Buyers Guide - HOME LOAN

YOUR EASY GUIDE TO HOME LOAN

Property Premise Loan

You must be at least 21 years of age for the loan to be sanctioned. The loan must terminate before or when you turn 65 years of age. You must be self-employed with a regular source of income. The loan can be for the purchase / construction / extension of a non-residential property. A loan for renovation or improvement will be given only at the time of acquisition of property. Professionally qualified and self-employed individuals can apply. A minimum of 3 year's work experience is a must.

Loan Amount

A number of factors such as your income, age, number of dependants, qualifications, assets and liabilities, income stability/ continuity of your employment / business etc. are taken into account when assessing your repayment capacity.
However, there are ways by which you can enhance your eligibility: If your spouse 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. While there is no need for a guarantor, having one might enhance your credibility with us. 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. In the total cost, registration charges, transfer charges and stamp duty costs are included.

Sanctioning

Documents required for applying for a home loan (for self-employed professionals and businessmen)

General Documents

  • Updated bank passbook or a Xerox of the statement of accounts for the last 6 months
  • Age proof: PAN card, Voters ID, Passport and License Xerox of ration card Business profile with details on the nature of business, list of clients, suppliers, staff strength, geographical spread, etc.
  • Xerox of education qualifications certificate and proof of business existence
  • Xerox of last 3 years Income Tax returns. Last 3 years profit /loss and balance sheet. Processing fees cheque
  • Documents required for applying for a home loan (for employed professionals)
  • Latest salary certificate / slip in original
  • Age proof: PAN card, voters ID, passport, license
  • Xerox of Form no.16 A (TDS Form) from employer. Certificate in original from employer for any other allowances, which are not reflected in salary slip
  • Updated bank pass book / Xerox of statement of accounts for last 6 months
  • Xerox of your company's ID or ration card
  • Passport size photographs of applicant and co-applicant
  • Processing fees cheque
  • 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.
Disbursement

Your loan will be disbursed after you identify and select the property that you are purchasing and submit the requisite legal documents. Each and every single document asked for will be verified and checked for your safety. This may take some time but we want to ensure a clear title by completing all the legal and technical verifications so that you have full rights to your home. The 230 A Clearance of the seller and / or 37I clearance from the appropriate income tax authorities (if applicable) is also needed. On satisfactory completion of the above, registration of the conveyance deed and investment of your own contribution, the loan amount (as warranted by the stage of construction) will be disbursed by Bank. The disbursement will be in favour of the builder/seller.

List of documents for disbursement
  • Loan Agreements
  • Disbursement Requests
  • Post-dated cheques
  • Personal guarantors documents, as the case may be
Buyers Guide - faqs

FAQs

Q: What are the documents that should be verified before buying a residential / commercial unit?
  • Ownership documents of land owner including title certificate.
  • Development Agreement, if the developer is not the owner and has acquired the development rights.
  • Intimation of Disapproval (IOD) and the building plan/s approved by 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 Occupancy Certificate or Building Completion Certificate.
  • Draft of Agreement for Sale and brochure for specifications, layout and amenities in the flat/complex/layout.
Q: What documents are required to be executed if the intended purchaser wishes to proceed for purchase of premises?
  • The Developer shall execute an Agreement for Sale as per the provisions of The Maharashtra Ownership Flats (Regulation of the Promotion, Construction, Sale, Management and Transfer) Act, 1963 ("the MOFA").
Q: What is the procedure for execution of the Agreement for Sale?

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 and;
  • Thirdly, Registration of Agreement for Sale

We shall deal with the above aspect in detail as under:

I.Stamp Duty

  • Unless there is an agreement to the contrary, the stamp duty shall be borne and paid by the Purchaser as per Section 30 of the Maharashtra Stamp Act, 2013.
  • As per prevailing laws, the stamp duty to be paid on the Agreement for Sale shall be an amount equivalent to 5% on the market value of the unit as per prevalent ready reckoner rates.
  • Market value means the price at which a unit could be bought in the open market on the date of execution of such instrument. This price is determined on the basis of the ready reckoner issued each year.
  • The Mode of payment of stamp duty is E-Payment through GRAS (Govt. Receipt Accounting System)

II.Execution

  • After the payment of stamp duty on the Agreement for Sale, the same shall be duly executed by all the parties, i.e. the Developer/Promoter and the Purchaser/s. All the pages of the document should be signed by all the parties. The Agreement should be witnessed by at least two witnesses giving their full names, signatures, and addresses.

III.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.
  • In case of delay in presenting within the stipulated four months from the date of execution of Agreement for Sale citing unavoidable circumstances by the Parties, the Registrar may condone the delay after collecting penalty under section 25 of the Indian Registration Act, 1908; provided the delay in presentation of the executed Agreement for Sale does not exceed 4 (four) months from the date of expiration of the aforesaid stipulated 4 (four) months (i.e. does not exceed 8 (eight) months from the date of execution of the Agreement for Sale).
  • Registration of the Agreement for Sale is compulsory as per Section 17 of Indian Registration Act, 1908.
  • The registration fees shall be an amount being 1% of the market value of the unit, subject to maximum of Rs.30,000/-.
Buyers Guide - EMI CALCULATOR

EMI CALCULATOR

What is an EMI?

EMI refers to equated monthly installment. It is a fixed amount which you pay every month towards your loan. It comprises of both, principal repayment and interest payment.

WHEN DOES THE REPAYMENT START?

EMI payments start from the month following the month in which the full disbursement has been made.

HOW IS THE EMI PAID?

The EMI should be paid every month through post-dated cheques (PDCs) or direct deductions from your salary. If you are opting for PDCs, you will have to provide 36 upfront. These PDCs are to be dated for the 1st of every month. However, most financial institutions do have flexible rules for dating of the cheques, keeping in mind the delay in processing of salaries. For definitive details, check the rules and regulations of the financial institution you are associating with.

WHAT IF A PDC BOUNCES?

In the case of a bounced cheque or delayed payment, charges and outstanding dues will be charged as per the prevailing company policy. You can replace old PDCs with new ones within 5 - 7 working days.

WHAT IS PRE-EMI INTEREST?

In the case of part disbursement of the loan, monthly interest is payable only on the disbursed amount. This interest is called pre-EMI interest (PEMI) and is payable monthly till the final disbursement is made, after which the EMIs would commence.

WHEN DO I PAY PEMIS?

The first PEMI is payable by cheque by the end of the month in which the disbursement is made. Each subsequent PEMI is payable at the end of every month till the commencement of EMI.

EMI CALCULATOR
Buyers Guide - Tax Benefits

TAX BENEFITS

The benefits that income tax authorities provide, as a result of servicing a housing loan from specified financial institutions, is documented over several sources. The following provides for some direction:

Let's start with Section 24 of the Income Tax Act

This section deals with deduction available on Interest paid on capital borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of property. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.
This is now a substantial amount. It started off with the Income Tax Department offering Rs. 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs. 30,000. It did not stop there. After getting enhanced to Rs. 75,000, it was then taken to a limit of Rs. 1 lakh. Presently, the limit stands elevated to Rs. 1.5 lakh.
So, should you borrow money to purchase or construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs. 1.5 lakh on interest paid. The criteria being: the property has to be acquired or constructed within 3 years from the end of financial year in which the capital was borrowed and be self - occupied. When put in figures, this is quite an amount:

  • Assume taxable income of Rs. 4 lakh, placing the assessee in the highest tax bracket.
  • Assume interest payment during the first financial year is Rs. 1.60 lakh
  • Taxable income stands reduced to Rs. 2.5 lakh (Rs. 4 lakh - Rs. 1.5 lakh being the maximum limit)
  • Total tax amounts to Rs. 24,720 (tax of Rs. 24,000 + Education Cess Rs. 480+ SHEC Rs. 240)
  • Tax saved is Rs. 46,350 (tax @30% on Rs. 1.5 lakh plus 2% EC+ 1% SHEC as purchaser is in the highest tax bracket)
That brings us to Section 80C of the Income Tax

A deduction u/s 80C (2) (xviii) is available on repayment of principal during a financial year up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs. 1 lakh specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is from Gross Total Income.

Income Tax certificate

Every bank issues an income tax certificate that serves as requisite proof to let you avail of tax benefits that accrue on repayment of a home loan. This will typically contain the total amount of interest and capital repaid during the year. This is mandatory to claim the tax benefit in respect of self-occupied property. You will have to file this with your tax returns and submit this to your employer or chartered accountant to calculate your tax liability.

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