Buying a home is an exciting time. But, as one of the largest purchases you're likely to make, it can also be seen as one of your best long-term investments - so it's important that you get it right. This means doing your homework and making sure that the property you will eventually buy is the right one for you in terms of price, location, value, size and lifestyle. Some important points to keep in mind while buying residential property:
- Locality – Proximity to workplace, educational institutions, hospitals, shopping areas, entertainment centres, transportation, pollution levels
- Quoted area of the flat i.e. Carpet, Built-Up Area and Super Built-Up Area
- Car parking space
- Quality of construction
- Reputation of the builder or seller
- Sufficient water and electric supply, other utilities
- Cost components: price, stamp duty, registration charges, transfer fees, maintenance charges, any other payments
- Appreciation of the property for resale and rental
- Any other distinguishing features or advantages of the property
Carpet Area is the area enclosed within the walls, actual area to lay the carpet. This area does not include the thickness of the inner walls. It is the actual used area of an apartment/office unit/showroom etc.
Built-up Area is the carpet area plus the thickness of outer walls and the balcony. Super Built-Up Area is the built up area plus proportionate area of common areas such as the lobby, lifts shaft, stairs, etc. The plinth area along with a share of all common areas proportionately divided amongst all unit owners makes up the Super Built-up area. Sometimes it may also include the common areas such, swimming pool, garden, clubhouse, etc.
This break up is extremely essential as builders can place anywhere from 65% to 85% per cent of the super built area as carpet area. That means, if the price is quoted as 1,000 sq. ft. super built up area, the carpet area could be anywhere from just 650 sq. ft. to 850 sq. ft. If this break up is not mentioned in the agreement, demand that the vendor/ builder mention it in the sale deed.
If you want to purchase a property, you have to look at the approved layout plan, approved building plan, ownership documents, carryout search, etc.
- Identify the property you wish to purchase
- Crosscheck current market rates of property in the vicinity and last known transactions, current market trends
- Formulate commercial terms
- Distinguish between negotiable and fixed terms and conditions of the contract, e.g. Price, payment schedule, time of completion, etc.
- Check for clear titles of the property. Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate. Ascertain the survey number, village and registration district of the property as these details are required for registration of the sale
- Ascertain outgoings to be for the property i.e. property tax, water and electricity charges, society charges, maintenance charges
- Request Vendor to obtain, if applicable, consent, permission, sanction, no objection certificate of various authorities such as the (a) society (b) the income tax authority (c) Municipal Corporation (d) the competent authority under the Urban Land Ceiling and Regulation Act (e) any other authority
- If you are looking for loan for property purchase, contact financial institutions and ask for a pre-approval letter
- Permanent Account Number of Vendor and Purchaser under Income Tax laws Payment of stamp duty on the formal agreement or document for transfer of the property, signing by both the Vendor and Purchaser and registration
- After payment of the entire sale price, take over legal possession of the property and check the receipt of original documents from the Vendor of the property
Sale Deed also known as conveyance deed, is a document by which the seller transfers his right to the purchaser, who, in turn, acquires an absolute ownership of the property. This document is executed subsequent to the execution of the sale agreement and after compliance of various terms and conditions detailed in the sale agreement.
The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.
The stamps are required to be purchased in the name of any one of the executors to the Instrument.
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 whichever is higher.
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.
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.
To decide your budget consult your banks to know your loan sanction limit. This limit is based on your income.
To decide upon the EMI of your sanctioned loan consider your total income:expenditure ratio. A thumb rule is to let your EMI be less than 40% of your income.
No, interest rates vary from bank to bank.
While applying for a home loan you would also need to consider other fees like processing fee, documentation fee, and pre-payment penalty (if, any), etc.
Yes, you can get tax benefit from your home loan. In fact, making your spouse the co-applicant would double your tax benefits.
Joint Ownership means purchasing a property in collaboration with somebody else to ease financial burden.
It is always advisable to draw a contract of joint ownership of all parties involved and their respective contribution. This might help in future if any disputes arise.
Under section 24 of the Income Tax Act, the interest on home loan is deductible from the income from house property to the extent of Rs 1.5 lakh per annum. Further, up to Rs 1 lakh of principle repayment can be deducted under section 80C (subject to an overall limit of Rs 1 lakh of that section). This interest can be deducted from rental income. In case of self-occupied property, your rental income will be zero but you can still claim a deduction of interest of up to Rs 1.5 lakh. In such a case, you would have a loss from house property.