Early on in the home buying process, you should review your credit situation. That way, if you need to improve your credit score, you can start right away.
Improving a credit score takes time, so you want to find out where you stand by (A) obtaining your credit report and score, (B) comparing yourself to the national average, and (C) working to improve your credit score if necessary.
Here are some resources to get you started:
10 Ways to Boost Your Credit Score
This excellent article is written by a mortgage expert, and it provides specific advice on how to improve your credit score in advance of buying a home.
Improving a Credit Score
Here we have gathered advice from BankRate.com, CNN Money, and a wealth of other expert sources.
All About Your Credit Report
Your credit report is different from your credit score. Banks use your credit report to create your credit score, which determines how likely they are to loan you money. This article explains the credit report in more detail, also providing instructions on how to request and review your credit report.
Remember, the better your credit score, the better your chances of qualifying for a mortgage at a good interest rate. So be proactive in maintaining good credit. Start early and focus on the long-term.
Happy home buying!
http://homebuyingtips.statesmanblogs.com/
Thursday, July 19, 2007
Subprime Mortgage Loans - A Borrower's Guide
Subprime mortgage lending and loans have certainly been in the news a lot lately. They usually tag along with a news story about the current spike in home foreclosures. In fact, I saw a story about it just a few days ago on KVUE.
There are many reasons that people default on mortgage loans and go into foreclosure. So it's not really possible to blame any one factor. But one thing is perfectly clear -- there is a connection between subprime mortgage lending and the number of foreclosures in the Austin area (and beyond).
Adjustable rate mortgages (ARMs) are aother piece of the puzzle. I call it the subprime-ARM-foreclosure triangle, and it's partially responsible for the current spike in home foreclosures.
So what are subprime mortgage loans, and how do they relate to foreclosures? And if you find yourself in a subprime lending situation, how can you protect yourself from becoming another foreclosure statistic?
http://homebuyingtips.statesmanblogs.com/
There are many reasons that people default on mortgage loans and go into foreclosure. So it's not really possible to blame any one factor. But one thing is perfectly clear -- there is a connection between subprime mortgage lending and the number of foreclosures in the Austin area (and beyond).
Adjustable rate mortgages (ARMs) are aother piece of the puzzle. I call it the subprime-ARM-foreclosure triangle, and it's partially responsible for the current spike in home foreclosures.
So what are subprime mortgage loans, and how do they relate to foreclosures? And if you find yourself in a subprime lending situation, how can you protect yourself from becoming another foreclosure statistic?
http://homebuyingtips.statesmanblogs.com/
Home Foreclosures Still Rising
In a previous post, we talked about buying a foreclosed home in Austin. But as foreclosures continue to rise (according to the latest news from Bloomberg), I feel I should shift gears and talk about some of the leading causes of foreclosure ... in the hopes it will help prevent a few folks from becoming yet another statistic.
Definition of Foreclosure
Most of you probably know this, but we will start with the basics anyway. Basically, foreclosure is what happens when you can't pay your home mortgage loan and the bank takes over the property. It is a legal process in which the mortgage property is sold to pay the loan of the defaulting (non-paying) borrower.
Common Causes of Foreclosure
Obviously, the root cause of foreclosure is always the same. For one reason or another, the homeowner(s) is no longer able to pay the mortgage. But there are other common factors that lead to this, which we will discuss.
But how can somebody qualify for a mortgage and then be unable to make payments?
This is a common question, for which there are two common answers: either (A) the person's income or debt situation changed after obtaining the mortgage loan, or (B) the lender qualified the person for a subprime mortgage loan with risky conditions associated with it.
Sure, there are more causes than these two. But both the federal government and the mortgage industry have conceded that subprime lending is a big factor in the current spike of foreclosures.
To learn more about this, read my tutorial on the subprime adjustable-rate mortgage.
The best thing you can do to avoid a possible foreclosure situation is to buy within your financial means. Use a free mortgage calculator to break the sale price down into monthly payments, then compare those payments to your budget, your current expenses, etc. Don't overstretch yourself, and don't make the common mistake of thinking, "Well, I plan to make more money soon, so I can get by."
If you can't afford a certain level of mortgage today, you shouldn't plan on being able to in the future. There's too much uncertainty and risk in that line of thinking.
http://homebuyingtips.statesmanblogs.com/
Definition of Foreclosure
Most of you probably know this, but we will start with the basics anyway. Basically, foreclosure is what happens when you can't pay your home mortgage loan and the bank takes over the property. It is a legal process in which the mortgage property is sold to pay the loan of the defaulting (non-paying) borrower.
Common Causes of Foreclosure
Obviously, the root cause of foreclosure is always the same. For one reason or another, the homeowner(s) is no longer able to pay the mortgage. But there are other common factors that lead to this, which we will discuss.
But how can somebody qualify for a mortgage and then be unable to make payments?
This is a common question, for which there are two common answers: either (A) the person's income or debt situation changed after obtaining the mortgage loan, or (B) the lender qualified the person for a subprime mortgage loan with risky conditions associated with it.
Sure, there are more causes than these two. But both the federal government and the mortgage industry have conceded that subprime lending is a big factor in the current spike of foreclosures.
To learn more about this, read my tutorial on the subprime adjustable-rate mortgage.
The best thing you can do to avoid a possible foreclosure situation is to buy within your financial means. Use a free mortgage calculator to break the sale price down into monthly payments, then compare those payments to your budget, your current expenses, etc. Don't overstretch yourself, and don't make the common mistake of thinking, "Well, I plan to make more money soon, so I can get by."
If you can't afford a certain level of mortgage today, you shouldn't plan on being able to in the future. There's too much uncertainty and risk in that line of thinking.
http://homebuyingtips.statesmanblogs.com/
Wednesday, July 18, 2007
Capital Gains Tax: Is 'A' House, One House?
The villain causing the confusion is the article ‘a’ used before ‘residential house’. The word seems to imply that the exemption would be available only against purchase of one residential house and not two, or more. In other words, when an assessee invests the capital gains u/s 54 or the net sale proceeds u/s 54F in purchasing or constructing two residential houses, only one of these, as opted for by the assessee, will be allowed for the tax concession.
Now, under this background, one can’t help but wonder whether it was plain English usage that led to the use of the article “a” or did the lawmakers really intend the exemption only for one house. For example consider the following sentences ---
“The constitution bestows upon a citizen the following rights.” --- Does this mean only one citizen or all citizens?
“A man should stand by his rights and duties.” --- Does this pertain only for one man or more than one man?
“A person who comes to the rescue of another person in difficulty is a good Samaritan.” --- Does this include all those persons who help the one or more in difficulties or only one of them?
My feeling is that “a” is used as an article to precede a noun. The other two articles “an” or “the” could not be used for grammatical reasons; therefore “a” had to be used.
Adopting the meaning of the article “a” as “only one” is against the very spirit, purpose and intent of the legislation which desires to give a boost to the housing sector. No wonder, this ambiguity has given rise to conflicting case laws.
In the case of Fulwanti C Rathod v ITO, ITAT Mumbai Bench ‘E’ (ITA 1092/Mum./1995), dt 3.5.02, the learned judge observed, “The word ‘a’ can be equivalent to the word ‘any’. Also as per the General Clauses Act, singular includes plural.” The judge referred to the principle of interpretation that when there was a doubt as to its meaning, it had to be understood in the same sense it harmonised with the objective of the enactment. Referring to the Wealth-tax Act and the Estate Duty Act, the words used therein were, ‘one house’ as against the words ‘a house’ used in the Income-tax Act.
On the other hand, in the case of Mrs. Gulshanbanoo R. Mukhi v Joint CIT Appeal #3369 (BOM) of 2000 [AY 96-97] dt 16.1.02 ITD 649 (Mum) ITAT Mumbai Bench ‘C’, it was held that ‘a’ can be ‘any’ but ‘any’ cannot be ‘many’.
Allahabad High Court in the case of Shiv Narain Chaudhari v CWT (108ITR104) held that if the two flats of the building are situated in same compound and within common boundaries and have unity of structure, then they could be regarded as constituting one house.
In spite of such contradictory decisions arising out of ambiguity, CBDT has not issued any clarification in spite of requests from many quarters, including yours sincerely. We have been given to understand that some of the ITOs have been sticking to the literal meaning of ‘a’ as ‘one’, if they do not like your face; not otherwise.
A difficulty
If the stand that ‘a’ is not two is accepted, then it can be claimed that ‘a’ is also not half. Consequently, if an assessee reinvests an amount in a residential property, jointly held with another individual, say his wife, the related exemptions either u/s 54 or u/s 54F would not be available. Yes, this appears to be preposterous, but we have very strong reasons, backed up by a case law, ITO vs Rasiklal N. Satra (280ITR243 dt 19.9.05).
Here the assessee declared capital gains of Rs. 6,68,698 on sale of shares and claimed exemption u/s 54F by investing the same in purchase of residential flats at Vashi, Navi Mumbai. The Assessing Officer noticed that the assessee was co-owner of a flat in Sion (West), Mumbai. Accordingly, the assessee was asked to explain as to why exemption u/s 54F be not denied. In reply, the assessee contended that he was not an independent owner of the house and exemption can be denied only where the assessee is the absolute owner of the house. He also filed details of purchase of the house which showed that he along with his wife had purchased the house on April 13, 1994, for a total consideration of Rs. 3,05,000 out of which the assessee had invested Rs. 1,60,000 and the balance amount was invested by his wife. However, the Assessing Officer did not accept the contention of the assessee since in his view, the assessee could be said to be the owner of house at Sion (Mumbai) on the date of sale of the original asset.
The learned judge observed, “We proceed on the basis of the language employed by the Legislature. The word ‘residence’, as per Strand's Judicial Dictionary, means a place where an individual or his family eat, drink and sleep. So a residential house would mean a building or part of the building where one can eat, drink and sleep. Here, we may clarify that house is not being equated with a building since a building may comprise of many houses. So house means an independent unit where one can eat, drink and sleep. In view of this definition, we hold that the flat at Sion, Mumbai, was a residential house since the assessee along with his family was living in that house.
“The only question remains as to whether the assessee can be said to be the owner of that residential house. The Legislature has used the word ‘a’ before the words ‘residential house’. In our opinion, it must mean a complete residential house and would not include a shared interest in a residential house. Where the property is owned by more than one person, it cannot be said that any one of them is the owner of the property. In such case, no individual person on his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of a residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the honourable Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166ITR783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act. Because of this judgment, the Legislature had to amend the provisions of Sec. 32 w.e.f. 1.4.97, by using the expression ‘owned wholly or partly’. So, the word ‘own’ would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After this judgment the Legislature could also amend the provisions of section 54F so as to include part ownership. Since the Legislature has not amended the provisions of Sec. 54F, it has to be held that the word ‘own’ in Sec. 54F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by the assessee and his wife. It is nobody's case that the wife is a benami of the assessee. Therefore, the said house was jointly owned by the assessee and his spouse. In view of the discussions made above, it has to be held that the assessee was not the owner of a residential house on the date of transfer of the original asset. Consequently, the exemption under section 54F could not be denied to the assessee.”
Finally
All said and done, all this is theory. In practice, the Department normally grants the exemption on tax on long-term capital gains u/s 54 or 54F only against one house where the assessee has purchased or constructed two or more houses in his own name. However, the exemption is granted even if such a house is held jointly.
Yes, this is the normal practice. But the ITOs are reported to take advantage of the ambiguity depending upon their whims and fancies.
To Conclude
If ‘a’ is one and not two or more, ‘a’ cannot be anything less than one. Clarification from CBDT is imminently required not only to enable the assessees take correct actions and a litigations, but also to ward off rent seeking, if any, by the ITOs.
http://news.moneycontrol.com/india/news/propertyexpert/capitalgainshouseproperty/capitalgainstaxisahouseonehouse/14/38/article/210927
Now, under this background, one can’t help but wonder whether it was plain English usage that led to the use of the article “a” or did the lawmakers really intend the exemption only for one house. For example consider the following sentences ---
“The constitution bestows upon a citizen the following rights.” --- Does this mean only one citizen or all citizens?
“A man should stand by his rights and duties.” --- Does this pertain only for one man or more than one man?
“A person who comes to the rescue of another person in difficulty is a good Samaritan.” --- Does this include all those persons who help the one or more in difficulties or only one of them?
My feeling is that “a” is used as an article to precede a noun. The other two articles “an” or “the” could not be used for grammatical reasons; therefore “a” had to be used.
Adopting the meaning of the article “a” as “only one” is against the very spirit, purpose and intent of the legislation which desires to give a boost to the housing sector. No wonder, this ambiguity has given rise to conflicting case laws.
In the case of Fulwanti C Rathod v ITO, ITAT Mumbai Bench ‘E’ (ITA 1092/Mum./1995), dt 3.5.02, the learned judge observed, “The word ‘a’ can be equivalent to the word ‘any’. Also as per the General Clauses Act, singular includes plural.” The judge referred to the principle of interpretation that when there was a doubt as to its meaning, it had to be understood in the same sense it harmonised with the objective of the enactment. Referring to the Wealth-tax Act and the Estate Duty Act, the words used therein were, ‘one house’ as against the words ‘a house’ used in the Income-tax Act.
On the other hand, in the case of Mrs. Gulshanbanoo R. Mukhi v Joint CIT Appeal #3369 (BOM) of 2000 [AY 96-97] dt 16.1.02 ITD 649 (Mum) ITAT Mumbai Bench ‘C’, it was held that ‘a’ can be ‘any’ but ‘any’ cannot be ‘many’.
Allahabad High Court in the case of Shiv Narain Chaudhari v CWT (108ITR104) held that if the two flats of the building are situated in same compound and within common boundaries and have unity of structure, then they could be regarded as constituting one house.
In spite of such contradictory decisions arising out of ambiguity, CBDT has not issued any clarification in spite of requests from many quarters, including yours sincerely. We have been given to understand that some of the ITOs have been sticking to the literal meaning of ‘a’ as ‘one’, if they do not like your face; not otherwise.
A difficulty
If the stand that ‘a’ is not two is accepted, then it can be claimed that ‘a’ is also not half. Consequently, if an assessee reinvests an amount in a residential property, jointly held with another individual, say his wife, the related exemptions either u/s 54 or u/s 54F would not be available. Yes, this appears to be preposterous, but we have very strong reasons, backed up by a case law, ITO vs Rasiklal N. Satra (280ITR243 dt 19.9.05).
Here the assessee declared capital gains of Rs. 6,68,698 on sale of shares and claimed exemption u/s 54F by investing the same in purchase of residential flats at Vashi, Navi Mumbai. The Assessing Officer noticed that the assessee was co-owner of a flat in Sion (West), Mumbai. Accordingly, the assessee was asked to explain as to why exemption u/s 54F be not denied. In reply, the assessee contended that he was not an independent owner of the house and exemption can be denied only where the assessee is the absolute owner of the house. He also filed details of purchase of the house which showed that he along with his wife had purchased the house on April 13, 1994, for a total consideration of Rs. 3,05,000 out of which the assessee had invested Rs. 1,60,000 and the balance amount was invested by his wife. However, the Assessing Officer did not accept the contention of the assessee since in his view, the assessee could be said to be the owner of house at Sion (Mumbai) on the date of sale of the original asset.
The learned judge observed, “We proceed on the basis of the language employed by the Legislature. The word ‘residence’, as per Strand's Judicial Dictionary, means a place where an individual or his family eat, drink and sleep. So a residential house would mean a building or part of the building where one can eat, drink and sleep. Here, we may clarify that house is not being equated with a building since a building may comprise of many houses. So house means an independent unit where one can eat, drink and sleep. In view of this definition, we hold that the flat at Sion, Mumbai, was a residential house since the assessee along with his family was living in that house.
“The only question remains as to whether the assessee can be said to be the owner of that residential house. The Legislature has used the word ‘a’ before the words ‘residential house’. In our opinion, it must mean a complete residential house and would not include a shared interest in a residential house. Where the property is owned by more than one person, it cannot be said that any one of them is the owner of the property. In such case, no individual person on his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of a residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, in our opinion, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. This view of ours is fortified by the judgment of the honourable Supreme Court in the case of Seth Banarsi Dass Gupta v. CIT [1987] 166ITR783, wherein, it was held that a fractional ownership was not sufficient for claiming even fractional depreciation u/s 32 of the Act. Because of this judgment, the Legislature had to amend the provisions of Sec. 32 w.e.f. 1.4.97, by using the expression ‘owned wholly or partly’. So, the word ‘own’ would not include a case where a residential house is partly owned by one person or partly owned by other person(s). After this judgment the Legislature could also amend the provisions of section 54F so as to include part ownership. Since the Legislature has not amended the provisions of Sec. 54F, it has to be held that the word ‘own’ in Sec. 54F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. In the present case, admittedly the house at Sion, Mumbai, was purchased jointly by the assessee and his wife. It is nobody's case that the wife is a benami of the assessee. Therefore, the said house was jointly owned by the assessee and his spouse. In view of the discussions made above, it has to be held that the assessee was not the owner of a residential house on the date of transfer of the original asset. Consequently, the exemption under section 54F could not be denied to the assessee.”
Finally
All said and done, all this is theory. In practice, the Department normally grants the exemption on tax on long-term capital gains u/s 54 or 54F only against one house where the assessee has purchased or constructed two or more houses in his own name. However, the exemption is granted even if such a house is held jointly.
Yes, this is the normal practice. But the ITOs are reported to take advantage of the ambiguity depending upon their whims and fancies.
To Conclude
If ‘a’ is one and not two or more, ‘a’ cannot be anything less than one. Clarification from CBDT is imminently required not only to enable the assessees take correct actions and a litigations, but also to ward off rent seeking, if any, by the ITOs.
http://news.moneycontrol.com/india/news/propertyexpert/capitalgainshouseproperty/capitalgainstaxisahouseonehouse/14/38/article/210927
New trend: Warranty on property
A warranty is a contractual promise. An individual making a promise is regarded as undertaking contractual liability, therefore, where a warranty exists, the maker undertakes strict liability for what he asserts. In simple words, it is an agreement between a buyer and a seller, detailing the conditions under which the seller will make repairs or fix problems without cost to the buyer.
Also, a warranty is an assurance by the seller of the property to the buyer that a property is as represented or will be as promised and the seller insures the buyer that the insurance risk or all the terms and conditions specified in the contract would be fulfilled as stated to keep the contract effective.
Indian developers are not providing any warranty on properties. The contract or the development agreement details the agreed price, payment and construction schedule, apartment plans, delivery date and the developer’s liability in case of delay in handing over possession and the developer bears no liability after he has handed over possession to the buyer of the property.
The builders are now recognising the need to commit themselves to quality construction to safeguard the interest of the investors and some developers have started offering a warranty on the building and construction material. However, this new trend was introduced for the first time in the history of real estate development by Pune-based Gera Developments, which is now being followed by other real estate developers.
The five-year warranty that is now being provided by some of the developers in India ensures that the property remains in premium condition and covers three main areas: preventive maintenance in the areas of carpentry, electrical diagnostic works, plumbing and bathroom tiles; repairs as a result of improper installation or supply from company’s end, and re-paint of the exteriors of the building to make it look new before the end of five years, which also maintains the prime real estate value of the property.
In this regard, the Government of India should introduce a new legislation that should make it mandatory for all the real estate developers to offer warranty plans to its investors, as it would build an environment of trust and transparency, which is lacking in the real estate sector at present. This will surely help the sellers in getting a better commercial value of the property and the buyers will have a peace of mind while buying such a property. The quality standards in terms of service delivery and construction are not yet up to the mark and the introduction of such legislation would automatically improve it to international level.
http://news.moneycontrol.com/india/news/propertyexpert/null/newtrendwarrantyproperty/14/38/article/187166
Also, a warranty is an assurance by the seller of the property to the buyer that a property is as represented or will be as promised and the seller insures the buyer that the insurance risk or all the terms and conditions specified in the contract would be fulfilled as stated to keep the contract effective.
Indian developers are not providing any warranty on properties. The contract or the development agreement details the agreed price, payment and construction schedule, apartment plans, delivery date and the developer’s liability in case of delay in handing over possession and the developer bears no liability after he has handed over possession to the buyer of the property.
The builders are now recognising the need to commit themselves to quality construction to safeguard the interest of the investors and some developers have started offering a warranty on the building and construction material. However, this new trend was introduced for the first time in the history of real estate development by Pune-based Gera Developments, which is now being followed by other real estate developers.
The five-year warranty that is now being provided by some of the developers in India ensures that the property remains in premium condition and covers three main areas: preventive maintenance in the areas of carpentry, electrical diagnostic works, plumbing and bathroom tiles; repairs as a result of improper installation or supply from company’s end, and re-paint of the exteriors of the building to make it look new before the end of five years, which also maintains the prime real estate value of the property.
In this regard, the Government of India should introduce a new legislation that should make it mandatory for all the real estate developers to offer warranty plans to its investors, as it would build an environment of trust and transparency, which is lacking in the real estate sector at present. This will surely help the sellers in getting a better commercial value of the property and the buyers will have a peace of mind while buying such a property. The quality standards in terms of service delivery and construction are not yet up to the mark and the introduction of such legislation would automatically improve it to international level.
http://news.moneycontrol.com/india/news/propertyexpert/null/newtrendwarrantyproperty/14/38/article/187166
Be legally right while buying property
A few years ago, owning a home was a mere dream for many. But recently, a handful of benefits like tax sops and cheap loans have been a blessing for millions of Indians who are now seeing that dream turn to a reality. In fact more people are buying homes now than ever before and they are buying it very early on in life.
Pallavi and Kartik Iyer are a young couple in Pune who are planning to buy their first home. They've done their research on area and location but have no clue about what documents need to be looked at before signing the agreement. Says Iyer, "We did a lot of research, scanned many websites. They all give out a list of more than 25 documents that we need to look into. It would just be easier if we would know which documents are most vulnerable to tampering"
With real estate being far from transparent, with nothing in clear black and white, Moneycontrol tries to help Iyer and many more like him by handing out a check list of 'grey areas' to watch out for.
Get your papers right!
Who owns the land?
You must verify whether the land is freehold (land owned by the builder) or leasehold (land leased out to the builder from someone else). This becomes important because in case of leasehold land, the owner of the land prescribes his own set of terms and conditions so far as use of the land is concerned. For instance, in case the lease has to be renewed after some years, the owner may charge a premium, which may come as a cost you hadn't planned for.
Builders usually possess the land of construction under their names or hold development agreements with the owners of the land. Says Anuj Puri, MD, Chesterton Meghraj Property Consultants Pvt. Ltd, "In both the cases, the purchaser of the flat must enquire and find out whether the builder is legally permitted to carry out construction on the land on which he proposes to construct the building. In many cases it may be necessary to seek the assistance of a professional to find out whether the builder or developer has good title to the land."
Are all approvals in place?
In the recent past, buildings in several metros faced the threat of being razed to the ground - the reasons - authorities clamped down on them for not complying with approvals. The only other way out is to pay a large fine and get the approval. By then, the builder may already have got off the hook by transferring the property to the co-operative society and residents will have to bear the brunt.
Therefore, as a buyer, you should check whether the builders have all the necessary approvals.
Plan approval, Intimation of Disapproval (IOD) and commencement certificate - key issues
A person in Mumbai (name withheld) booked an apartment on the seventh floor of a building. He had asked the builder for the plan approval and commencement certificate but never got around to seeing it. In the meantime, he did not want to lose out on time and therefore enquired with other buyers about this approval. Most other buyers had seen this approval and hence, he went ahead and booked the apartment. It was only when his bank rejected his loan did he realise that the builder had approval to construct only a six storey building and the seventh floor was a modification, approval for which was still to be taken. His builder convinced him that he would pull strings with the necessary authorities and get the approval, but the entire situation seemed too risky and he pulled out from the deal.
Documents like these are vital to a chaos at a later stage. Likewise, the IOD specifies the conditions subject to which the building should be constructed by the builder. "IOD is issued for one year and if the construction is not completed within one year, it should be re-validated. The purchaser of the flat must verify whether the IOD is issued and if it is issued, the terms and conditions stipulated by the local authorities," says Puri.
The commencement certificate permits the builder to carry out construction of the building and is valid for a year, after which it has to be re-validated. Rajiv Sabharwal, Head, ICICI Home Loans, says, "The customer should ensure that builder has requisite FSI - he should have the commencement certificate issued by Municipal Council and approved plans up to the floor where he is buying a flat."
Agreement of Sale - The fine print
Once you have verified documents, as a buyer, you must enter in to an agreement with the builder or the developer. You have to ensure that the conditions are spelt out clearly, to a problems arising out of ambiguity, in future. Puri elaborates, "Such an agreement should specifically mention flat number, wing, and floor of the building, amenities provided in the flat, terms of payment, date on which the possession of the flat will be given etc."
"Check the carpet area (which is the actual area you get) in addition to built-up or super built-up area," advises Sabharwal. Once the agreement is finalized, stamp duty must be paid on the agreement. Insist on getting an Occupation Certificate (OC) before occupying the flat, to eliminate any problems.
Small but significant
Apart from these larger issues, there are certain areas that may seem minor but are really a must-do.
Hidden costs
Buying a house means talking in terms of lakhs of rupees. Of course, you need to pay attention to the big costs, but in the process do not ignore the smaller costs. Warns Sabharwal, "The buyer should look out for hidden costs - like water connection, electric meter, development charges, clubhouse charges, etc. These should be added to the agreement to sale."
Keep records
Talking of documents, of course, insist on getting all the original ones but equally important, retain photocopies of them as well. Cautions Puri, "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."
What details do you look out for in these? "Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared," says Puri.
http://news.moneycontrol.com/india/news/propertyexpert/realestatebuilders/belegallyrightwhilebuyingproperty/14/38/article/168912
Pallavi and Kartik Iyer are a young couple in Pune who are planning to buy their first home. They've done their research on area and location but have no clue about what documents need to be looked at before signing the agreement. Says Iyer, "We did a lot of research, scanned many websites. They all give out a list of more than 25 documents that we need to look into. It would just be easier if we would know which documents are most vulnerable to tampering"
With real estate being far from transparent, with nothing in clear black and white, Moneycontrol tries to help Iyer and many more like him by handing out a check list of 'grey areas' to watch out for.
Get your papers right!
Who owns the land?
You must verify whether the land is freehold (land owned by the builder) or leasehold (land leased out to the builder from someone else). This becomes important because in case of leasehold land, the owner of the land prescribes his own set of terms and conditions so far as use of the land is concerned. For instance, in case the lease has to be renewed after some years, the owner may charge a premium, which may come as a cost you hadn't planned for.
Builders usually possess the land of construction under their names or hold development agreements with the owners of the land. Says Anuj Puri, MD, Chesterton Meghraj Property Consultants Pvt. Ltd, "In both the cases, the purchaser of the flat must enquire and find out whether the builder is legally permitted to carry out construction on the land on which he proposes to construct the building. In many cases it may be necessary to seek the assistance of a professional to find out whether the builder or developer has good title to the land."
Are all approvals in place?
In the recent past, buildings in several metros faced the threat of being razed to the ground - the reasons - authorities clamped down on them for not complying with approvals. The only other way out is to pay a large fine and get the approval. By then, the builder may already have got off the hook by transferring the property to the co-operative society and residents will have to bear the brunt.
Therefore, as a buyer, you should check whether the builders have all the necessary approvals.
Plan approval, Intimation of Disapproval (IOD) and commencement certificate - key issues
A person in Mumbai (name withheld) booked an apartment on the seventh floor of a building. He had asked the builder for the plan approval and commencement certificate but never got around to seeing it. In the meantime, he did not want to lose out on time and therefore enquired with other buyers about this approval. Most other buyers had seen this approval and hence, he went ahead and booked the apartment. It was only when his bank rejected his loan did he realise that the builder had approval to construct only a six storey building and the seventh floor was a modification, approval for which was still to be taken. His builder convinced him that he would pull strings with the necessary authorities and get the approval, but the entire situation seemed too risky and he pulled out from the deal.
Documents like these are vital to a chaos at a later stage. Likewise, the IOD specifies the conditions subject to which the building should be constructed by the builder. "IOD is issued for one year and if the construction is not completed within one year, it should be re-validated. The purchaser of the flat must verify whether the IOD is issued and if it is issued, the terms and conditions stipulated by the local authorities," says Puri.
The commencement certificate permits the builder to carry out construction of the building and is valid for a year, after which it has to be re-validated. Rajiv Sabharwal, Head, ICICI Home Loans, says, "The customer should ensure that builder has requisite FSI - he should have the commencement certificate issued by Municipal Council and approved plans up to the floor where he is buying a flat."
Agreement of Sale - The fine print
Once you have verified documents, as a buyer, you must enter in to an agreement with the builder or the developer. You have to ensure that the conditions are spelt out clearly, to a problems arising out of ambiguity, in future. Puri elaborates, "Such an agreement should specifically mention flat number, wing, and floor of the building, amenities provided in the flat, terms of payment, date on which the possession of the flat will be given etc."
"Check the carpet area (which is the actual area you get) in addition to built-up or super built-up area," advises Sabharwal. Once the agreement is finalized, stamp duty must be paid on the agreement. Insist on getting an Occupation Certificate (OC) before occupying the flat, to eliminate any problems.
Small but significant
Apart from these larger issues, there are certain areas that may seem minor but are really a must-do.
Hidden costs
Buying a house means talking in terms of lakhs of rupees. Of course, you need to pay attention to the big costs, but in the process do not ignore the smaller costs. Warns Sabharwal, "The buyer should look out for hidden costs - like water connection, electric meter, development charges, clubhouse charges, etc. These should be added to the agreement to sale."
Keep records
Talking of documents, of course, insist on getting all the original ones but equally important, retain photocopies of them as well. Cautions Puri, "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."
What details do you look out for in these? "Ascertain the survey number, village and registration district of the property, as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared," says Puri.
http://news.moneycontrol.com/india/news/propertyexpert/realestatebuilders/belegallyrightwhilebuyingproperty/14/38/article/168912
Documents you need to buy that dream home
Q: What are the documents needed for transfer of allotment of flat in case of death?
A: The papers to be submitted are
(a) affidavits about the surviving legal heirs from the transferee made on non-judicial stamp paper of Rs. 10,
(b) relinquishment deed on Rs. 100 non-judicial stamp paper duly registered,(c) undertaking from the transferee on non-judicial stamp paper of Rs. 10,
(d) indemnity bond from the tranferee on Rs. 100 non-judicial stamp paper,
(e) original death certificate,
(f) no-objection certificate from the employer/government or loan-giving agency if advance for house building has been obtained,
(g) documentary evidence of relationship i.e., attested photocopy of school leaving certificate or passport and ration card duly attested by a gazetted officer; and photograph of the transferee with three signatures duly attested by a gazetted officer.
Q: Which are documents required for executing a conveyance deed?
A: The documents for this purpose consist of a photocopy of possession slip indicating the date on which the allottee took possession, NOC from the office/bank/ financial Institution if loan has been taken and if not, an affidavit to the effect that no loan has been taken from any such organization, photocopy of the treasury challan for having deposited the stamp duty to the Delhi government, and names and addresses of two witnesses, along with their identification (electoral card/ration card, PAN or passport) along with four unattested passport-size photographs.
Q: What is the benefit of getting the property mutated?
A: Mutation is beneficial because otherwise the local authorities do not recognize the purchaser of the immovable property as the new owner. All the property tax bills and payment thereof would continue to be in the name of the previous owner. Further, if the new owner intends to sell the property, it would be difficult for him to do so if the property does not stand mutated in his name.
Q: What are the documents necessary for mutation of property as I am having GPA in my name?
A: Generally the documents needed in this case are copies of the power of attorney and the Will, receipt of payment duly registered by the sub-registrar, application for mutation with Rs. 3 court fee stamp affixed on it, indemnity bond on a Rs. 100 stamp paper, affidavit on Rs. 10 stamp paper and clearance of the latest property tax.
Q: Is any permission required if I undertake additions and alterations in my flat?
A: For minor additions or alterations, which do not require structural changes, no permission is needed. But if you are planning any major transformation that necessitates structural changes, you have to contact the DDA or the MCD and secure permission from them.
http://news.moneycontrol.com/india/news/property/propertypurchasedocumentsvijaychawla/documentsyouneedtobuythatdreamhome/14/27/article/202019
A: The papers to be submitted are
(a) affidavits about the surviving legal heirs from the transferee made on non-judicial stamp paper of Rs. 10,
(b) relinquishment deed on Rs. 100 non-judicial stamp paper duly registered,(c) undertaking from the transferee on non-judicial stamp paper of Rs. 10,
(d) indemnity bond from the tranferee on Rs. 100 non-judicial stamp paper,
(e) original death certificate,
(f) no-objection certificate from the employer/government or loan-giving agency if advance for house building has been obtained,
(g) documentary evidence of relationship i.e., attested photocopy of school leaving certificate or passport and ration card duly attested by a gazetted officer; and photograph of the transferee with three signatures duly attested by a gazetted officer.
Q: Which are documents required for executing a conveyance deed?
A: The documents for this purpose consist of a photocopy of possession slip indicating the date on which the allottee took possession, NOC from the office/bank/ financial Institution if loan has been taken and if not, an affidavit to the effect that no loan has been taken from any such organization, photocopy of the treasury challan for having deposited the stamp duty to the Delhi government, and names and addresses of two witnesses, along with their identification (electoral card/ration card, PAN or passport) along with four unattested passport-size photographs.
Q: What is the benefit of getting the property mutated?
A: Mutation is beneficial because otherwise the local authorities do not recognize the purchaser of the immovable property as the new owner. All the property tax bills and payment thereof would continue to be in the name of the previous owner. Further, if the new owner intends to sell the property, it would be difficult for him to do so if the property does not stand mutated in his name.
Q: What are the documents necessary for mutation of property as I am having GPA in my name?
A: Generally the documents needed in this case are copies of the power of attorney and the Will, receipt of payment duly registered by the sub-registrar, application for mutation with Rs. 3 court fee stamp affixed on it, indemnity bond on a Rs. 100 stamp paper, affidavit on Rs. 10 stamp paper and clearance of the latest property tax.
Q: Is any permission required if I undertake additions and alterations in my flat?
A: For minor additions or alterations, which do not require structural changes, no permission is needed. But if you are planning any major transformation that necessitates structural changes, you have to contact the DDA or the MCD and secure permission from them.
http://news.moneycontrol.com/india/news/property/propertypurchasedocumentsvijaychawla/documentsyouneedtobuythatdreamhome/14/27/article/202019
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