BUYERS GUIDE :

Here is an overview of topics for you.We’ve tried to cover most of your queries; your bank officer is your best guide for any doubts that remain.

Documentation:

This section gives you an overview of the paperwork it takes to purchase an apartment.

1. What are the documents that should be verified before buying a residential / commercial unit?

• Ownership Documents of the Land Owner/Promoter including title certificate .
• Development Agreement, if the Developer/Promoter is not the owner and has acquired the development rights.
• Intimation of Disapproval (IOD)/Development Permission/ Commencement Certificate and the building plan/s approved by the competent authority.
• Commencement Certificate.
• Other permissions issued by the competent authority depending on the nature of plot/type of development.
• If the construction is completed then the Occupancy Certificate issued by the competent authority.
• Draft of Agreement for Sale and brochure for specifications, layout and amenities in the flat/complex/layout.

2. What documents are required to be executed if the intended purchaser wishes to proceed for purchase of premises?

• The Developer/Promoter shall execute an Agreement for Sale as per the provisions of the Real Estate (Regulation & Development) Act, 2016

The procedure involved is three-fold:

Firstly, the payment of adequate stamp duty on the Agreement for Sale Secondly, Execution of the Agreement for Sale by the Developer/Promoter and the Purchaser/Allottee(s) and; Thirdly, Registration of Agreement for Sale.

STAMPDUTY

• Unless there is an agreement, the stamp duty shall be borne and paid by the purchaser as per Section 30 of the Maharashtra Stamp Act, 2013. The stamp duty to be paid on the Agreement for Sale shall be equivalent to 5% on the market value of the unit. The mode of payment of stamp duty is E-Payment through GRAS (Govt. Receipt Accounting System).

REGISTRATION

• The duly stamped and executed Agreement for Sale should be presented at the office of the concerned Sub-Registrar of Assurances for registration within 4 (four) months from the date of execution of Agreement for Sale. Registration of the Agreement for Sale is compulsory as per Section 17 of Indian Registration Act, 1908.

GENRAL DOCUMENTS:

• Proof of Income: a) Salaried Applicant minimum 4 months’ salary slip along with 2 years form 16. b) Self Employed, Professionals 3 years ITR with Profit and Loss, Balance Sheet and all the Annexures(if any)
• Business profile with details on the nature of business, list of clients, suppliers, staff strength, geographical spread, etc.
• Age proof: PAN card, Voters ID, Passport, or License
• Copy of ration card or company ID card
• Updated bank passbook or a copy of the statement of accounts for the last 6 months for salaried and 1 Year for Self Employed/Professionals.
• Copy of educational qualifications certificate/s and proof of business existence like Shop Act Registration copy, GST/TAN registration
• Cheque for processing fees, Certificate in original from employer for any other allowances which are not reflected in salary slip
• Passport size photographs of applicant and co-applicant
• 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.

HOMELOAN:

Many factors such as your income, age, number of dependants, qualifications, assets and liabilities, income stability / continuity of your employment / business, etc. are considered when assessing your repayment capacity. Points to note: You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 70 years of age. You must be employed or self-employed/professional with a regular source of income.

However, there are ways by which you can enhance your eligibility: If your spouse/husband 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. Rental Income can also consider to increase the eligibility. While there is no need for a guarantor, having one might enhance your credibility. 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. Registration charges, transfer charges and stamp duty costs will be included in the total cost.

Do remember that banks are not very willing to finance properties that are considerably old and / or in poor condition.

What is my Home Loan Eligibility?

A lender needs ‘proof’ to believe that you can make repayments on your loan. For this, he/she/they will take a thorough look, not just at your income statements, but also your assets and liabilities, your credit history to see how you handle repayments on credit cards and other existing loans, your education and work experience to see how qualified you are to meet your professional and financial goals, and whether you can really afford a large debt burden like a home loan.

The standard method banks use to assess your home loan eligibility is the application of FOIR (Fixed Obligation to Income Ratio) of a borrower. This is an important calculation for the bank for this is the way to understand what your other obligations are as a borrower. To calculate the FOIR the lender takes into consideration all the other monthly instalments a borrower is paying, including the home loan that he has applied for. The statutory deductions from your salary like provident fund, insurance premium payments are not taken into consideration in this calculation.

Consider an example:

• Income of a prospective borrower is Rs 50,000 per month and he pays a car loan EMI of Rs 8000 per month
• He has just bought a gadget and pays an EMI of Rs 2000 per month for the same, his proposed housing loan instalment is Rs 15000 per month
• When all his loan instalments are divided by his monthly income, the FOIR is 50%, or Rs 25,000/-
• Few Housing finance ltd considers FOIR up to 70% of monthly income (Eg.LICHFL)
• Most lenders restrict the FOIR limit to a maximum of 50% of one’s monthly income. In other words, it means that if one needs around 50% of his income to meet his personal expenses, the other half is committed towards fulfilling his fixed obligations including the home loan.

Pros and Cons of Floating rate Home Loan

The benefits of opting for a floating rate of interest:

The one clear benefit that a floating interest on a home loan has been that it is cheaper than a fixed rate by at least 2 to 2.5%. Even if there were to be a case where a floating rate exceeds a fixed rate of interest it will only be for some period of your entire loan tenure as interest rates a cyclical in nature. Needless to say, floating interest rates bring in a lot of savings for the borrower when the interest rates soften in the market. Interest rates would reduce in future automatically if Bank reduces the ROI on loans in future.

The drawbacks of opting for a floating rate of interest

The drawback of such rates is the impact they have on your monthly outgo as EMI. Given the uneven nature of floating rates, either your EMI may shoot up one fine month throwing your monthly budget out of gear or you may end up repaying substantially higher due to an increase in your loan tenure (EMI remains same). However, if you think that this aspect does not bother you, going in for a floating interest rate does indeed make sense

Pros and Cons of Fixed rate Home Loan

Benefits of opting for a fixed interest rate:

Your EMI remains the same irrespective of the conditions prevailing in the market. It is a great option for those who are good at budgeting and do not want their monthly outgo to go haywire because of market conditions.

Gives the borrower a sense of security and peace of mind.

Drawbacks of opting for a fixed interest rate:

The major disadvantage of a fixed rate of interest is that it is at least 1-2.5% higher than a floating rate of interest. The other disadvantage of such a loan is that if the interest rates decrease significantly, a borrower who has opted for a fixed rate of interest does not get any advantage. As a borrower, you must also cross check with your bank whether you are allowed to fix your interest rate for the entire loan tenure or only for a few years. If you perceive that the interest rate cycle will be on the rise for the next few years, it’s a good idea to be locked under the regime of a fixed interest rate on your home loan.make sense.

What is an EMI? How does it work?

If you are planning to get a home loan, the EMI or the equated monthly installments will be your main consideration. EMI is the sum of money that you as a borrower will pay your lender to clear your outstanding loan. These payments are made every month on a date that is stipulated by your bank till such time that the loan has been completely repaid. The three things that go into the calculation of an EMI are:

The loan amount – Principal The rate of interest The tenure of loan

The most popular method of computation is that of ‘monthly reducing loans’. In the monthly reducing cycle, the principal is reduced with every EMI and the interest is calculated on the balance outstanding. The majority of the retails such as Home loans, auto loans and personal loans are computed on a monthly reducing basis.

Effectively, therefore, in the initial years of the loan, a major component of the EMI is the interest that is payable by you. As the loan tenure reduces, the interest component reduces too, as the principal gets paid. Note that an increase in the tenure of the loan, will lead to an increase in interest rates and therefore, the interest component of your loan. As a borrower, you should try and pay as much of EMI as possible, and shorten the tenure of the loan.

NRI:

1. Who is an NRI?

• As per India's Foreign Exchange Management Act (FEMA) 1999, an NRI or Non-Resident Indian is a citizen of India, or a foreign national of Indian-origin, living outside India for employment, business or any other vocation, which would indicate his intention to stay outside India for an indefinite period. An Indian would also be termed as an NRI if his stay in India is less than 182 days during the previous financial year (April-March)

2. Do NRIs require consent of the Reserve Bank of India (RBI) to buy immovable property in India?

• No, NRIs don’t require consent from the RBI to buy an immovable property in India, provided the property is residential or commercial in nature.

3.What is the eligibility criteria for obtaining NRI Home Loans?

• The eligibility is calculated in the same way as it is done for resident Indians with special emphasis on:
  • Qualifications - Graduate (minimum)
  • Current job-profile and work experience
  • Chances of continuing working abroad for the duration of the loan’s tenure
  • Chances of servicing the loan with an extended tenure, in case the applicant needs to return to India

4.Is there any limit on the number of housing properties that an NRI can buy?

• No. There is no limit placed on the number of residential properties an NRI can buy in India.

5. What are the documents required for obtaining NRI Home Loans?

• NRIs are required to submit a few additional documents for home loans. These include:
  • A copy of the passport
  • A copy of their works contract or the labour card
  • A Power of Attorney (POA) as the borrower is not based in India

6. What should the mode of payment for purchase of residential/commercial property in India by an NRI/PIO be?

• Under the general permissions available, an NRI/PIO may purchase residential/commercial property in India out of funds remitted to India through normal banking channels, or through funds held in his NRE/FCNR (B)/NRO account. No amount for the purchase can be paid outside of India.

7. What kinds of property can an NRI avail home loans for?

• A house which is either ready to move in, under construction or bought from another owner, an NRI is eligible to apply for home loans
• For construction of a property on a plot of land by self
• To purchase a plot allotted by a society/development authority
• To renovate or improve upon an existing property in India

8. What is the mode of payment for NRI home loans?

• The housing loan needs to be paid upfront for the entire tenure of the loan, by way of direct remittances from abroad through normal banking channels, or from other financial accounts as may be permitted by RBI
• Generally, payments are done through NRO, NRE, NRNR and FCNR accounts. These allowed accounts may change as per RBI regulations

9. Can a home/land be sold by an NRI or Person of Indian Origin without the permission of the Reserve Bank of India?

• Yes, the RBI has granted general permission for sale of property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India, or paid out of balances in non-resident accounts maintained with banks in India

10. Can NRI or PIO buy property in India jointly ?

• Yes NRI can by property in India jointly with Indian citizen,
• But NRI or a PIO cannot buy a property in India jointly with a foreign citizen

11. Are there any tax benefits for Non-Resident Indians buying properties?

• No tax benefits are available for NRI's, unless you file your returns, and subsequently become eligible to avail them.