Buying A House

 In Hindu mythology, there is the story of a man who visited a famous astrologer and was granted one question.

The man asked, "Why only one?", and thus lost the chance of a lifetime. The art of asking the right questions is underrated. Especially when it comes to the biggest decision of your life: your home. Some might argue the biggest decision is your life partner. But if you are a good boy (or girl), you will go with your parents' choice, no questions asked!

But when it comes to your home, be sure to ask plenty of questions. Surendra Hiranandani, MD and Founder, Hiranandani Group of Companies, highlights eight pertinent questions most likely to arise during this process, as also how to solve them.

How big a house do I need?

It depends on your individual needs. If you are a family of five seeking more room, choose your second home with space and additional rooms. If you are a young couple buying your first nest, settle for a cosy place for two. That is, if you are not planning a family soon.

Once you have figured out your needs, translate them in terms of built-up, carpet area and the new concept of super built-up areas. Carpet area is simply 75 per cent to 85 per cent of super built-up area. That means if the super built-up area is 1,000 square feet, the carpet area would be around 750 square feet to 850 square feet.

The ratio for built-up can be as low as 15 per cent for an old construction and as high as 28 per cent for new constructions. Super built up is at a phenomenal 40 per cent!

Make a note of the budget you will need for the same.

Which is the right area for me?

Ask yourself, do I want to spend half my life commuting? Or live in townships or residential complexes far from the dust, grime and noise of the city? Or are the happening suburbs with their attractions -- malls, multiplexes, luxurious homes -- more my style? Keep the investment point of view in mind. Suburbs offer value for money and investment appreciation.

What do I look for in a neighbourhood?

Once you have the area, narrow it a step further to a neighbourhood. Your immediate neighbourhood will decide how hassle-free your existence will be. Look for proximity to doctors and clinics, shopping, transport connectivity, schools and hospitals.Today, people also check out entertainment and recreational options, which could include bowling alleys, game centres, sports facilities, shopping malls, food courts and restaurants.

How much importance do I give amenities?

As dull as they sound, these things can be major reasons of concern if they are absent or insufficient. Starting with water and power supply, look into access roads, parking space, safety and security and perks such as children's play areas, gardens, etc.Verify the construction quality carefully. Compare a new construction with other existing projects by the same builder. This way, you can be sure that what you get will be the same as what you see in the sample flats.

Does it live up to my lifestyle requirements?

Your house is your refuge from the world and speaks volumes about you. Flooring, tiling, classy fittings and fixtures, fancy lighting, French windows can all make your nest a beautiful place to relax in. Features offered by your building -- jacuzzi, swimming pool, gymnasiums, clubhouses, jogging tracks -- will all enhance your lifestyle.

A major element in your lifestyle will be the profile of people living nextdoor. If you have like-minded people in the neighbourhood, it puts your social calendar in place too.

What if I want more?

Above and beyond these, if you are looking at the best, most elite complexes, you are likely to be offered wide open spaces with lush, landscaped gardens and tree-lined roads. This gives the complex an elegant feel, besides keeping the air fresh. Other green ideas that builders incorporate are rainwater harvesting and sewage treatment plants.

But like all good things in life, this comes with a price tag which you should be able to afford.

What if all this is there but the flat size is small?

Small flat sizes are a fact in a city like Mumbai. But there are myriad ways to maximise space with clever interior design. Traditional layouts have fast been abandoned in favour of specialty rooms or areas within the home. Thus, larger rooms can be segregated into various areas of utility with the help of furniture, screens, dividers and so forth. Balconies can provide both leisure and storage space, even a computer room. 

What about resale value?

The most important aspect in resale is the view. Naturally, all the amenities will be factored in, but houses with a great view normally sell for premium prices. So if view is what pleases you, it may be worth that extra chunk of cash. Only people who can afford to pay a premium for a view will be your buyers so you may have to wait longer or drop your asking price substantially and match the general rate of the neighbourhood.

Excellent construction quality and good infrastructure in your area could give your property graph an upward slant.

If you ever get a chance to visit that famous astrologer, forget the above eight questions (because you already know the answers!).

Just ask him one question: Which area will witness the biggest property boom? Then go right ahead and invest!

Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.

Exercise Caution

YOU just got news that your home loan has been approved and you are on your way to see an existing model of your future home. Your heart is pounding with excitement, but wait, the tedium of paperwork is not over yet. You need to ensure that your agreement with your builder has no unforeseen loop holes that can plunge you in a legal mess!

Here are five essential steps you need to take to avoid such situations.

Aspect 1: Cost of your dream home

There are various costs attached to the owning your home besides its cost. The cost covers basic utilities like electricity, water, parking space, various taxes and in certain instances the registration charges as well. These may come as part of the deal or may be charged under separate heads. Make sure all these costs are factored into the final price you pay.

Safety points

 Scan the agreement with great care for all these charges.

• Get the agreement ratified with a real estate lawyer to see if there are any hidden or missed out charges. So, you can have an upfront discussion with the builder and have the document corrected.
• If the extra charges are for alterations made to the original plan, ask the builder for the sanction letter provided by government authorities for such alterations.  

Aspect 2: Size of the house

Look for the specifications in the agreement that defines the size of the house. This should be clear and specific. Also, look for a clause that says ‘…the plans, designs, and specifications are tentative and the developer reserves the right to make variations and modifications….’ This might mean that you may agree for a certain size, but the builder can give a different size.

Safety points

 Do a thorough check on the builder to determine his track record in project delivery. The way the builder has handled the past projects should serve as a measure to how your project is going to turn out.

• Discuss with your lawyer and think about including another clause that provides a definite range to the maximum and minimum size beyond or below which the builder cannot venture.

 Aspect 3: Carpet are

Carpet area is the space where it’s possible to lay the carpet. It does not take into account the area of the walls and balcony. When you include these areas as well to the carpet area you obtain the total built up area of the house or apartment. Additionally, if you include common spaces like lobby, lifts, stairs, garden, swimming pool etc., then its termed as the super built up area. The actual carpet area is bound to be around 20 to 30 per cent lesser than the super built up area.

 Safety points

 Always base your purchase decision on the carpet area of the flat.

• Double check if this area is specified in the agreement.
• Discuss with your builder and the lawyer to make sure it’s possible to include a termination clause if the final construction of the house has a carpet area lesser than what is specified in the agreement.

Aspect 4:Completion of construction and date of possession 

During the realty crash that occurred in the recent past, there have been several instances where projects have not been completed on time. Though agreements have a tentative date of possession it is important to for you to check this aspect of the deal.

Safety points

• Monitor the progress of the construction and keep a regular tab on it.
• Follow up with the builder if you find the progress painfully slow and request him to step it up. Keep in touch with the builder as the work progresses.
• Establishing a society with other buyers in the case of an apartment complex, will ensure that things happen at a decent pace from the builder's side.

Aspect 5: Completion certificate

When the project is completed and the house is delivered to you ensure that the builder provides you with a completion certificate. This certificate provided by the municipal authorities authenticates that the building complies with the approved plan and obeys all government norms and specifications. This certificate is critical for the registration of the house and to complete other legal formalities.

Safety points 

• Make sure the agreement has a clause that indicates the certificate will be handed over to you on completion and hand over of the house/apartment.
• Again a society could help move things faster if the builder is laid back about this aspect.

 Apart from the above mentioned aspects an overall quality check on the construction, society management etc. are important. Ensure these aspects are also covered in the agreement. Be aware and clued on about what you are getting into before you sign the dotted line.

Glossary Of Terms

Administrative Charges

These are the charges levied by the home Loan providing company for the various functions involving the administration of loan processing.

Agreement to Sell

This is a legal document executed on stamp paper that records the understanding between the buyer and the seller in a property transaction. This document should be registered under the transfer of property act. This can take place anytime after some money- mostly earnet money has changed hands.

Annual Rest

In this arrangement for home loan calculation, for the following year, the interest on the home loan would be calculated on the outstanding amount at the end of each completed year of the loan tenure.

Attachment of Property

This pertains to the payment default by the home loan borrower as a result of which the lending institution seizes the house property from the borrower to recover the dues from its eventual sale.

Borrowers’ Liability

If the home loan is being taken jointly, all the borrowers are individually and jointly responsible for home loan repayment.

Brokerage

It is the service charge that is to be paid to the broker for their services. It is often 2 percent of the property price.

Built up Area

It is the outer covered area and includes thickness of walls. By measurement, it is approximately 10% more than the carpet area.

Capital Gains

Profits earned from the house property. Long term gains arising from the sale of a house property after 3 years of acquisition, must be reinvested in another house property within 2 years of the sale in order to escape capital gains tax. Alternatively, the gains should be invested in 54EC bonds like those of NABARD that have a lock in of 3 years to make the gains free of capital gains tax.

Carpet Area

It is the actual floor area of the house that can be carpeted. By definition , it excludes the walls. This is the true indicator of space that you get to use in the house. While comparing areas of various housing options, you should be using this measure.

Closing Costs

The expenses you incur towards wrapping up the home purchase transactions. The cost includes stamp duty, legal and professional fees, besides transfer charges. Apart from the down payment ,you have to make for the purpose of getting a loan, you need to save for these costs in advance. Banks provide loans for some of these costs like registration and stamp duty.

Closing Date

The date by which you intend to finish the property purchase transaction. It is also the date when the property gets registered in your name and you become the legal owner.

Club Fees

These are the fees charged by the builder for the right to access various facilities in a club within the housing complex where you have bought a home.

Commitment Charge

Home loan providers recover this charge, usually 1 percent of the loan amount, from the borrower if the loan has not been availed of, within stipulated period of time, usually six months.

Conveyance Deed

It is the legal document through which the title of the property is transferred from the seller to the buyer. It not only contains the past history of the property but also clearly defines the property being transacted and lays down price paid and the other commercial terms that have been complied with.

Direct Sales Agents

They are brokers who sell home loan products of various home loan players, especially banks.

Daily Rest

Interest on the outstanding balance is computed immediately after some principal outstanding amount has been paid. This is the best basis of interest computation for the home loan borrower, though many banks and financial institutions use the monthly rest.

Declining Liability Term Cover

A pure- risk life insurance cover that provides cover equal to the home loan outstanding, at any point of time. The cover declines during the loan tenure as the loan outstanding decreases. This is a must for all home loan borrowers. Single premium options work out cheaper than annual premium options.

Down Payment

The money that a home borrower has to contribute often ----often, atleast 15% of the value of the house-----when he is taking a home loan. When you are young , this amount has to be the least possible while buying a house. At the same time, down payment should be as much as possible as you get old so that loan obligations do not hurt retirement finances in the future.

ECS

This stands for electronic clearing system where the home loan repayments are deducted directly from the bank account of the borrower through standing instructions to the bank. It does away with the need to give  post dated cheques to the lender.

EMI (Equated Monthly instalment)

A home loan buyer must make this payment each month towards repayment of interest and principal of a loan taken by him. EMI’s have a principal and interest component. In the initial years of a loan, the interest component is much larger than the principal component. Towards the latter half of the tenure, it is the principal component that is much larger.

Encumberance

Term describing the state of the property where there are claims or charges on the property due to liabilities like unpaid loans and bills. During your home loan search you must make enquiries on whether the property that you see have this issue affecting them. If you find it to be so, you should stop considering the option.

Fixed Rate Loan

Interest rate charged on the loan remains fixed during the tenure of the loan.

Floating Rate Loan

Interest rate charged on the loan benchmarked to a particular lending rate. The rate gets adjusted during the tenure of the loan as the benchmark interest rate changes.

Foreclosure

This is a term associated, with loans especially home loans , where the lender, say the bank reserves the right to recall the outstanding loan amount before the end of the loan tenure or in default take possession of the property by obtaining a court order.

Holding Charges

Municipal authorities often levy this charge on buyers who don’t begin construction of their property within stipulated time period.

Home Insurance

An insurance product that covers the risk (say fire and burglary) to the house and its contents.

Land Conversion Deed

This is the document that records the conversion of land from one category to another for e.g. from leasehold to freehold or from residential to commercial.

Loan Swap Charges

To prevent existing borrowers from migrating to another lender offering cheaper rates, home loan players charge 2% of the outstanding loan amount on the date of the full prepayment.

NOC

This is an abbreviation for No Objection Certificate. This document is often needed from society management committees and other authorities when a buyer wants to buy a housing society apartment or house.

Pre Launch Discounts

Builders and Developers offer discounts on the price of their homes to buyers before the launch of a housing project.

Power of Attorney

In the context of property transactions, this document, when made by the seller in favour of the buyer, effectively gives the buyer the ownership rights. With this document, the buyer can make alterations to the property and sell it in the future.

Property tax

Tax levied on home owners by municipal or other statutory authorities for the services rendered by it. In the past this was based on the cost of acquisition but now it is increasingly getting linked to market based rates assigned by authorities based on the locality where the house is based.

Property Valuation

This exercise is done either by the buyers’ representative or the lending institutions representatives, in order to try and arrive at the correct market value of the property. For the banks it helps to ensure that the home loans that are practically much cheaper than  other types of loans are not diverted  towards other purposes. For the individual it helps so that there is no conflict in the valuation done by the bank and him and he gets the loan amount that he seeks.

Ready to Move In Property

Category of homes where you can move in immediately after completing the transaction. They are useful in avoiding the double impact of interest and rent on your finances.

Registration Charge

Statutory authorities levy this charge when property transactions come up for registration.

Sale Deed

See “ Conveyance Deed”.

Stamp Paper

Paper on which the sale or conveyance deed is printed and registered. Depending on the prevailing rates in different states, the buyer has to pay stamp duty of the right denomination. While buying a property extra care has to be taken so that the right denomination of stamp paper has been bought and used for registering the property.

Super Built Up Area

It is the built up area plus the proportional area ( per resident of the complex ) of common facilities like lobbies lift wells, internal staircases and society office etc.

Time over Run Costs

Expenses incurred by you in the form of interest costs on loans and rent when the builder delays handing possession of the property to you.

Transfer of Property Act

Under this act, it is mandatory for all kind of property transactions like acquisition, sale, lease, gift, bequest, renting and mortgage to be registered with the registrar of Assurances.

Under Construction Property

Homes which are in the process of construction and possession would be handed over to the buyer at a subsequent date. People buying such homes often  have to pay both the rent and the simple interest on the borrowed home loan amount. Of course the upside is that you can get 25% to 40% during the interim period in appreciation.

Unit Area Method

 This is relatively a new system of calculating property taxes where various areas of a city are assigned to different categories with each category having a different per square meter rate. To find out the rate you have to multiply the per square meter rate with the built up area.

 FAQs

 What is meant by valuation of property?

 The valuation process evaluates the market value of the property. Demand and supply forces operating in the market, as well as other factors like type of property, quality of construction, its location, the local infrastructure available, maintenance, are all taken into consideration before the market value is decided.

 How does property valuation help?

 Typically, if a real estate agent is asked to judge the value of a piece of property, he would do so based on information of recent sales or purchases of similar properties in that area. Though this may give a fair idea of the property's market value, an official property valuation would carry more weight. E.g. if you need to use this piece of property as a security against a loan, the bank's loan approval process would be faster and smoother if the property is certified by an official valuer. Many banks now insist on valuation certificates before issuing loans using properties as security. The value thus certified may also have chances of getting a higher amount of loan sanctioned. Another benefit of official valuation is that it is a useful negotiating tool when selling the property. Such certification also becomes essential in situations where the correct value of the property has a legal bearing-such as, a will statement, insurance papers, business balance sheets etc.

 What is the meaning of a property’s market value? Is stamp duty payable on market value?

 The price that a property can command in the open market is known as its market value. Stamp duty is based on the market value or the agreement value of the property, whichever is greater.

 What does the term ‘Leasehold Property’ mean?

 A property (plot/ built up) in which perpetual leasehold have been granted by the title paramount in favour of the lessee. The title paramount i.e. president of India in these kinds of properties acts through DDA, L & DO. Leasehold properties are not freely transferable. Depending upon the covenants pf. the lease deed prior permission of the lessor (DDA/LDO) is required to transfer the property. One is required to pay charges such as 50 & of the unearned increase and conveyance.

 When a piece of property is given or 'leased' to an individual (known as the 'Lessee') for a stipulated period of time, by the owner of the property (known as the 'Lessor'), the property is referred to as Leasehold Property. A certain amount is fixed by the Lessor to be paid as lease premium and annual lease. The land ownership rights remain with the Lessor. Transfer of property requires prior permission.

 What does the term ‘Freehold Property’ mean?

 A property where title paramount has conveyed the property in favour of the purchaser by conveyance/ sale deed with no restriction on the right of the holder of the property to further transfer the property. Record of ownership of the freehold property can be ascertained from the office of the sub-registrar. It can be transferred by registration of sale deed.

When ownership rights for a piece of property are given to the purchaser for a price that property is referred to as Freehold Property. Unlike in the case of leasehold property, no annual lease charges need to be paid and the freehold property can be registered and / or transferred in part(s).

 Are there any benefits in converting to a freehold property from a leasehold one?

 There are several benefits: if you convert the property to a freehold property, you become a full-fledged owner by getting the sale deed and having it registered. A freehold property has better marketability and can be sold, mortgaged or kept for standing security, which cannot be done with leasehold property.

 Are there any income tax considerations while transferring newly acquired property?

 If the transfer takes place within three years of purchase, the income tax exemption under Section 54F of the Income Tax Act does not hold good.

 What constitutes conclusion of sale of a property?

 An agreement of sale, coupled with actual possession of the property would be considered as a conclusion of the sale. Usually, the entire amount is paid at the time of handing over possession.

 HOME LOANS

 Who can apply for a home loan?

 Any Indian Resident, Non-resident Indian or Person of Indian Origin can apply for a home loan if they are 21 years of age at the origin of the loan and 65 years or below at loan maturity. Housing Finance Companies (HFCs) usually give home loans for properties located in India to people who are employed or self-employed, with a regular source of income. 

 ⇒ Eligibility for Home Loan 

 You must be at least 21 years of age when the loan is sanctioned. 

-The loan must terminate before or when you turn 65 years of age or before retirement, whichever is earlier. 

-You must be employed or self-employed with a regular source of income. 

 ⇒Eligibility for Office Premise Loan 

 -You must be at least 21 years of age when the loan is 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.

 When can a home loan be applied for?

 An individual can apply for a home loan even before the property has been selected. The loan amount is sanctioned based on the ability to repay. This helps in planning a budget while purchasing the house.

 How does the lender calculate eligibility?

 A number of factors are taken into account when assessing your repayment capacity. Your income, age, number of dependants, qualifications, assets and liabilities, stability/ continuity of your employment / business are some of them.

 However, there are ways by which you can enhance your eligibility.

 - If your spouse is earning, put 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 can also be considered for sanctioning the loan on your combined income? The disbursement of the loan, however, will be 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, it could be that having one might enhance your credibility with us. If so, our loan officer would provide you with the necessary details. 
The final amount to be sanctioned will depend on your repayment capacity. However, what you ultimately are entitled to will have to conform within the limits fixed for each loan. 
Also, when the company looks at the total cost, registration charges, transfer charges and stamp duty costs are included.

 How do I repay the Loan?

 You can repay the loan in Equated Monthly Installments (EMIs) comprising principal and interest. Repayment by EMIs commences from the month following the month in which you take full disbursement. Till then, you only need to pay the interest on the amount disbursed.

 How is the loan repaid?

 All loan repayments are done via equated monthly installments (EMI).

 What is an EMI?

 An EMI refers to an 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 is to be paid every month through post-dated cheques (PDCs), Electronic Clearance or direct deductions from your salary. If you are opting for PDCs, then you will have to provide 36 upfront. The PDCs are to be dated on the 1st of every month. However, if you receive your salary a few days later, no problem. There are some flexibilities of dating the cheques, which depends on that financial institution's rules & regulations.

 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 and each subsequent PEMI at the end of every month till the commencement of EMI.

 When does the repayment start?

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

 What is pre-EMI interest?

 Before final disbursement, you may have to pay interest on the portion of the loan disbursed. This is called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of EMI commencement.

 Is there a fixed interest rate for the duration of the loan?

 Most HFCs offer the fixed rate as well as the variable rate options to customers.

 What is a fixed rate loan?

 A rate of interest that is constant throughout the duration of the loan is known as a fixed rate loan.

 What is a floating rate loan?

 A floating rate is when the interest rate on the loan changes according to the rates in the market during the period of the loan.

 It is better to opt for a fixed or a floating interest rate?

 If interest rates are falling, a floating rate loan is a better option. But when interest rates are rising, opt for a fixed rate loan, because you will then know in advance what your EMIs will be.

 Is there a difference between monthly rest & annual rest?

 On the basis of the principal at the start of every month, the interest is calculated in monthly rest. For annual rest, this is done at the beginning of every year.

 What are the other areas of expenditure before I get a home loan?

Processing and administrative fees, pre-payment charges and delayed payment charges, legal fees, technical fees, stamp duty and registration of mortgage deed are all likely areas of expenditure.

 Is a guarantor required?

 A guarantor is insisted on by the HFC so as to ensure that the loan is paid back in full and in time. The guarantor is responsible for the repayment of the loan if the borrower is unable to do so.

Can I repay the loan before the set date of repayment?

 You could do this, but some HFCs require a pre-payment fee to be paid. Check with your HFC.

 How do I select my HFC?

 Various considerations would help you zero down on the HFC most suitable for your loan requirements. Analyze the following points before taking your decision:

• Loan amount: The minimum and maximum loan amounts vary between HFCs. Find out if the amount you require falls within this limit.
• Duration: There is no lower and upper limit to the tenure of the loan. Find out if the time limit you want it for can be accommodated. This varies between HFCs. Normally HFCs offer loans ranging from 5-20 years, with some going up to 30 years. For NRIs the maximum tenure could be 10 years in some cases. Depending on your requirements, this would have a bearing on the loan you opt for.
• Interest rate: This varies between HFCs. Fix a duration that you want the loan for and find out the EMI from them. Compare and identify the lowest EMI.
• Pre-payment: Check if the HFC charges for repaying the loan before its due date.
• Flexibility: Find out whether you can change your interest scheme from fixed to variable if so desired or if there are restrictions.
• Guarantor: Some HFCs require this, while others don't.
• Documents required: These may vary between HFCs although there are a few standard documents like proof of income, proof of age and residence and a salary slip.
• Co-owner: If there is to be a co-owner or co-applicant for the loan, the HFC has to accept the relationship between the two.
• Other fees: Each HFC has different fees for administration and processing among others.

Can a loan be switched over if I have obtained it at a high rate of interest, but another HFC is offering a better interest rate?

You could do this. After discussing the reasons with the current HFC, they may even reconsider the interest rate.

What is the maximum amount of housing loan available?

The maximum amount is 85% of the cost of the property, including the cost of land, subject to a maximum amount of Rs 1 crore.

 What is the amount I can borrow and what are the criteria?

 Generally, the amount is up to 2.5 times your gross annual income. But your equated monthly installments usually should not exceed 35 per cent of your gross monthly income. Besides this, HFCs will assess your eligibility based on your ability to repay.

 What is the period in which I will have to repay the loan?

 The repayment tenure:

 1. Home Equity Loans - Maximum loan tenure of 15 years. 
2. Office premise loan - Maximum loan tenure of 15 years. 
3. Home loan - Maximum loan tenure of 30 years - Few HFCs offers usually at a higher interest rate.

 Usually in a period of between 5 to 15 years, but definitely before you retire.

 How is the interest calculated on my loan?

 Most HFCs follow the yearly reducing balance method, which accounts for your principal repayments only at the end of their financial year. Thus you pay interest on the principal that you have already returned to the HFC during the year. The effective interest rate is thus higher than the quoted interest rate by around 0.7 per cent. Banks and some HFCs, in contrast, follow the daily or monthly reducing balance method, which results in a lower interest burden.

 How do I apply for a loan?

 Approach an HFC with the latest salary slip and TDS Form 16 of the last two financial years for yourself and your co-applicant. The loan officer will informally tell you the amount of loan you are eligible for and the terms, in areas in which they finance homes.

• Collect a loan application form and confirm the needed documents.
• Visit more than one company since you are likely to get better terms / larger loan amount if you shop for the best deal.
• At your chosen HFC, submit the duly filled loan application along with the required documents and an application fee (around 1 per cent). They will then interview you on the same. After conducting an appraisal of your application, the HFC will give an in-principle sanction of your loan.
• You now have to submit your property documents, which should show a clear title. The HFC will check these and levy an administrative fee (around 1 per cent). It will then disburse the loan, either fully or in installments, directly to the builder / seller of the property.

Who can be co-applicants for the housing loan?

Usually a spouse can be a co-applicant. Other immediate family members are also acceptable to some companies, depending on merits. If both partners are working, it is better to have your spouse as a co-applicant since this will entitle you to a much larger loan.

What security do I have to provide

A first mortgage of the property to be financed. The title should be clear marketable. Some HFCs may also require collateral security like the assignment of life insurance policies, pledge of shares, NSCs, units or mutual funds, bank deposits or other investments.

Does the Agreement for Sale have to be registered?

Yes. In many Indian states, the agreement between the builder and purchaser has to be registered. This can be done at the office of the sub-registrar appointed by the State government.

Does the property have to be insured?

The property should be insured against fire and other hazards and the HFC will have to be the beneficiary of the policy.

How long does it take to get my application processed and my loan sanctioned?

It will take around 15 days for the processing of your application if your documents are in order. Make an application only if you are eligible for the loan since the HFC will not return the application-processing fee. It will take another week for the company to check out your property papers and make the disbursement.

Documents required:

1. Passport size photograph. 

2. Age verification: PAN card, Voters ID, Passport, License. 

3. Bank statement for the last six months. 

4. Income Documents e.g. Latest Form 16, Certified IT returns for latest 3 years. 

5. Admin Fee cheque. 

6. Loan Enclosure letter 

These are the documents required for sanctioning a loan. You may be asked to submit further legal documents if required by the Bank or its approved lawyers 

Do retain photocopies of all documents being submitted by you.

When do I have to make my share of the contribution to the purchase price of the property?

 You will have to make your payments towards the property price up-front before the HFC disburses any installment of the loan.

 What do I have to do when my housing loan is sanctioned?

You must submit the property papers and pay an administrative fee (approximately 1 percent). When the HFC clears these papers, you must take the first disbursement of the loan within a stipulated period (usually three months) and avail of the entire loan within about a year's time.

In how many installments can the loan be disbursed?

The loan can be either disbursed in full for outright-purchase / ready properties or in a few installments for under construction properties. The disbursement will be made taking into account the requirement of funds and the progress of construction.

Your loan will be disbursed after you identify and select the property or home that you are purchasing and on your submission of the requisite legal documents.

While you may be under the impression that the list of documents asked for is rather extensive, please note that it is for your own good. Each and every single document asked for will be verified and checked to ensure your safety.

This may take some time but we want to ensure a clear title and will complete all the legal and technical verifications to ensure 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, on registration of the conveyance deed and on the 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 standard documents for disbursement: 

1. Loan Agreements 

2. Disbursement Requests 

3. Post-dated cheques 

4. Personal guarantor's documents, as the case may be.

Some documents are specific to each case.

Do I get tax benefits on the loan?

Yes. You are eligible for certain exemptions on both the principal and interest components of the loan as per the Income Tax Act, 1961. The principal repayment of the loan up to Rs 10,000 is eligible for a rebate @ 20 per cent U/s 88 of the IT Act. The income tax exemption limit for interest paid on housing loans is Rs 75,000 per annum on self-occupied houses. Therefore an interest payment of up to Rs 6,250 per month can be deducted from taxable income in arriving at the total income tax payment of an individual.

Can I get a loan for extension / upgradation / renovation of my house?

Yes, these loans are available from some HFCs. However the loan terms may be different from the usual housing loans.

Can I sell the property on which I have taken the loan?

Yes. But the loan will have to be repaid before the sale is affected. Some HFCs allow the transfer of loan to the buyer of the property, depending on his eligibility for loan.

What is an amortization schedule?

An amortization schedule is a table giving the reduction of your loan amount by monthly installments. The amortization schedule gives the breakup of every EMI towards repayment interest and outstanding principal of your loan.

Can I get IT certificates in the name of both the Applicant and co-Applicant separately?

As per the IT rules only one certificate can be issued for a home loan and hence one certificate will be issued in the name of both applicant and co applicant.

When is the IT certificate issued?

Yes, this is allowed by HFCs.

Can I rent the property on which I have taken the loan?

The IT certificate will be issued at the end of a financial year. You can expect to receive your copy of the IT certificate in the month of April or May.

How can I get the tax benefit during the year?

You can request for a provisional IT certificate that can be issued any time during the course of the year.