Factors to keep in mind before getting a home loan

1- Your income and your track record of repaying previous loans – this is obtained from the Credit Bureau.

2- Your current expenses including other loans you are servicing. The amount of loan related to the property value.

3- Ownership of the property – this means that the lending bank should be comfortable that the seller has full and complete ownership of the property.

4- Getting a loan depends on the report of the local bank surveyor who will inspect the property and give his recommendation.

5- Home loan eligibility depends on your ability to pay (ie based on your salary) and not on the age of the building. However, the quantum of loan depends on the age and undivided share too, in addition to your repayment ability.

Document Required for home loans

  • 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
  • li> 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.
  • A stamp duty paid document is considered a proper and legal document and as such gets evidentiary value and is admitted as evidence in the court of law. The documents that are insufficiently stamped are not admitted as evidence by the court.
  • Stamp duty is payable under Section 3 of The Bombay Stamp Act, 1958.
  • Stamp duty is payable on market value or agreement value whichever is higher.
  • The market value of any property is determined by the stamp duty authorities on the basis of the Stamp Duty Ready Reckoner issued by the government on April 1st every year.
  • Stamp duty must be paid at the time of execution of the agreement. The penalty for late payment of the stamp duty is 2% per month on deficit stamp duty amount, subject to maximum four times of the deficit stamp duty amount.
  • Stamp Duty for residential and non-residential property is flat 6%.
  • Registration Fees

    • Once the stamp duty is paid on the document, it has to be registered with the Sub Registrar of Assurances of the respective district. The document is to be registered according to the provisions of The Registration Act, 1908.
    • Registration fees is 1 % of the market value or agreement value whichever is higher, subject to a maximum of Rs. 30,000/-.
    • The document should be registered within 4 months from the date of execution.
    • All parties executing the document admit before Sub Registrar of Assurances that they have executed the document presented for registration. Parties are then identified by two independent witnesses.
    • Parties to the document are photographed and their left-hand thumb impression is taken and such photograph and thumb impression are affixed on additional pages attached to the document apart from color photographs and thumb impression which a person affixes in agreement value while executing a document.
    • The Sub Registrar of Assurances records the content of the document, including the additional pages, either by photocopying or scanning the content of the documents.
    • If a particular document is required to be compulsorily registered under the law and is not registered then the proper legal title will not pass on the purchaser i.e. the title will be defective and the document becomes inadmissible in the court of law.

Section 24 of the Income Tax Act states that an investor is allowed to deduct an amount equivalent to the total interest payable on the housing loan from his/her taxable income within the same financial year. If an investor were to take a loan, he/she would receive a deduction of up to 1.5 lakhs on the interest rate paid. The only concern is that the property would have to be bought or constructed within 3 years from the end of the financial year in which the loan was taken and would have to be self-occupied.

According to Section 80C of the Income Tax Act: A deduction u/s 80C (2) (xviii) is available on repayment of the principal during a financial year of 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 taken from the Gross Total Income.

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulatory Act, 1973. According to RBI guidelines, NRI – “An Indian citizen who holds valid documents like Indian passport and stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of staying abroad is an NRI.”

Broadly categorized, Non-Resident Indians qualifying for NRI housing loans are:

  • Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad
  • Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials receive their salaries from Government resources
  • Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, Economic and Social Commission for Asia and the Pacific (ESCAP) International Monetary Fund (IMF), World Health Organization (WHO)
  • Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches/offices abroad.

Documents required for Resident Indians as well as for NRIs for getting Home Loans are different. Home loans For NRIs are available for construction of new house/ flats, purchase of old house/ alteration to an existing house and repairs/ flat addition/ renovation etc. NRIs can avail of loans by mortgaging an existing residential property. For availing home loans, NRIs’ have to fulfill certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more. The FDI Policy that permits FDI up to 100% from foreign/ NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. NRIs should take care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is important that loan seekers associate with a proactive and responsive HFC.

Eligibility for NRI

The eligibility criteria of NRIs differs from Resident Indians based on a few criterion. The criterion includes:

    Age

    The loan applicant should be at least 21 years of age.

    Income

    The loan applicant should have a minimum monthly income of $ 2,000 (although, this criterion may differ across HFCs). The eligibility is also determined by the continuity stability of your employment or business.

    Number of dependants

    The eligibility of the applicant is also determined by the number of dependents, assets, and liabilities. An NRI applicant is eligible to get a home loan ranging from a minimum of Rs 5 lakhs to a maximum of Rs 1 crore, based on the capacity of repayment and the cost of the property, which although is variable by the priorities of the home loan provider. Home Loan Tenure for NRIs is different from Resident Indians. An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the capacity of repayment of the borrower. However, an NRI can enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than what is offered to Resident Indians. The difference is up to 0.25%-0.50%. Some HFCs also have an internally earmarked 'negative criterion' for NRI home loans. The NRIs who come from locations that are marked as being 'negative' in the books of HFCs, find it difficult to get a home loan.

    Qualification

    The NRI loan seeker should be a graduate.

    Payment options

    The NRI has to route his/her EMI (Equated Monthly Installments) cheques through his/her NRE/NRO account. He/She cannot make payments from another source, for example, his savings account in India.

    RBI directive loans

    The Reserve Bank of India (RBI) has clarified that NRIs and Persons of Indian Origin (PIO), purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country. The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued a certain directive for sanctioning home loans to Non-Resident Indians. The guidelines provided are: The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed. The cost of dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) `{`NR(E)`}` Account and /or Non-Resident (Ordinary) `{`NR (O)`}` account in India. However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) `{`NR(E)`}` Account and /or Non-Resident (Ordinary) `{`NR (O)`}` account in India.

Making payments

- Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes.

- Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO/ NRE/ FCNR account.

Documents required for Loan: The documents required to be submitted by the NRIs are different from the Resident Indians since they are required to submit additional documents, like a copy of the passport and a copy of the works contract, etc. NRIs also have to follow certain eligibility criteria in order to get Home Loans in India. Another vital document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the HFC would need a 'representative' 'in lieu of' the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI's parents/wife/children.

The documents needed for obtaining NRI home loans are

  • Passport and Visa
  • A copy of the appointment letter and contract from the company employing the applicant.
  • The labor card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying a name, date of joining, designation and salary details.
  • Bank Statements for the last six months

Home Loan

Can a NRI (Non-Resident Indian) avail of a housing loan?

Yes, NRIs can avail a NRI housing loan to buy a property in India. However, the loan disbursement process, as well as the terms & conditions for a loan taken by a NRI are different than regular home loans granted to Indian residents.

I intend to co-own the property with my brother, sister, father, mother. Will I be eligible for a loan?

You would not be eligible for a loan as most home loan lenders allow only immediate relatives to co-own a property meaning that a parent-son combination and a husband-wife combination are only allowed.

I’m a single woman. Can I get a loan?

Yes, a single woman can get a loan. Many lenders also have special schemes for women offering them a discount up to 0.25%.

How instantly can I take a home loan?

Most lenders consider any property bought during the last 3 -6 months as a regular home loan application. You would be eligible for the same rates and income tax benefits as any other home loan. However, if you delay and the property purchase becomes more than 6 months old it will be treated as Loan against Property. The rates for the same are higher and there would be no tax benefits.

Do professionals have special eligibility norms?

Most home loan lenders offer special privileges to self-employed professionals. Every Housing Finance Institution (HFI) has its own conditions regarding the type of professionals they would cater to. The HFI also decides on the qualifications required for such professionals to qualify for the relaxed norms for loan eligibility calculations.

NRI

Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?

Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.

Can such property be sold without the permission of Reserve Bank?

Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

Can sale proceeds of such property if and when sold be remitted out of India?

In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993 will have to be credited to the ordinary non-resident rupee account of the owner of the property. How should the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission? The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India. What are the formalities required by foreign citizens of Indian origin to purchase residential immovable property in India under the general permission? They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Tax Benefits

What are the benefits of taking a home loan for Section 88 of the Income Tax Act?

You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. 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.

What are the benefits of taking a home loan for Section 24 of the Income Tax Act?

Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of the property is entitled to a deduction. 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 acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.

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