bombay Stamp Act, 1958 states the liability for payment of Stamp Duty.

The Stamps are required to be purchsed in whose name?

The Stamps are required to be purchased in the name of any one of the executors to the instrument.

What is meant by the market value of the property and whether Stamp Duty is payable on the market value of the property or on consideration as stated in the agreement?

Market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.

Which are the instruments that attract payment of Stamp Duty on?

The instruments like Agreement to sell, Conveyance Deed, Exchange of Property, Gift Deed, Partition Deed, Power of Attorney, Settlement and Deed and Transfer of Lease attract Stamp Duty on market value of the property.

Who is the appropriate authority for knowing the market value of the property?

The Sub-Registrar of the area in whose jurisdiction the property is located is the appropriate authority for knowing the market value of the property.

Is a POA Revocable?

Purchasing a flat on a POA basis is not permitted under the law of the land.

What exactly do we mean by a Free Hold Flat? What are the advantages and disadvantages, if any?

A freehold property (plot or a flat) is one where there is a whole and sole owner(s) ownership is full and unconditional (within the provisions of the laws of the land) and there is not lessor / lessee involved.

How to convert a POA flat into a Free Hold one?

POA cannot be converted into anything. Leasehold properties of DDA in Delhi can be converted to freehold, as per provisions

How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party?

Regarding authenticity of documents, again you have to take the help of an advocate to verify.

Do we have any agency in Delhi which can provide a comprehensive service under one roof for hassle free purchase of society flats for its customers?

Comprehensive services in the real estate sector are provided by several brokers in various cities of India. In the directory of services onour portal www.indiaproperties.com you can find a list of them and you can contact them directly.

A flat in a Co-op. Hsg. Society is to be gifted. What are the legal formalities? What about Stamp Duty?

Gift of an immovable property is considered as a ‘transfer’ under the provisions of the TOP Act and you have to have the transaction registered through a Gift Deed and pay Stamp Duty as per provisions of the relevant Stamp Act depending in which state the property is situated.

Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genuinity of the builder?

When you are buying a flat from a builder in a building under construction, you have to check the following : Approved Plan of the Building along with the number of floors. Ensure that the Floor what you are buying is approved. Check if the land on which the Builder is building is his or he has undertaken an agreement with a landlord, if so, check the title of the land ownership with the help of an advocate. Check the Building byelaws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height etc. Check Specifications given in the Agreement to sell off the Sale Brochure. Is he providing the same actually on the ground or not? Check the Reputation of the Builder. Ensure that Urban Land Ceiling NOC (if applicable) has been obtained or not. NOC from Water and Electricity Authorities also have to be obtained. NOC from lift authorities.