Tag Archives: homebuying

5 tips for Home loans

5 Easy Ways To Manage Your Home Loan

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If you’ve taken a Home Loan or plan to take one, here are a couple of tricks up your sleeve to manage it better. Stay ahead of your home loan EMI with these 5 simple tips.

Make repayment a priority

Paying EMIs on time boosts your creditworthiness. It may be difficult at first, but you must remember that a good credit history is an essential part of your financial journey. Future lenders judge your credibility based on your Credit Score. Failure to pay your Home Loan EMIs on time take a major blow on your Credit Score. As a result, the chances of your loan and Credit Card applications getting rejected in future increase significantly.

Bonus EMI Tip to make sure you maintain your creditworthiness: Schedule the EMI close to your salary date. This ensures sufficient funds in your account and minimize chances of default due to lack of funds.

Try not to skip any home loan EMI, maintain your credit score to avoid any penalties from your lender.

Use lump sums to prepay

Paying off your Home Loan as soon as you can is the one thing every homeowner dreams of. So, opting for a high monthly payment can help you reduce the loan tenure. As a result, the total interest that you’re supposed to pay to the lender also goes down. By opting to pay more every month, you reduce your own financial burden. This helps an individual invest in other projects of life like retirement planning, a car loan or even a second home.

Pay an extra EMI every year

Paying an extra EMI every year can be tough initially. But it helps put to rest your home loan. There is usually no prepayment charge for floating rate term loans. By paying an extra EMI every year, you can reduce your overall outstanding principal amount. Lenders are unlikely to complain if you repay a little extra every year. Over a 10-12 year period you find your loan paid off soon, erasing the stress of the loan.

Switch to a lower interest rate

Be aware of market fluctuations and updated with reduced loan interest rates available by different banks. Switching to a lower interest rate than your existing one will shave a few years off your loan.

P.S. – But be careful. Don’t jump too many times at low-interest rate differences. If you’re getting a good dip in the rate of interest, you should definitely consider switching. But in case the difference isn’t much, it might be a bad idea to opt for that switch.

Get the math right

There are tools available online by banks and NBFCs that help you determine your financials when you repay a Home loan. For example: The Home Loan EMI calculator gives a clear understanding of monthly EMIs when you enter the details of your loan amount, tenure, interest rate, and processing fee calculation.

Loan amount: You have decided on a property and are aware of its price. After you have acquired your down payment, you will have a better idea of what loan amount you need to apply for. You then have an idea of the amount of your EMI’s.

Tenure Of Home Loan: Decided the loan amount, choose the tenure you would like to opt for, starting from 6 months to 30 years. Keep in mind, the longer the tenure of your loan, the higher the total amount to be paid back will be.

Interest Rate And Processing Fee: The next thing you need to enter is the interest rate offered by your preferred bank. Generally, banks have a 2% processing fee on Home Loans which needs to be accounted for as well when calculating your monthly EMI.

Prepayment Option: Some people prefer to prepay a certain amount of their loan. The Home Loan EMI calculator gives you an option to specify whether you wish to prepay your loan amount. Your monthly Home Loan EMI amount is calculated based on whether you choose a Yes or No on the prepayment option.

The Home Loan EMI calculator is a simple, fast and reliable source of information to calculate your Home Loan EMI’s.

Do A Quick Rain Check Before You Apply For A Loan For A Quicker Procedure

Step 1: You can also use our loan calculators to check your eligibility and you’ll get an assurance of your current capacity.

Step 2: Let HomeCapital take care of your down payment requirements

Buying a home set to get easier as RBI cuts Repo rate by 35 points

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Buying a home? Worried about the interest on your home loan EMI’s? Recent developments in the monetary policy review by the Reserve Bank of India will help you save on these home loans.

Good news home buyers

The six-member monetary policy committee (MPC), headed by RBI Governor Shaktikanta Das, decided to reduce key repo rate by 35 basis points to 5.45 per cent from 5.75 per cent, on Wednesday with immediate effect.This cut in the repo rate stands as the lowest in the past nine years, encouraging the common man towards his goal of buying a home.

Buying a home is becoming a seamless process. With the fourth cut in row, the RBI trimmed the GDP growth forecast for the current fiscal to 6.9 per cent from 7 per cent predicted previously. In January 2014, the repo rate stood at 8 per cent. Since then, it has been revised to 5.40 per cent, a reduction of 2.6 per cent. The RBI governor said in the press conference that a 25 basis points rate cut would have been inadequate while a 50 basis points rate cut would have been excessive.This cut insures that EMIs on home loans and other loans will come down significantly.

“Our interactions with various stakeholders, including both public sector and private sector banks, indicate that steps are being taken by them on an ongoing basis to progressively lower their interest rates so that the benefits of the policy rate reductions are passed on to the economy,” RBI Governor Shaktikanta Das said. “We expect higher transmission of monetary policy actions and stance by the banks in the weeks and months ahead.”

But what does all this mean for the common man and his plans of buying a home? Let us take a look at the outcome of this change.

What does the monetary policy review mean to the country in general?

Any economy measures its economic activity by the gross domestic product or GDP. This could be done taking into account four avenues of cash flow.

  • Private individuals and households that spend money on consumption. This is the common man, his daily expenses and buying capacity.
  • The government and its agendas that strive to promote a stable and growing economy.
  • Private sector businesses that are investing in their productivity. These create jobs, pay the taxes that finance services and investment.
  • Net export in the country. This is the difference between the cost of imports and what they earn from exports.

All these processes in the end determine the cost of money in the country and its GDP decline or growth.

A Monetary policy helps the central bank regulate the cost of money. The central bank is mandated to decide the cost of money, commonly known as the “interest rate” in the economy.

However, dictating exact interest rates is difficult for a central bank due to various factors affecting it. The rate set by the RBI is used as a marker for the rest of the country’s economy. In other words, the EMI for buying your car or a home is determined by the RBI’s decision of the repo rate.

What is a Repo rate?

Repo rate is the interest rate at which the RBI lends money to commercial banks.

100 bps make a full percentage point. The RBI’s repo rate has now fallen 110 basis points since February.

How does a Repo rate affect the common man?

Repo and Reverse repo are short for repurchase agreements between the RBI and the commercial banks in the economy. The repo rate is the interest rate the RBI charges a commercial bank when it borrows money from the RBI. If the repo falls, all interest rates in the economy should fall, further impacting the process of buying a home.

Outcomes of the Repo rate

Immediately after, the RBI announced a drop in its Repo rate, SBI or State Bank of India which is the country’s largest lender by assets because its best interest rates on personal and home loans, introduced a reduction in its benchmark lending rates across all tenors. The bank said its MCLR or marginal cost of funds-based lending rates will be reduced by 15 basis points (0.15 per cent point), and the new rates will take effect on August 10.

Many professionals also commented on the steps taken by the RBI to try and boost the declining economy of the country. Anuj Puri, chairman, Anarock Property Consultants Pvt. Ltd, spoke about the potential of these rate cuts. He said they could stimulate borrowing in the affordable housing segment.

“While we won’t see a significant reduction in unsold inventory, affordable housing is another matter. The segment already has various incentives and being very cost-conscious, it may see a perceptible uptick. But, it all depends on how efficiently banks transmit this rate cut to actual consumers,” he said. Improving transmission remains key to the success of the latest RBI rate cut.

Are you planning to take your first step towards buying a home? Look no further than HomeCapital, to help you with your down payment!

Understanding RERA

How Has RERA Helped Home Buyers and Property Investors In 2018?

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RERA as an Act has been beneficial to buyers but this meant complete transparency from the developer’s end which brought out all the hidden rodents to the surface for clear transactions. RERA is the RTI (Right to information) in the Real Estate world, but our question here is, was it necessary? If yes, then did home buyers benefit from the Act?

Many home buyers believed that the real estate transactions were heavily skewed in favor of brokers, developers, and other middlemen. The Act was set in place to protect home buyers from fraudulent activities like money laundering and to mainly establish a more streamlined process for the Realty sector. The whole purpose of the act is to basically make every real estate transaction safer by inculcating more transparency and accountability.

Ashutosh Limaye, head of research at consultancy JLL India, says while so-called ‘fly-by-night’ developers have been exiting since RERA was implemented, it would be unfair to think that all small players are unscrupulous. “It has nothing to do with the size or scale at which developers operate, it is about their intent. Several small players have made themselves RERA-compliant, because they want to be in this space for the long term,” Limaye says.

RERA’s Benefits to home buyers

Carpet Area Standardisation

The Act introduced a carpet area formula for an even calculation. The carpet area is therefore defined as ‘The net usable floor area of an apartment, excluding the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment’.

This standardization has kept the builders away from inflating the carpet area price which works perfectly in favour of the buyer.

Rate of Interest for Defaulters

The Act has brought both the buyer and seller parties on a common platform by maintaining an equal rate of interest for defaulters. Before the act, the interest paid by the builder to the home buyer was less but if the buyer defaulted, the interest was higher, and this was an unfair deal that discouraged home buyers.

No More False Promises

The buyer has every right according to the act to withdraw from the project with a full refund if the builder fails to deliver any commitments. This increased the faith of home buyers back in the whole Real Estate system and we shall give you the proof to it further.

Advance Payments

The builder can’t take more than 10% of the cost of the apartment, villa, etc. or any other application fee before entering into an agreement of sale. This works in the buyer’s favour yet again!

In case of defects

Any infrastructural defect in quality, workmanship, provision or service if discovered within the first 5 years is entitled to rectification by the builder at no extra cost within 30 days and buyers can also claim compensation for the same.

Delay in Possession

The buyer has all the rights to withdraw from the project with a full refund, along with interest payable from the due date of completion until the amount is refunded. If the buyer decides to continue with the project, till the completion, he will be entitled to compensation along with interest payable from the due date of completion of the project until the project gets completed. This ensures proactive commitments and a fair process that is beneficial for both the buyer and the builder.

A Title Compensation

A defect in the title of the property can also result in compensation which is not barred by any limitation and this means there isn’t any time limit within which you need to discover the defect.

Right To All Information

The buyer is entitled to all the information related to the project in terms of the plan, layout, execution, completion status, facilities, etc. What more could a buyer ask for?

Grievance Redressal

In case the builder fails to comply with the terms of this act, the buyer can take it to the state authority set up under the act, which has the power to redress the grievances.

A MahaRERA official said, “If a homebuyer or a developer is not satisfied with the RERA order, he/she can make an appeal to the appellate board instead of approaching the high court.” 

Did Housing Purchases Increase Post RERA?

Housing sales in the top seven cities grew by 12% in the first quarter of 2018 which indicated that the act restored the faith of serious home buyers, attracted by the new environment of transparency, accountability and financial discipline back in the Real Estate sector – Anarock Property Consultants.

Around 49, 000 units were sold in the quarter, with NCR, MMR, Bengaluru, and Pune alone accounting for 80% of the sales, while the only state that experienced a 12% drop was Chennai.

Homebuyers are now encouraged to make their first home purchase because of the security provided by the state. There couldn’t be a riper season than now, to take advantage of the schemes implemented by the government and an array of firms that are trying to close the massive gaps between the desire of owning a house to turning those dreams into reality.

If you are a new home buyer, we’re happy to let you know that you can now own your dream house without even worrying about the total down payment, because HomeCapital takes care of that!

5 Financial Investment Decisions You Should Take in Your 20s

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A financial investment sounds like an adult step in your life, now that you’ve reached a certain stage of stable income. Millennials all over the world find it hard to save, while in India, we find it hard to spend. You’re probably familiar with the words ‘Saving at an early age is good for your finances beta’, because the habit of saving and investments have been deeply ingrained into our culture.

The question however, that arises here is, ‘Where do I invest these savings?’ While you begin thinking about your financial investment decisions, make sure you don’t invest all your eggs in one basket. They need to be spread out across baskets made of iron, cane, gold and even cement for optimal return on investments.

Charting a financial investment plan is easy but sticking to it is where the game changes. This is where you account for every penny that you spend, so that its on the right track towards giving you a prosperous future.

Equity / Stocks

Stocks aren’t for the risk takers we agree, but what if we asked you to skip spending on a T-shirt that costs Rs 300 (with no returns) and invest in a stock worth that amount? When you watch that stock double in a few months, you’ll thank us! You can take baby steps with SIPs and Mutual funds for starters and then take the big risky moves once you’re confident enough.

Before you make your financial investment in the stock market, you must know that you won’t see your money double instantly. The path to long-term wealth creation is building a diversified portfolio of stocks, bonds and a variety of other assets.

Bonds

Bonds or fixed income investments are basically loans from an investor to a company or government. Bond investors receive periodic payments based on the interest rate at which the bond is sold. A bond is usually tied to a coupon or interest rate that is known at the time of buying and this is where you identify your profit in the long run.

All bonds offered to the public have to be listed on a stock exchange and you can sell them on the stock markets if you need funds before maturity. You make a long-term capital gain (LTCG) if you hold the bonds for at least one year before sale and you also score the benefits of indexation while calculating the LTCG tax!

Fixed Deposits & Recurring Deposits

One of the safest financial investment strategies would include multiple fixed deposits od FDs with different tenures. Fixed deposits are a form of investment where you invest a fixed amount of money for a period at a predetermined interest rate. Your money here is safe and returns are guaranteed with high interest rates, but the only drawback is the inability to withdraw this money before its maturity as compared to other investment instruments.

Recurring deposits on the other hand serve your short-term investment goals where you invest a certain amount of money for a fixed tenure. Interest rates for this kind of a deposit are predetermined and based on the amount and tenure, but the catch here is that you cannot change the monthly deposit amount, nor can you withdraw any part of the investment until the tenure is over.

Gold

Gold is one of the best financial investment tools that will always come in handy. As Indians we cherish the idea of stocking gold because we already know its financial value in times of emergencies. You can buy physical gold in the form of jewellery, coins, gold bars and also own paper gold by using gold exchange traded funds and sovereign gold bonds. There are also gold mutual fund options today that gives you added flexibility towards owning the asset. So the next time you receive gold as a present, preserve it in your locker.

Real Estate / A House

Real Estate is the only commodity in the world that will never depreciate in terms of its value. Investing in a house will give you returns in the from of appreciation (Increase in the housing value) and rent.

In 2017, the rental real estate market was pegged at one crore units and was valued at $22 billion (Rs 1.53 lakh crore). By 2023 its volume is expected to reach 1.8 crore with a valuation of $41 billion (Rs 2.85 lakh crore). Make sure you invest in a locality that is upcoming or in high demand to reap maximum benefits.

While you think about this decision, you’ll have one aching question ‘But What About Down Payment?’ Let our home down payment program take care of that!

An example

With that being said, we’ve come up with a hypothetical situation to give you an idea about your financial investment roadmap:

Name: Rahul Kapoor
Age: 26
Salary: Rs 40,000 PM
Savings: Rs 1,20,000
Wishes to buy a home in 5-6 years

Rahul should begin by investing 50 percent of his income in Mutual Funds. He must ideally invest Rs 12,500 in ELSS funds and Rs 7,500 in non-ELSS funds for five years via SIP, so that he gets a good base amount to purchase his new property. He can invest his savings in Corporate Fixed Deposit with yearly cumulative interest.

SIP investment – Rs 20,000/month
Expected rate of interest – 14 percent
Investment duration – 5 years

Post 5 years, the invested Rs 12 lakhs along with SIP investment’s future value will give him a total of Rs 17.24 lakhs. He now has close to Rs 18.5 lakhs as down payment which can be utilised if the home, he is buying is under Rs 80 lakhs.

Using his own savings, a bit of a contribution from HomeCapital and a home loan on his current salary, Rahul can now own a home in 5 years.

home-loan-eligibility

Home Loans – How To Check Your Eligibility

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Home loans and the whole process associated with them may seem like an unending task, but let us remind you that we live in 2019. The internet and a plethora of startups have just made our lives and the home loan process extremely simple. We’d like you to sit back and relax as we spread out the basics for starters.

Here are a few questions you need to ask yourself about home loans.

Home Loans and Their Eligibility Criteria

Home loan eligibility is dependent on an individual’s income and their repayment capacity. There are various universal factors that determine this. Age is an important aspect. The present age and the working years that an applicant has recorded plays a major role. This is also connected to their present and future financial position of the individual. However maximum loan tenure is generally capped at 30 years.

Your Credit or CIBIL Score

Keep a track of your credit score. This score makes it easier to get approved for a housing loan. Your score could vary from 300- 900 points, depending on the individual’s past loan or credit repayment record. A good credit score is equivalent to 750+ points and above. Lenders also take into account other Financial Obligations such as an existing car loan, credit card debt, etc.

A Co-applicant: Is it necessary?

Firstly in order to proceed with this point, we need to distinguish between a co-owner and a co-applicant. A co-owner is a joint owner of the property whereas a co-applicant need not be a part-owner of the property.

All co-owners of the property will have to be co-applicants of the home loan. However, all co-applicants need not necessarily be co-owners and this is the difference a buyer has to keep in mind. It is their income which is considered for credit.

Adding a co-applicant to a home loan helps to increase your loan eligibility. You can also buy a bigger home in your preferred location and there could be many tax benefits.

What is the maximum borrowing amount for home loans?

Before you plan on purchasing a home by obtaining a loan, you must keep in mind the ‘own contribution’ factor. This is the down payment that most lenders require. It comprises of at least 10-20% of the price of the home in question. The rest, which is 80-90% of the property value, is then financed by the lender. The total amount should also include registration, transfer, and stamp duty charges.

Even though the lender calculates a higher eligible amount, it is not necessary to borrow that amount or you could forget the hassle associated with down payments and check out HomeCapital Services – Where the down payment is taken care off!

What documents does an applicant need?

The basic documents that you require for a home loan are listed below.

  1. Application form
  2. Photo
  3. Identity proof
  4. Address proof
  5. Salary slip/ Form 16(Income Tax return)
  6. Bank account statement (the last 6 months bank statements)

Keep these documents handy always!

Check your rate of interest

It is crucial to check interest rates by various banks and NBFCs. This will help you make a choice better suited to your financial needs. Keep in mind the different types of interest rates that are currently provided; Fixed Interest rates and floating interest rates.

In a fixed interest home loan, the rate does not change throughout the loan tenor, irrespective of market fluctuations. The benefits include the ability to plan long-term. This makes it easy to budget other expenses. Customers also do not expect any future risks.

However in floating interest rates, the interest charges on your home loan changes to the tune of current most lending rates of the bank. The rate is linked to the latest published rate of the bank. This depends on multiple factors. After 2016, MCLR i.e. Marginal Cost of Funds-Based Lending Rate is also applicable only for floating rate-based loans.

Learning about your EMIs

When it’s time for your repayment installments, keep a tab on the tenure that you are picking to pay back your loan. Though smaller installments seem like the wiser choice, the longer duration and higher interest rates may not be the best option for many. Pick a repayment that is better suited for you.

Delayed start of EMI payments

In this type of loan, the payment of equated monthly installments (EMIs) begins at a later date. This is only available to salaried and working professionals aged between 21 years and 45 years and requires a highly secure job along with decent annual increments.

An Increasing EMI

In such loans, you can avail a higher loan amount and pay lower EMIs in the initial years. It then increases with the assumed increase in your income. The repayment schedule is linked to the expected growth in one’s income. If the salary increase falters in the years ahead, the repayment may become difficult.

A Decreasing EMI

The EMI is higher during the initial years and subsequently decreases in the later years. A higher EMI can also mean higher interest in the initial years. However, this will help pay off the loan at a faster rate.

Home loans with longer repayment tenures

Many banks also offer repayment products that are more than 30 years of duration. These, however, depend on the age and salary of the individual and the interest rates vary according to the financial status of the person. He could be middle-aged or even a freelancer.

An important note to remember is to make sure your EMI doesn’t exceed 40% of your total income.

Banks Vs Non-banking financial companies (NBFCs)

After you have taken into consideration the different types of loans that are available, you should also consider the advantages and disadvantages of both banks as lenders and Housing financial companies as lenders.

For instance, the best interest rates are always offered by a bank. But, if you have a low credit score, an NBFC could be better suited for you. It all depends on the type of services that you need. If you use banking services along with the home loan, the choice is a bank,

If it is only a housing loan, then you can evaluate your options by comparing associated charges and facilities provided the bank and HFC players.

Also, do your research before you apply for any of the two and always read the document carefully before signing. It is better to be safe and to have a clear understanding of your housing loan.

buying your first home

Simplify your approach to buying your first home

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Buying your first home may seem like a tough task. But with a few simple guidelines and a little help, you can breeze through the process without much stress.

Here are a few tips to consider before or during the journey of buying your first house.

Map out your reasons for the home

As much as the excitement of buying a new home can thrill a person, you need to sit down and wrap your head around the basic questions of buying the home.

Are you looking to stay in the home? / is it just an investment?

This makes it easier to figure out your requirements of the home. This can range from ‘the number of rooms in the house’ to amenities provided. It helps you focus on a property that could be a long term investment. This also helps you pick between a second sale house and one that is under construction.

Check your finances

There are three financial points that influence the house you plan on buying.

First, save up for your down payment. This is the minimum amount needed to be paid at the time of purchase of a home. It ranges from at least 5 percent to 20 percent of the price of the property you are looking at. The more you set aside for down payment, the lower the amount needed to be borrowed through loans and mortgages.

Keep a track of your credit score. This score makes it easier to get approved for a housing loan.

Finally, estimate the total cost of the property purchased. This includes parking charges, stamp duty, registration charges, new furniture / furnishings for the future.

It isn’t just about what you can afford now but also about the future.

Ask the experts

Use skilled professionals to help make the journey easier. You may need to spend slightly more but is useful to understand the different parts that come into buying a new home. There could be unpaid property taxes, understanding the usable area in a home; all these factors can be avoided with the help of professionals.

Real estate agents help understand the different prices in a locality and which locality is best suited for your needs. Invest time in meeting with your local banking agents to help pick out loans that are better suited to your needs. Make sure to run the legal paperwork by a lawyer. This will help protect your interests in the process. But don’t forget to do your homework first.

Explore the neighbourhood

It is crucial to survey the neighbourhood. For working professionals, it is important to understand the commute to work. How close is the nearby train station? Can one walk to work? For a family, the need for a good school in the neighbourhood, a nearby hospital, a supermarket and a cinema are top priority when it comes to the location of the house.

It is also important to find out about the future development of the neighbourhood.

If you are planning on investing in a rental property, look for localities with high-rent or highly populated areas. Choose wisely and your home may be your best investment.

Keep your checklist ready and secure your loan

Once you have checked everything off your list, it is now time to secure the best loan for you. Think about the fact that a short term loan often has a lowered interest rate than a long term one, but a larger EMI. It is ultimately your decision. You have to decide how much time you need to repay your debt, within a given span of time.

The best way to start the process for finding a home loan in India, best suited to your needs, is to check for the lowest home loan interest rate. Look at the additional fees and charges such as the processing fees and prepayment charges. Make sure you pass the eligibility criteria. Check the other offers provided by the lender. These include prepayment facility, customized insurance scheme, online account access, etc and different loan repayment options.

Remember that banks, housing finance companies and other lending institutions calculate home loan eligibility on the basis of various factors like age, income, credit score, property value and work experience.

The next step is applying for the right house insurance. This will protect your property and ultimately makes the process of buying easy.

Keep looking for the best

Always remember to keep looking until you find a home better suited to your needs. At times you may get carried away with fancy furnishing and grand views and landscapes. Remember that these may increase the maintenance of the home. It is important to think minimal, not extravagant.

Keep in mind that the first house you like may not always be the answer to your prayers.

For homes that are under construction, visit ready buildings by the builder for a clear understanding of what you can expect.

Resale sale Value is an important aspect to consider before you plan on investing in a property. Most property buyers focus solely on prime locations or the budget of the property. If you choose the wrong estate or location, it is possible that your future sales price will always be less than the other homes around it.

After you have bought your dream home remember to fill rooms with basic furniture and build up from there. This helps protect finances and keeps you stable with your loans and mortgages.

Conclusion

These simple but important points can help make the process simple and as smooth as possible. Now the question that arises next would involve down payment and your current savings account.

You are probably waiting for the right time when your savings account is ripe with the exact down payment budget you had set for your dream house, but here’s the truth – You might take years until you reach that ‘right time’ and probably end up settling for less.

The good news is, you now have an option where your down payment is taken care of. Don’t believe us? Check out the HomeCapital Program.

home deal closure

Chapter 8: Deal Closure

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Legal Due Diligence

Legal due diligence is a process by which you can minimize the legal risks associated with a real estate transaction before you proceed for home deal closure. It forms the most critical aspect of your home buying process as you put your life savings into it. Neglecting anything in this aspect can lead you into unnecessary litigation or property dispute. It might also lead to losing your ownership rights or paying hefty penalties. Real estate transactions are legally sensitive matters. The true value of your real estate transaction or investment is realized only when you take into account the legal risks associated with it.

Homebuyers should not go for home deal closure with the builders/agents without conducting proper legal due diligence on the property of interest. You will need the help of a lawyer or legal expert to perform your due diligence. You should ask your lawyer to create the draft agreement between you and the builder.

HomeCapital has put together a comprehensive checklist of steps necessary to complete your legal due diligence process before the home deal closure. The steps included are as follows:

Chain of Deeds/Title

The first step of your legal due diligence process before you proceed for home deal closure is settling the chain of deeds/title. While purchasing a property, make sure all the historical transfers of the land title are in order and there is no missing link. Your lawyer will conduct searches in the Registrar Office and courts to be sure about the land. You should establish the successive transfer of land ownership since the past 30 years. If you are buying a flat/apartment in a multistorey complex, you can conduct searches to verify that the developer/promoter has clear title of the land on which the structure is built. Ask for the title clearance certificate along with the search report from the builder.

Intimation of Disapproval (IOD)

An IOD is an authorization certificate issued by the local municipal body once the builder has obtained all the required No Objection Certificates (NOCs) separately from various departments and government authorities. The final approval to build is called the Commencement Certificate, which is given only when all the NOCs are obtained and all the IOD conditions met. There are about 40 IOD conditions for the builder to be met. Some of these include the Environment Authority and Airport Authority., If you are buying a unit in an under-construction project, make sure to ask for the copies of the IOD, NOCs and Commencement Certificate to avoid any future problems.

Completion Certificate (CC)

This is a certificate from the local municipal body confirming the completion of the building in accordance with the Building Standards and originally approved plan. You should ask for the CC from the builder once the deadline for the completion as mentioned in Sale Agreement is over.

Occupancy Certificate (OC)

This is the permission to occupy the building for the purpose of living. This certificate is issued by the local municipal body once the developer submits all necessary clearances such as electricity, water, fire and sewerage. You cannot legally occupy your unit for living until and unless the builder has the OC for the same.

Obtaining Possession

Once the building is ready for occupation as notified by the builder, it is your responsibility to check if what you are getting is what was promised during the start of the project before the final home deal closure. There have been instances, where the buyers have felt cheated by the builder as they did not deliver the amenities and features as initially promised or advertised. So, before taking the possession of your home from the builder make sure that you check everything related to your new home be it Project Delivery or Legal Documents.

Any irregularities with the delivery of the project or with the documentation should be flagged with the developer or agent. In case your queries are not resolved by the developer/seller, you can approach your state Real Estate Regulatory Authority (RA) for a timely resolution.

Your checklist before possession is classified into two categories: Project Delivery and Legal Documentation.

Project Delivery

Final Layout

Check if the final delivery is as per the originally planned layout & floor plan mentioned in the project brochure. Measure the dimensions of the rooms, hall, bathrooms, kitchen and balconies among other areas. to see if the actual carpet area is as per the agreements. In case of any major deviations, you can deny the possession and ask for a full refund with interest from the builder. You can approach your state RERA if the builder denies his obligations.

Built Quality

Check if the building and unit walls are properly built without any cracks. Check for any water leakages in the walls. Ensure that your unit adheres to the building standards & safety norms. Check if the door and windows of the house are placed as per the original plan. Ensure that they are of good quality with proper latching & knobs and are working smoothly.

Paint

Check for the quality of paints applied on the walls, wooden surfaces, doors, roofing sheets and so on. Check if the paint is of a good brand and has been applied as per the manufacturer’s recommendations.

Amenities

Check if you are getting all the amenities as promised. Check for the type of amenities you were promised/advertised such as a park, swimming pool, gym and clubhouse, among other facilities along with their quality and size. Flag any misrepresentations with the developer or approach your state RERA.

Electric Connections

Check if all the lights, fans and buttons are working properly. Ensure that all the sockets, plugs and bulb / light holders are properly fitted and connected to the mains supply. Check for any broken wires in the house. Check that all the meters are installed and ensure that they are running properly. In case there is an inverter, check for the supply shift by turning off the main switch. For this purpose, you can hire an electrician. Check if the Miniature Circuit Breaker (MCB) has been installed and is of good quality. The MCB needs to be suitable as per the voltage supply of your home.

Common Facilities

It is a common occurrence that the flats are ready but the common amenities and facilities remain incomplete. The builder insists on giving you the possession and demands 100% payment even if the project remains incomplete. You should avoid doing such a mistake as there is a risk that the project will never be completed. Remember that you are not just paying for your house but for the common facilities as well. You have the right to deny the possession and demand compensation or refund if the project remains incomplete when it comes to common amenities such as lifts.

Kitchen, Bathroom & Sanitation

Check if all the kitchen, bathroom and sanitary fittings are done in a proper way. The number of fittings, quality & brand should be as per the sales agreements. Check the working of all the taps in the house; if they are opening and closing without any leakages. There should not be any leakages and blockages in the fittings. And lastly, ask for the warranty papers of the fittings as most of the trusted brands come with a few years of warranty.

Flooring

Check for the floor of the new flat, if it is as per builder specifications (ceramic, marble or wooden) and does not have cracks. You would need to do a major rework if you ignore the flooring quality. You should check the material and work quality.

Drainage

Check if the water is flowing properly through the drainage system of the house without any clogs in bathrooms, kitchen and balconies. Also, check for any water leakages in the house. Clogs and leakages will lead to seepage in walls, which can be difficult to rectify later.

Obtain All Sets of Keys

Ask for all the sets of keys before possession for a worry-free stay. Some keys might be held by the construction/maintenance agencies. Ensure that you get back those keys as well.

Others

Some builders may promise additional features such as home furnishing and air conditioners (ACs) among others. Check if the ACs have proper water outlets as improper ducting can lead to water seepages in the walls. If you have invested in a home that has digital features such as lighting control, security cameras and temperature control, do check all the equipment to make sure that they are in a perfect working condition.

Legal Documentation Prior to Home Deal Closure

Encumbrance Certificate

A document that has details of all the transactions on the property over a period of time (usually 13-30 years). It is evident that the property in question is free from any monetary or legal liabilities. The certificate confirms that the property has a clear marketable title and will come to you without any financial obligations.

Khata/Patta (Certificate/Extract)

These documents certify that a particular property belongs to a particular person, who is responsible to pay taxes over the property to the local authorities. The documents also contain property details such as name, size, use and value of the property needed to evaluate tax on the same. Khata is used for registering your property, selling the property, availing loan on the property and applying for utilities such as water & electricity connections.

Sale Deed

Also known as Title Deed/ Mother Deed/Conveyance Deed this is a legal document, confirming the sale of property and transfer of ownership. The document establishes the ownership of the property in favour of the buyer and entitles them for further transactions on the property. A Sale Deed will be your main property document that needs to be registered with the Sub Registrar’s Office within 4 months from the date of execution.

Allotment Letter

A document issued by the developer, Co-operative Society, Housing Board or the Regional Development Authority required by the banks / Housing Finance Companies (HFCs) for the disbursal of your home loan. The document is proof that a certain property has been allocated to the buyer upon the payment of initial funds. The document contains the details like the amount paid, the amount due, the property details and project specifications on the basis of which the banks / HFCs will release the funds as a loan.

Possession Certificate Copy

A document issued by the developer to the home buyer that confirms that the possession of the house is being delivered to the home buyer on a specific date mentioned in the document. The document is essential to get tax deductions. By accepting the possession certificate, you confirm that the final product is delivered in a good condition as initially promised and that there is no major re-work. Do not accept the possession if you are not fully satisfied with the final product. If you notice any shortcomings in the delivery, you can deny the possession or accept conditional possession.

Tripartite Agreement

It is an agreement between the buyer, the builder and the bank/HFC in case one goes for a home loan in an under-construction project. Such an agreement is made because the owner of the flat/apartment lies with the builder until the date of possession. The agreement ensures that the builder has a clear title over the land and makes them liable to complete the project on time as per the actual plan.

The agreement bars the builder from entering into any other agreements over the said property with any other party. It makes the buyer liable to pay the EMIs as per mortgage agreement even if the builder delays or fails to deliver the flat on time or in case of any disputes between the buyer and the builder. In case of a default in repayment by the borrower or in case the deal between the borrower and the builder gets cancelled for any reason, the builder has to refund all the money back to the bank.

Maintenance Service Agreements (MSA)

An agreement between the builder and buyer where the builder agrees to provide and maintain essential services on reasonable maintenance charges to be paid by the residents. Most buyers don’t pay heed to maintenance charges initially but later feel the burden as the possession nears.

Once the society’s Resident Welfare Association (RWA) is formed, and the maintenance work is handed over to it, the builder can no longer charge for maintenance. The RWA can then devise its own set of rules for maintenance charges.

No Dues Certificate

It is given by the builder, once you make all the balance payments and pay all the charges as mentioned in the sales agreement. It is to be noted that the builder will not grant you the possession of your flat until and unless you clear all your dues as per sales agreements.

Joint Development Agreement

Joint Development Agreement comes into picture when the builder develops on the land owned by a third party. The landowners pool their land as a resource and the builder bears the cost of construction. If you are buying property in such an arrangement, make sure to ask for a copy of the Joint Development Agreement registered in the sub-registrar’s office.

Make sure who has the marketing rights over the flat/apartment you are purchasing, the landowner or the builder. You can ask for a NOC from the other party or execute a tripartite agreement involving yourself, the builder and the landowner prior to home deal closure process.

Successfully Negotiating a Deal

Chapter 7: Successfully Negotiating a Deal

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Scope for Negotiation

The developers are experiencing a liquidity crunch. They are bending by accommodating customers with more discounts and attractive offers for negotiating a home deal. In the current market scenario, where there is more inventory than buyers, there is a room for more innovative negotiations such as flexible payment plans and freebies such as club memberships. Before starting a successful negotiation, it is advisable to do a background check on the developer. If the developer has enough number of buyers for his new project, then you can negotiate but up to a certain limit. The final discount, which you get might not be up to your expectations.

In order to successfully negotiate with the developer, our HomeCapital experts have put together a guide to help you with the process:

Thoroughly Research the Market

Knowledge of the local market will help you in negotiating with the developer in a smart manner. In order to successfully strike a deal, you should know the prices of similar properties in the area. You can gauge the property prices prevailing in the area of your interest through online property portals such as MagicBricks.com, Housing.com and CommonFloor.com among other portals. You should try to find out for how long the property has been up for sale. In case of a property that has been unsold for a long time, the developer will like to liquidate the property at terms that are favourable for you. In such a scenario, the two things that work in your favour are long unsold inventory and the developer’s level of indebtedness.

Understand Price Trends

To get a realistic picture of how much discount you can get, it is necessary to understand the price trends prevailing locally. You should compare the price of the property now to the price of the property during launch. Local brokers can also help you in understanding how the property prices have moved in the market and how much discount on the quote you can get. Anyone who has already purchased a house in the same project/area will tell you how much the property has appreciated and how much discount you can expect. You should be extra cautious in case of heavily discounted properties.

Place Your Offer

Now that you understand the prevailing market conditions and price trends, it is time for you to make an offer. Contact the developers of all the properties you are interested in and ask for a quote. You should let them know that you are a serious buyer and want to buy a home at the earliest. Let them know that you are looking for the best possible deals and discounts and are exploring all possible options with different builders. Once you have the quote, make an offer supportive of your market and price research. Liquidating inventory even at lesser prices helps them to save funding costs and get the much-needed cash. You can make an offer at a price that is 15% lower than the quoted price so that you can get a practical discount of 7% to 8%, which is a win-win situation for all.

Be Cash Ready For Negotiating Your Home Deal

Developers wish to sell their inventories as soon as possible. So, if you are cash- ready to make an ‘Advance Payment’ or pay the ‘Application Fee’, you can strike a good deal. For serious buyers, developers sometimes offer irresistible deals. You should keep your cheque book and/or pre-approved home loan documents ready in such a situation, as you will not be able to get the same deal again.

Realistic Approach

You should adopt a rational approach while negotiating with developers. You should understand that the developers might not lower prices below certain levels due to the costs involved and their own expectations of margins. Developers will also be mindful of their code of ethics as they do not want to give an impression that some customers are paying more and some are paying less. They are also averse to continuous bargaining. So, the buyers must consolidate all the negotiating points into a single offer.

Approach Brokers/Agents

It is sometimes likely that some real estate brokers/agents might bring you excellent deals and discounts given their experience, knowledge and network in real estate. In such a case, the amount they charge as brokerage will make economic sense. Even if you decide to go with a broker you should do your own thorough research. If you do not do your research, it is likely that you will end up paying a higher commission in the form of a higher quote of the property. You should also only go with reputed and RERA compliant brokers.

Perform SWOT Analysis

SWOT stands for Strength, Weakness, Opportunities & Threats. Before buying any property, you should analyse and note down, the Strengths, Weakness, Opportunities & Threats associated with any property. Such an analysis will help you in making your buying decision and enhance your negotiation skills especially while negotiating for the price. SWOT is an all-round analysis and will help you in making a particle decision.

Conclusion

Finally, you should understand that negotiating a home deal is different from bargaining and is intended to benefit both- the buyer and the seller of the property. In a successful negotiation, the buyer will be able to get the best price within his budget and seller would be able to make decent profits after all the deals and discounts in the favour of the buyer. To summarise, in order to successfully negotiate the deal, you should do your groundwork about the project, its developer, his overall credibility and track record of previous projects, the location and property prices in the vicinity and lastly the overall trends in the property market.

Understanding RERA

Chapter 6: RERA

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The Real Estate (Regulation & Development) Act, 2016 (RERA) was enacted by the Indian Parliament in 2016 to regulate the real estate industry in India with the objective to ensure transparent and fair transactions. It is a landmark development and a much-needed consumer-oriented reform introduced with the aim to usher in a new era of transparency and accountability. RERA is a blessing for home buyers as it is launched with the vision to create a more balanced ecosystem in their favour. Our HomeCapital experts for put together this guide to educate you about the RERA Act.

The purpose of RERA is to curb the inflow of black money into the primary and secondary markets and help end speculation & price control. It is introduced to improve the financial discipline of the developers as they will not be able to divert funds from a given project. This will ensure timely completion of the projects.

About The Act

Real Estate (Regulation & Development) Act, 2016 (RERA) is an Act of Parliament of India passed in March 2016. It received the consent of the President of India on 25th March 2016 and came into force from 1st May 2017. The Act aims to establish a Real Estate Regulatory Authority in each state and union territory for the promotion and regulation of the real estate industry. It aims to ensure the sale of real estate properties (plots, apartments buildings) and projects in an efficient and transparent manner by protecting the interests of consumers.

The Act is applicable to ongoing and upcoming commercial and residential projects. However, it is not applicable to redevelopment, repair or renovation projects that do not include new allotment, selling, advertising and marketing.

The chance of a delayed possession has been the biggest cause of concern for any home buyer. In the absence of a regulator and no rules in place, it was the home buyer who had to suffer at the hands of builders. Now with RERA, each state and union territory will have its own Regulatory Authority (RA). The RA is responsible for framing rules and regulations according to the Act.

The Act aims to empower the RA or an Adjudicating Officer to resolve disputes and pass judgements. It also aims to create Appellate Tribunals to hear appeals against the orders, directions or decisions of the RA or the Adjudicating Officer.

Under the Act, the centre and the states are stipulated to notify their own versions of RERA based on the model rules framed under the Parliament Act within six months of its commencement date.

Features of the Real Estate (Regulation & Development) Act, 2016 (RERA)

  • Mandatory Registration: All the real estate developers across the country need to register mandatorily with the Real Estate Regulatory Authority of the state or union territory where the projects are developed. The projects (total size >= 500 sq.m. or number of apartments >= 8), which are new, ongoing or where the completion/occupancy certificates have not been obtained come under the purview of RERA. The Act also calls for compulsory registration of real estate agents.
  • Deliver as Promised: The promises made by the developer/promoter would be legally binding on them. Developers will now have to notify the buyers of the ‘carpet area’ of the units sold to them. They will now have to provide a declaration along with a written affidavit about the time period within which a project or a specific phase would be completed. The promoter is liable to compensate the buyers if any incorrect or false statement is given related to the building, apartment, plot or real estate project with a full refund of the property value and the interest amount.
  • Customer Centricity: RERA aims to protect the interest of property buyers and has empowered them with enormous rights to deal with errant developers. Its penal measures act as a deterrent for builders against cheating home buyers. RERA also contains provisions for speedy and effective redressal to aggrieved buyers.
  • Financial Discipline: Developers cannot accept more than 10% of the cost of unit sold as an Advance or Application Fee from the buyers. The developers will now have to deposit 70% of the amount collected from home buyers for the project in an Escrow Account, which is an entirely different dedicated account. This account is maintained in a scheduled bank to cover the cost of land and construction. The withdrawals from this account depend on the progress of the project, which has to be certified by an engineer, authorised architect or a Chartered Accountant. All the project accounts need to be audited on a timely basis, failing which would lead to freezing of the account by the RERA.
  • Land Title: The developers must provide a declaration that they possess the legal title to the land on which the development will take place. The declaration has to be supported by legally valid documents and a written affidavit. A separately written affidavit has to be provided by the promoter stating that the land is free from all encumbrances.

Consequences of Non-Compliance

In case of non-compliance with the RERA rules & regulations, the developers can lose the registration of the project. They can also face imprisonment up to a maximum period of three years and/or can be fined up to a maximum of 10% of the total estimated project costs.

In case of a default or delay in granting possession of the property by the developer as stipulated in the ‘agreement of sale’, the buyers have a right to withdraw from the project and get a full refund of the amount along with a certain rate of interest. Even if the registration of the developer/project is cancelled, the buyers will have full right to refund.

In case the buyer does not want to withdraw from the project and ask for a refund, the developer has to compensate the buyer every month with interest payments until the possession is granted. In case the buyers default in making payments to the developer, they will also have to compensate the developer with the same rate of interest.

The rate at which the developers or the buyers will compensate each other will be the same and will be determined by the state RA. This rate may differ from state to state. In most states, the rate of compensation is SBI MCLR + 2%.

The Real Estate Appellate Tribunal (REAT)

If buyers are not satisfied with the decision passed on by the Real Estate Regulatory Authority or the Adjudicating Officer, they can approach the REAT to challenge the same.

Benefits for the Home Buyers

  • Developers cannot delay the project. If delayed, the buyers should be compensated at the rate of SBI MCLR + 2% by the developers.
  • Home buyers need to pay only for the carpet area.
  • The developers must inform the buyers about any minor changes or additions to the project.
  • For any major changes or additions, the developer must seek the consent of at least 2/3 of the buyers.
  • Consent of the above-mentioned ratio of buyers is also required if the majority of rights are passed on to a third-party.
  • Mandatory disclosure by developers regarding project-related details such as project plan, layout and government approval like sanctioned Floor Space Index (FSI) and the number of buildings, among other aspects.
  • Mandatory registration of the projects by developers with RERA before launching, advertising or marketing.
  • Any structural defects or developer obligations as per the sales agreement should be rectified free of cost if brought to the notice of developers within five years.