Home buyer's guide
Buying a home is undoubtedly the biggest financial and lifestyle decision that you will make. A little homework will help turn your dream into reality. With the help of these Q&As, you can now make an informed decision. Happy Home Hunting!
Where do I begin?
Once you’ve set your mind on buying a home, there is a lot more to consider thereafter. Prioritize your requirements, budget, locality and everything that affects your buying decision. Every detail needs your attention!
How should I go about buying a home?
When buying a home, always do a background check on the builders and review their credentials.
- Know the builder: An established company with a history of sound construction and above- board policies would be the right place to start.
- Possession: Consider the time taken for completion of the company's projects as that often helps in making an informed decision.
- Legal Concerns: Find out if there are litigations in any court in India against the company and if there are any criminal cases against any of the directors of the company.
Are there additional costs for specific features?
Most quality projects come with a built-in set of amenities like- swimming pool, gym and common recreation areas. There may be other amenities that can be provided with additional costs. Look for features that are taken for granted, like pre-connected telephone, TV and Internet cables, security systems, interior design etc.
What’s the construction terminology that’s generally used?
You can familiarize yourself with the actual measurement terminology used for projects:
- Carpet Area: This is the area of the apartment/building that does not include the area of the walls.
- Built up Area: This includes the area of the walls along with the apartment
- Super Built up Area: This includes the built up area plus 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.
- Balconies are usually included as part of the carpet area. Understand the ratio and analyse the plans to understand how much of the carpet area is being taken up by unroofed spaces. It is advisable to look into the common areas that are shared between apartments and regulations regarding their use.
Should I be worried about any legal issues?
While purchasing a property, you have to look at the approved layout and building plan, ownership documents, and research on the same. It is advisable to contact an advocate before you purchase a property so that he can advise you. Certain areas have specific commercial or residential reservations and hence it’s advisable to have all the details before you commit to a purchase.
How do I finance my dream home and save on tax?
Finance plays a critical role in the purchase of your home. The important issues that are to be considered include modes of arranging finance and its implications on taxation.
- Use your own funds: If the house is being acquired out of the sales proceeds of an earlier house, the exemption from the long-term capital gain tax on the sale of the earlier house can be claimed under u/s. 54. To claim this benefit, the new property should be acquired one year prior to selling or two years after the date on which the transfer of the earlier house takes place. If not then the sales proceeds should be deposited in a bank or institution, which runs Capital Gain Accounts Scheme approved for this purpose. Further, in the case of individual or HUF (Hindu Undivided Family), exemption is provided from long term capital gain tax u/s. 54F on sale of any long term capital asset, if sale proceeds are invested in acquiring a house within prescribed period.
- Taking a bank loan: Interest paid on housing loan can be claimed as deduction under u/s. 24(b) to the maximum extent of Rs.1,50,000 per year. Such limit is per person and not for one property. Hence, a loan can be taken in two joint names for one house to claim deduction of Rs.1.5 lakhs each for both the persons repaying the loan. Repayment of the principal amount of housing loan is also eligible for the rebate u/s. 88 subject to a maximum sum of Rs.20,000 per year.
What issues should be considered when applying for a home loan?
It is generally safe to take a loan from one of the leading financial institutions but staying updated with the financial schemes and tax rates is always advisable.
- Fixed/Floating Interest: You can either opt for a fixed or floating rate of interest. The fixed rate is generally 50-75 basis points higher than the floating rate. The floating rate is linked to the PLR (Prime Lending Rate) of the lending institution.
- Processing Fees: Processing fees are charged by financial institutions for verifying the title report, financial performance, valuation of flat and so on. This fee can be up to 1% of the loan amount.
- Tenure of the loan: The tenure of the loan should be decided by the buyer after considering various things like repayment capacity per month, earning potential over the next few years, other financial commitments like weddings, children's education etc. The expected outflow on property maintenance should also be considered.
- Other aspects: Considering the percentage of the cost of house that is available as loan is equally vital. Another important factor is financing for the interior work, furniture etc. Some institutions have started providing a composite loan that extends over the cost of interiors and design.
- Generally, housing loans are available ranging from 5 years to 25 years. Some banks also offer step-up housing loans which charge a lower EMI for the initial years which gets increased for the later period.
What are the documents I have to submit to the bank?
Different banks require different sets of documents for processing a housing loan. Following are some documents generally required by majority of the banks:
- Proof of Income: Salary certificates and form No. 16 for last three years, TDS certificate for last 3 years, bank statements showing credit entries for salary/ professional fees received for past 12 months, professional qualification certificates etc.
- Title of the property: Copy of the property sale deed, title report by a solicitor, valuation report, NOC from the builder/condominium/society, amenities agreement, if any are all required for property title.
- Other common documents like proof of age, copy of passport, driving license, proof of residence, copy of ration card, passport, society letter, photographs with signature also come in handy.
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You are Eligible for this loan
` 35.0 Lac at EMI ` 4,850
You are Eligible for this loan
You are Eligible for a maximum loan of ` 35.13 Lac at EMI ` 5,000
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Total Amount Payable`