By Advocate S R Agarwal
Accommodation Times News Services
Present time is the most suitable time for acquiring a property for self occupation. The property rates seem to be realistic and affordable and good choice from the point of view of one’s requirement, based on financial capacity, family size, location etc. is available in the market. As for a majority of the buyers, it is not possible to afford the entire cost of the accommodation from own savings. In addition, good incentives have been provided by the Government by way of concession in the Income Tax provisions as much as interest paid on housing loan in a financial year is totally exempt from tax to the extent of the Rs. 1.5 Lakh and a rebate of 20 percent is further allowed on the payment towards the principal loan amount to the extent of Rs.20,000/- under Section 88. Earlier Income Tax Clearance Certificate U/S 230-A was required at the time of registration of Agreement for sale, transfer, deed etc. where the value of the property was Rs. 5 Lakh or more, obtaining such certificate was quite cumbersome and the Government has done away with this requirement in the current year’s budget w.e.f. 1st June, 2001.
Keeping in view these factors, the question now arises how to select a housing finance company from a number of companies operating in this field in the market. The first and foremost criteria may be the convenience, good and prompt service, acquaintance or dealings with the company or a group companies in one way or the other and hassle free processing of papers.
The second most important criteria could be a comparative study of the various terms and conditions, being offered by these housing finance companies, such as under:-
a. Whether the quantum of loan is 80 percent or 90 percent of the cost of the property and whether expenses towards transfer, stamp duty, registration etc. are included in the value of the property for this purpose?
b. Whether the rate of interest is fixed one or the option for adjustable rate of interest, linked to the primary lending rate, is permissible ?
c. Whether the monthly EMI is calculated on monthly or yearly basis?
d. Whether the rate of interest increases with the term of the loan, say above 15 years or so?
e. Whether in addition to the security of the property , one or two guarantors are required?
f. Whether any other collateral security is insisted upon?
g. Whether any pre-payment charges are levied, if the outstanding loan is paid at a particular stage before the expiry of the repayment term?
h. Whether any commitment charges are levied, if the full sanctioned loan is not availed of?
i. Whether a memorandum or a letter about deposit of title deeds is taken, because it attracts a substantial amount towards the stamp duty in the state of Maharashtra?
j. Whether certain concessions such as free group insurance against accidental death of the borrower and / or fire insurance against the destruction of the property is offered?
k. What are the processing and administrative charges payable?
These are some of the major terms and conditions and a careful analysis of the terms and conditions should be made to select a most suitable housing finance company to avail of the loan.
Sometimes a borrower decides to go in for a particular flat on the basis of self assumption or verbal discussions with a housing finance company, enters into an agreement and when he applies for loan, he may find that he is not found eligible for the required quantum of loan and such a situation may lend him in a serious financial problem to complete the transaction. With a view to avoid such a contingency, housing finance companies have devised a system of Advance Processing, where , financial capacity and other relevant factors, a prospective borrower is informed of the quantum of loan that can be advanced to him and, thereafter, he may identify the flat and enter into the agreement. It will be advisable to take advantage of this system to avoid problems at a later date.
An applicant has to submit an application form (in single name or joint names) alongwith income proof in the nature of salary certificate, if he falls in the category of “employed” and in case of others, copies of income tax assessment orders or returns, Profit and loss A/C, bank accounts, particulars of other savings or assets, agreement for sale, registration receipt, NOC, guarantee form and processing and administrative charges.
In addition to these common requirements, he has to arrange a few documents from Builder, Developer , Society or the Seller, such as copies of title documents including 7/12 extract, all necessary approvals i.e. NA permission, ULC clearance, development permission, commencement certificate, occupation certificate, title report with search report for a period of 30 years.
To avoid supplying these documents again and again to each applicant, the Builder or Developer submits Project Reports (containing all these documents) to housing finance companies and get their projects approved and when an application is received to purchase a flat in such an approved project, all these documents are not required to be submitted with the application and it is processed expeditiously.
Where a co-operative housing society has already been formed, NOC from the society and share Certificate of the seller will have to be submitted and in case of resale, all the earlier title deeds will be required in original.
Where the property in question is built or being constructed on a leasehold plot either from CIDCO or MHADA or the Collector, there are restrictions on the assignment or transfer of interest in such properties without the prior permission of the lesser and, hence, in such cases NOC from the lesser will be essential .
Housing loans are available for various purposes such as purchase of plot, purchase of flat either from a Builder or Developer or the Society or in resale or to construct a property on a vacant plot or even to undertake extension, renovation or repairs to an existing property.
Similarly for the disbursement of the loan, a few more requirements are essential. Firstly, the loan is disbursed, after own share or margin money is invested or paid. Secondly, all the original documents such as agreement for sale, transfer deed, registration receipt , NOC, share certificate etc. will be required to be deposited to create an equitable mortgage and , thirdly, the loan documents, such as loan agreement, pronote, deed of guarantee, power of attorney, affidavit, declaration , memorandum or letter about deposit of title deeds (wherever applicable) are required to be executed by the borrower and the guarantor . In addition, one has to have the property in question insured against the risk of fire, earthquake , flood etc. and has to deposit post dated cheques of EMI for a period of about 12 months or so as per the practice with that company.
If a borrower is a little bit conscious to understand these requirements at various stages after analyzing the terms and conditions, it will be worthwhile for him to select a housing finance company and acquire the roof over his head and his family by availing of financial assistance, because delay in this decision may not be in his interest from the point of view of short repayment term, adverse financial factors, appreciation in property rates in future and so on. It is also not necessary to depend on some mediator and it will always be in the interest of a borrower to directly deal with the housing finance company to avail of the loan as not more than a couple of visits will be necessary for this purpose.