What are the approval documents?

What are the Approval Documents?
In a complex, there are basically three types of Approval Documents indicating approval granted by the authorities concerned. These are the Approved Plan, the Planning Permission and the Building Permit or the Licence to build. All the three are important and are to be scrutinised for checking whether the development is properly approved. Depending on the nature of the development, certain additional documents may also be required on a case-to-case basis.
Whether the sale and registration of the Undivided Share of Land is sufficient to give me title to the flat?
Although the Sale Deed is effected only in respect of the land, in matters where land alone is sold on a first sale basis, the ownership of the flat is acquired by entering into a proper Construction Agreement which in most of the cases does not require mandatory registration. When the documents are read together on a composite basis and when there is completion of construction and delivery of the apartment concerned with the intention that the purchaser shall acquire the ownership of such flat, then the documents are sufficient in normal course to have a ownership of flat as well as undivided share of land.

Parent and patta documents for a flat

What are parent documents?
The Sale Deed or other document under which a person derives title is known as “Title Document”. All earlier documents that indicate the title of the persons who are predecessors in interest establishing the flow of title up to the present purchase are known as “Parent Documents”. In order that a title is clear, both the present title deed and parent documents have to be in order.
Is Patta issued for flats?
Generally, as undivided shares of land are sold to the Purchasers, Patta is not issued for undivided shares of land. The non-issuance of Patta in these cases will not affect the title if the same is otherwise in order. However, in certain cases and where practicable, there are instances of all the co-owners of a complex obtaining joint Patta.
What does sale of Undivided Share of Land mean?
There are many purchasers in an apartment complex. The size of the apartments may also vary. An undivided share of land is the proportionate share, which a Purchaser should own and possess in order to acquire ownership for his or her apartment. There are various methods of calculation of this undivided share. Generally, the undivided share being purchased must match the approved FSI as per approvals granted by authorities. This is transferred by means of a Sale Deed to enable the Purchaser to hold that share to have a registered document of title relating to the same. The undivided share will be an important factor to be taken into account in case of demolition of entire complex and redevelopment of the same and other similar circumstances, to work out the rights of the purchaser.

What does Encumbrance Certificate mean?

All transactions that are in the nature of conveyance or transfer of immovable property of the value of Rs. 100/- or more have to be effected by a duly stamped and registered document. The entries relating to these transactions are recorded in a book known as Book I in the office of the Registrar of Assurances concerned. The Encumbrance Certificate is an extract of this book for the period requested. It is issued in the name of the person who makes the application. It may be noted that merely issuance of this application in the name of the applicant does not signify any ownership of the property by itself.
What is value of Encumbrance Certificate?
A buyer who is purchasing the property has to take all reasonable care and caution in purchasing the same. As the Encumbrance Certificate reveals all registered transactions relating to the property concerned, this is a mandatory step to understand as to whether there is any previous transaction that will affect the instant purchase. Further, the rights of a Purchaser will be subject to the rights of parties under such documents. Furthermore, this is an important step for a person to make a purchase in good faith.

How is Car Park allotted?

Usually, the Car Park is allotted by including the same in the Construction Agreement. A Plan of the area allotted is also annexed. The Car Park can also be allotted under Amenities Agreement, Car Park Agreement or a Letter under which the same is allotted. These allotments are in the nature of giving an exclusive right for usage of the Car Park. At times, when land and building are sold under a single Sale Deed, Car Park may also be sold under the Sale Deed.

What are the typical documents for purchase of a flat?

Agreement for sale
The usual practice is to have an Agreement for Sale for sale of undivided share of land to the Purchaser. This gives the right of purchase to the Purchaser, subject to the terms and conditions contained therein. This document also sets out the extent of undivided share of land to be purchased.
Agreement for Construction or Builders agreement
This contains the terms of construction and also payment by the Purchaser. The specifications of the flat are set out in this Agreement. This is in the nature of a Works Contract. The Purchaser acquires ownership on completion of the contract and delivery of the flat.

Other Agreements like, Amenities Agreement, Car Park Agreement, Common Area Allotment Agreement are also entered into depending on the requirements and the structure usually devised by the builder.

Judge your home price

How we can arrive a price of a Residential Property?
Method1
One old and powerful methodology to arrive a price of a particular property is calculating its "Rental Yield Per Year". For example a property which fetches rent amount as 3000 rs per month (A). The property owner is asking around 1500000 rs (B), Then the Rental Yield is (A*12/B)*100 -> 2.4%. If the rental yield is 5% or morethan 5% then the property is worth to buy or best to wait for another property
Method2
If the current price is 15% more than 2004 or 2005 then you can surely go ahead with that

Construction Tips

1. Ferro Cement walls are fire resistant and also it can resist termites
2. Ferro cement walls are weather proof but a coating of quality paint can make it durable
3. Cracks in cement can be sealed with a coating of watery cement solution after wetting the surface
4. Edge thickness of minimum 150mm for footing and salts should be provided
5. Clear Cover should be 75mm from corrosion prevention point of view

Before you buy a flat

The below details are must before you buy a flat
1. Check whether the details of approved plan have been displayed at the site
2. Check whether the promoter/power of attorney has the right to transfer the undivided share of land
3. Check whether the completion certificate has been obtained after the completion of the building
4. Check the records with Directorate of Town and Country Planning and ascertain the need for layout approval

Grapping best loan options

A major area of concern for home buyers is the loans they apply for. More so now when in the last six months it has changed many times, depending upon the RBI's policies, which have been changing rather too frequently. At present the market is abuzz with a lot of talk on teaser rates coming to an end and the new higher interest rates being applicable from April 1, 2010. With such fluctuating changes happening in the home loan rates since the past one year, how does the home buyer fare? The problem compounds with too many choices, offered by various banks. The decision is made after thorough comparisons are done, and even then, one may not be too sure.

Fixed rate home loans are history, as volatility in interest rates is a new reality. In fact, if one makes the home loan a deciding factor it would not be the best thing to do now as the current scenario has changed, although I must say reduction of loan interest rates do put people into action.
However it is important to decide soon. The customers should try to opt for limitedperiod offers that a few banks are offering for two to three years. Further, they should select a home loan that provides transparency in rate linkage to bank Prime Lending Rates so as to ensure that they get the benefit of downward rate revision in as timely manner as the upward movement. Overall, the customer needs to go beyond the interest rate comparison to decide the home loan as it is a long-term transaction
With the introduction of service tax on builders in the recent budget, property prices are also bound to go up. The proposed Direct Taxes Code (DTC) proposals are expected to shrink some of the tax benefits available to home buyers. In a scenario like this, it is better to decide now, if one has made up his mind to buy a home.

Looking at the present state of the economy, the rate of interest is increasing and is expected to go upwards in the future; hence it is advisable to go for a home loan at this stage. Also, the borrower will benefit if he goes for fixed rates instead of floating rates

Common parameters for deciding loan tenure

Tenure is the period or duration for which a loan amount is sanctioned. Borrowers might feel like taking the shortest possible loan tenure ideally. However, do not rush for the shortest loan tenure. It may appear enticing to pay off your home loan debt in the shortest possible time span.

However, a short tenure loan translates into very high EMI dues month after month. The borrower must remember that he has other financial commitments - usual monthly expenses - and must not stop saving during the repayment period.

Ideal loan tenure?

Consider different EMI outflows for various loan tenures. Will you be comfortable paying the EMI, yet have enough to meet all other financial commitments and emergencies? Freeze on the tenure for which you can pay the EMIs without a major financial stress.

Consider these parameters before deciding on the loan tenure:

Is the amount high?

If the homeowner has borrowed a huge sum of money, the EMI outflow would be high. Hence, to make EMI repayment comfortable, the borrower may have to go for longer loan tenure. Longer the loan tenure, lesser is the EMI outflow. Consider a loan of Rs 50 lakhs borrowed at 12 percent interest. If the tenure is 15 years, the EMI outflow would come to around Rs 60,000. If the loan amount was lesser, say Rs 25 lakhs at 12 percent interest, the EMI outflow for a tenure of 15 years would be around Rs 30,000. If the borrower can afford to take a shorter tenure loan, of say 10 years, his EMI outflow would be around Rs. 36,000.

Purpose of buying a property

If the borrower has purchased the property solely as an investment, he would like to sell it off when he gets a good deal. In such cases, most buyers prefer to keep the loan tenure as short as possible. This way they need not pay any penalties towards prepayment or exiting the loan before end of tenure.Those who have purchased the property only to live in it may prefer longer loan tenures. They may not be very keen on a very short loan tenure. Further, they benefit from tax deductions on their home loans. However, borrowers must keep in mind that longer the loan tenure, greater is the associated cost of borrowing.

Age of borrower

A person close to his retirement years will not be eligible for a long tenure loan. A middle aged person who is making good money may prefer repaying the loan before he retires.A young borrower who has recently started working may not bring home a huge income. His income level may go up as the years pass by. He should opt for a longer loan tenure as he has many years ahead to work and clear his debt.

Income:

A person with greater disposable income can pay off his debt faster than a person who earns lesser. If the borrower has higher income, he can pay higher EMIs and clear his debts faster. A person having greater financial commitments , other debts or a lower income may find repaying his debt a big challenge.A borrower's current income level and expected increase in income are factors that can influence the loan tenure. Interest rate fluctuations are difficult to predict.The impact of increase in interest rates could be hard if the borrowed amount is high. Whenever you have excess funds, partially prepay the loan. This way, a borrower can clear his debt faster.

Choose home loan for your needs

Borrowers can avail loans for various needs like purchasing a house, constructing or renovating a property, or even home extension. Home loans come in different flavours and it is very important for homebuyers to select an option that suits their specific needs. The decision to select between fixed and floating rate options must be based on the prevailing interest rate, market scenario, nature of the borrower and other influencing factors.

Here's how the different loan options work:

Fixed rate loan:

Fixed rate loan, unlike what its name suggests, can be changed by the lender under extreme market conditions. Loans like fixed for three years indicate it is fixed for a constant period of three years. After this period , the interest rate on the loan is reset to the market rate prevailing at that time. Only 'pure' fixed rate loans have a truly constant rate of interest. However, they are not so popular because the interest rate charged is very high. Borrowers who seek predictability and want to know in advance what their loan is going to cost them can opt for a fixed rate loan. Some borrowers who panic when the rate fluctuates find fixed rate loans suitable for them.

Floating Rate loan:

The floating rates move downwards when general interest rates fall and upwards when rates outside go up. The interest rate fluctuates with the change in the rates in the economy. Hence, a borrower's EMI outflow could increase if the lender decides to increase his rates. The borrower can stand to gain in a floating rate loan when there is a slide in the rate of interest. When rates go up, your loan can become more expensive and resets your EMI repayments till date. Those borrowers who feel the rates are likely to dip further and seek to benefit from it can opt for floating rate loans.

Hybrid Loan

In case of a hybrid loan, a part of the loan amount is locked under fixed and the remaining exposed to floating rate. The borrower can decide what percentage should be locked under fixed, what percentage exposed to floating rate fluctuations. Hybrid loans are the best option for homebuyers who cannot decide between fixed and floating options.

Know your home loan: Managing EMI payments

Many borrowers who opt for the floating rate of interest face financial stress whenever the rates move upwards. An increase in the interest rate translates into an increase in the EMIs. If the homeowner is under financial stress, home loan repayments become a nightmare. This is because EMIs are as high as 40 percent of a borrower's take-home income on an average.

Here are a few tips to manage EMIs effectively:

Prepay

Partial prepayment could reduce the high interest cost on that part of the loan. If you have any other asset or property that is not yielding anticipated returns , the option to sell it off and prepay the home loan exists. However, foreclosing a loan ahead of the tenure might attract a prepayment penalty of around two percent. If borrowers fear defaulting under the burden of increasing rates, prepaying is an option worth considering.

Negotiate

The borrower can try convincing the lender about his financial crunch and negotiate for a lower rate. You can work out a more comfortable repayment option with the lender.

Switch

If another lender offers very low rates compared to what you are paying towards your home loan, consider moving to the other lender. Home loan is a financial commitment that spans over long tenures, say 10-15 years. Weigh in the switching cost and penalties. Do your homework on the new lender. There is little the borrower can do if the new lender hikes the rate within two months of switching.

Manage Finances:

Chalk out a plan to manage your existing debts, regular monthly expenses and contingencies. Do not indulge in new debts and delay any new purchase plans. Spend judiciously and avoid splurging till you are out of debt.

How much loan you are eligible?

Here is a look at some factors that determine your home loan eligibility. Your income level and stability of job determine how much a bank is willing to lend. Most banks consider the fixed monthly income alone and ignore the performance bonus and variable pay components when arriving at the installment to-income ratio. Banks are more stringent while lending huge loans. Salaried individuals are considered to possess greater repayment capacity than the self-employed. Your income and repayment capacity decide your home loan eligibility.
Financial position
An applicant's overall financial health is an indicator of his repayment capacity. Savings in other instruments, a good bank balance and other assets assure the lender that the probability of default is very low. A person with no previous history of default and no other debts will be eligible for a greater loan amount.
Age
Age determines the earning potential of an individual. A person close to his retirement years will not be eligible for a loan tenure beyond his working years. A young person who has started earning will be eligible for a long tenure loan. He is considered to have greater earning potential.

Nature of Job

Certain jobs are classified by banks as having high risk. The list varies from lender to lender. Some companies are more favoured by lenders and such applicants are also offered lower interest rates.

Enhancing Limit

Your educational qualification , age, number of dependants, other assets, liabilities , credit report, other savings and job stability determine your enhancement eligibility. Enhance your home loan eligibility by opting for a higher tenure. The EMI that is due declines as the tenure is increased. On the flip side, you may have to pay more to the bank in the form of interest. You can also enhance loan eligibility by clubbing your income with that of either, your spouse, father, mother or son. Joint loans increase your loan eligibility.

Do’s and Don’t Do’s in property Investment

Investment in real estate may yield lucrative returns but any slipshod while observing the ground rules will be a costly affair for an investor. The following list may not be exhaustive but an attempt has been made to highlight the nittygritty involved while investing in immovable property. When you buy property, buy it from the owner and you must become the owner. Ownership means the ability to possess and enjoy it. The difference between perpetual lease and ownership is that in the former you can put a building and you will be able to deal with it.

However, you can't destroy the property whereas ownership gives the right to deal with the property in any manner you like. In perpetual lease, you can surrender the lease. When you are the owner of a property, you have the right to write a Will or leave a Will relating to the property. The owner can be an individual or minor or corporate or society or trust. The procedure for dealing will depend on who the owner of the property is. Rights which will affect the ownership can be created by all these persons which can vary by religion of the person concerned or by execution of documents including certain unregistered documents.

Your right to acquire and occupy the immovable property must be complete. There should not be a third party right. The capacity to deal with the property in toto is an indication of ownership. The requirements will differ on a case to case basis. If you are dealing with a freehold property, on purchase of property you should step into the shoes of the erstwhile owner and be able to exercise all rights subject to legal limitations. If the owner is a minor, you should get a court order. If he is of unsound mind, you have to get the court order; if it is a company, it has to follow certain procedures before the property is sold. When you buy the property, there should be a transfer of ownership free of encumbrances, free of other claims, free of third party interest and you must get the possession and transfer all records to be made in your name, which is called mutation.


You should ensure that a patta is obtained for independent plots. This is because in case the government wants to acquire it, it will go on the basis of patta (revenue record) as the main record to determine the ownership of the property. Above all a word of caution. Even if all the due diligence exercise has been carried, there is always a scope for some error. Go to a professional to scrutinise in its entirety and ensure that things are in order.

Factors to consider while deciding budget for dream house

A 2-BHK (995 sq ft.) flat, with all the modern facilities; just 15-minute drive from the heart of the city at Rs 2,800 per sq ft; Book Now! As the property market has revived, so has the frequency of such messages. However, buying a dream house has always eluded people. In most cases, it is the pricing that does not match the budget of a buyer. Not to forget the other unmentioned costs that further have an inflationary impact on the overall value of the property.

This guide provides a checklist of various costs that must be kept in mind while deciding the overall budget before buying one’s dream house.

First and foremost, it is the area over which the buyer is charged. Typically, one does not get the area for which he/she pays for. If one is looking at buying, say a 1,500 sq ft apartment, the useable area could vary anywhere between 750 sq ft to 1,200 sq ft depending on the loading done by the builder. Thus the actual livable area, or the carpet area, one gets is around 50-75 % of the super built-up area. The difference in the area is accounted for by utilities and common areas like staircase, lobby, lift, society office, clubhouse and swimming pool among others. Loading is a double-edged sword. It not only reduces the useable area, but also pushes up the effective price. In a project with 50% loading — not uncommon in many parts of Mumbai now — the actual cost of the leviable areas is double that of the sticker price. This practice is more pronounced in new projects that were mostly sold on their USPs of providing ever greater number of amenities, such as swimming pool, club house, gym, common party halls, society office and lobbies among others. But every additional amenity adds to the building’s super-built-up area and cuts in the apartment’s carpet area. In fact, some developers misguide buyers by selling on the basis of super built-up area only, without clearly mentioning how much is the carpet area. This is despite the fact that most states have laws that say that flats should be sold only on the basis of carpet area.
About 5% of the value of the property is paid towards stamp duty and registration charges, though it could vary across states. These are mandatory fees that need to be paid. In the above case, it would be Rs 1.40 lakh. Value-added tax (VAT) is another recent addition to the already long list of taxes to be paid. In Maharashtra, VAT is charged at 1% on the contract price of a flat as disclosed in the sales agreement. Brokerage charges could vary from 1-4 %. The processing fee for taking a loan, though, depends on the loan amount, typically ranges between 0.35% and 2%. According to the Budget proposal, real estate developers might have to pay a service tax on transactions or sales, where the booking amount is collected from prospective buyers before the project is completed. This means, a tax of 10.3% would be applicable on one-third (33%) of the price of the apartment, which will be passed on to customers
Taking an example, a property costs Rs 2,800 per sq ft as a basic rate. The buyer is interested in buying an apartment of 995 sq ft. So the value of the apartment stands to be Rs 27.86 lakh. But this does not include the parking charges and maintenance charges. The price calculated does not include the preferential location charges (PLC) either. A specific floor will be charged anywhere between Rs 10 to Rs 100 per sq ft of the basic area. A park facing view or a swimming pool view would be charged additional PLC. This charge ranges between 5% and 10% of the basic cost. As per our example, if you take external development costs (EDC) at 5% of the basic price, it adds Rs 1.39 lakh to the basic cost. If you own a car, you will need to pay one-time parking charges. For each parking space, you have to pay 5-10 % of the basic cost of the house. As per the above example, if you have one car, your basic cost goes up by Rs 1.39 lakh. Other than these costs, you need to pay for power and water connections and other such charges. Normally, these costs do not exceed Rs 20,000-Rs 25,000. For our case, we may take Rs 20,000 as a cost against utility connections.
There are costs that you will incur towards maintenance of the society/locality, such as payments to the guard and sweepers, and for repairs. Before the flat is allotted, you will need to pay a security deposit that will be used to meet these costs in the future. Club club membership, maintenance charges and other such charges are 15- % over the basic cost of the house. As per our example, taking 5% each towards the charges against club membership and security deposit for maintenance cost, your budget goes up by approximately Rs 2 lakh.
Legal fees need to be paid to the lawyer to verify the legal title of the property and that the ownership of the property is not in dispute. One may have to pay conveyance costs to the lawyers for transferring property from one person to another. Inspection fees might have to be paid to a surveyor to get the property inspected for the purpose of availing a home loan. Thus, if one adds up all the additional incidental costs, the actual price of the house may turn out to be much higher than the one suggested by the sticker price.

Buying Home is a Major Financial Commitment

Many of us are taking the first available home loan offer and then stuck ourselves by paying hefty EMI’s. We all forget buying a home loan is huge financial commitment. Hence we must be careful in choosing a home loan

There are different factors we need to analyze, below are some (not limited to this… but more)
Interest Rates
http://fromrentaltoown.blogspot.com/2010/04/fixed-or-float.html
Lender Reputation
Will post later more details
Prepayment Penalty
What is the percentage of loan that the bank charges towards prepayment? Try to select the bank that charges the lowest possible penalty, as you will end up losing any possible savings that you'll get by changing the lender.

Will post later more details

Proceeding fees and Other Charges
Will post more details later

Besides the above, buying a home involves other costs like insurance, processing fees, legal fees, inspection fees etc. Try to go for the lenders that charge the lowest charges, as these fees add up to the cost of buying a home.

Fixed or Float?

The decision to select between fixed and floating rate options must be based on the prevailing interest rate, market scenario, nature of the borrower and other influencing factors.

Fixed rate loan, unlike what its name suggests, can be changed by the lender under extreme market conditions. Loans like fixed for three years indicate it is fixed for a constant period of three years. After this period, the interest rate on the loan is reset to the market rate prevailing at that time.

Only 'pure' fixed rate loans have a truly constant rate of interest. However, they are not so popular because the interest rate charged is very high.

Borrowers who seek predictability and want to know in advance what their loan is going to cost them can opt for a fixed rate loan. Some borrowers who panic when the rate fluctuates find fixed rate loans suitable for them.

The floating rates move downwards when general interest rates fall and upwards when rates outside go up. The interest rate fluctuates with the change in the rates in the economy. Hence, a borrower's EMI outflow could increase if the lender decides to increase his rates.

The borrower can stand to gain in a floating rate loan when there is a slide in the rate of interest. When rates go up, your loan can become more expensive and resets your EMI repayments till date. Those borrowers who feel the rates are likely to dip further and seek to benefit from it can opt for floating rate loans.

Currently for another 1 or 2 years the interest rates are going to be little higher, so it is better to choose a fixed one for those whom wanted to ensure the current rate of interest for another couple of years

In case of a hybrid loan, a part of the loan amount is locked under fixed and the remaining exposed to floating rate. The borrower can decide what percentage should be locked under fixed, what percentage exposed to floating rate fluctuations.

Hybrid loans are the best option for homebuyers who cannot decide between fixed and floating options.