REAL ESTATE LOANS

REALESTATE LOANS

Buying a property necessitates in depth knowledge of real estate and choosing the right kind of loans. Several banks are stepping up their exposure to real estate. These banks are entering into agreements with builders for real estate loans. The scheme mainly caters to builders / promoters / developers of real estate. According to RBI figures loans to builders, along with retail credit (like home loans, credit cards and personal loans) constitute a big chunk of banks total loan portfolio.

Maximum Amount of Real Estate Loans granted

Banks normally give real estate loans to builders / real estate developers of repute. Experience of 3-4 years is a must to avail the loan. The quantum of loan is decided after scrutinising the financial statements and cash flow statement of the applicant. The maximum amount of loan varies from case to case and from bank to bank. Repayment is done in lump sum installment after the completion of project / selling of the flats. The number of installments is restricted to 3 to 4.

Interest Charged by Banks on Real Estate Loans

The interest rate is normally determined and charged according to the prime lending rate of the bank. Builders can either opt for a fixed or floating rate of interest.

Process of Loans Applications

Builders / real estate developers can fill up the loan application either in person or utilise online facilities and apply for loan. A nominal processing fee is charged by the banks.

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Documents required for Real Estate Loans:

1. Application form with photograph affixed thereto.

2. Copies of certificates Educational qualifications.

3. Residence proof

4. Proof for existence of business and business profile with last three years income tax return.

5. Last 3 years income and expenditure statement and balance sheet.

6. Last 3 months personal and business bank statements.

Terms and conditions of loan may vary from bank to bank.

Mortgage loans

Banks provide loans against mortgage of property. Businessmen, self employed professionals, salaried persons are all eligible to apply for the loan. It enables the borrower to apply for loan against a fixed asset.

Maximum amount of mortgage loans granted

The maximum amount of loan depends on a number of factors, like customer's profile, his financial status and repaying capacity, tenure of the loan etc. The repayment tenure increase or decreases with the quantum of loan. Repayment of loan shall be made through Equated Monthly Installments or EML

Interest Charged by Banks

Interest is charged at the predetermined rate as per the terms and conditions. Interest can be either on fixed or floating rate basis. Interest rate can be discounted for existing clients and in special cases according to the policies of the bank.

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Process of Mortgage Loan Applications

Customers can apply for mortgage loans by filling an online form. They can also visit the nearest branch of a particular bank. Normally, banks charge 1-2% of the actual loan amount as processing fee.

Documents required for approval of mortgage loans Salaried Individuals

1. Proof of identity (passport copy I voters ID card I driving license)

2. Address proof (ration card Tel I Elect. Bill, passport copy)

3. Bank statements (latest 6 months bank statement I passbook)

4. Latest salary slip of current dated salary certificate with latest form 16 under Income tax Act, 1961.

5. Proof of ownership of fixed asset being mortgaged.

Self employed professionals and businessmen

1. Proof of identity (passport copy I voters ID card I driving license)

2. Address proof (ration card Tel I Elect. Bill I passport copy)

3. Bank statements (latest 6 months bank statement I passbook)

4. Latest IT return along with computation of income, B/S & P & L alc for the last 2 years duly certified by a chartered accountant.

5. Qualification proof of the highest professional degree.

6. Proof of continuation of business(Trade license I establish- ment I sales tax certificate)

7. Other mandatory documents (sole proprietorship. Declaration. Or certificate, copy of partnership deed, Cert. copy of MOA, AOA & Board resolution.)

8. Proof of ownership of fixed asset being mortgaged.

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PROPOSED CONCESSION IN REAL ESTATE BILL - BOOST-UP REALTORS

PROPOSEDCONCESSION IN REAL ESTATE BILL - BOOST-UP REALTORS

The proposed concession in the Real estate bill wherein the Builders will be allowed to divert up to 50% of the amount collected from their buyers for a specific project, to their other projects, as against the earlier mandated share of 70% of the amount collected, will not only settle the long pending claim, but also will boost-up the Real Estate Sector.

As a matter of fact, the much awaited entry of large international suppliers like Wal-Mart into the country is desperately anticipated by many in the realty market, where contractors and designers hope to benefit from an increased need for retail areas. Experts hope that there shall certainly be a development in the Real estate sector once international multi-brand suppliers enter the market. According to Mr. Mehta, Director for real estate business, Motilal Oswal Personal Value Consultants “For the time being there will be a spurt in need as suppliers need to set up test stores immediately.”  However, whether this will convert into sustainable need in the long run or not depends upon whether these companies are able to get over infrastructural difficulties and stand up well in the local Indian market.

Advocate at Koramangala

As regards the position in Bangalore, Amplus Realty Finance (Fund-I), the first SEBI-registered household residence fund, hither to focused on Gujarat, propose to invest in Bangalore real estate project, and declared its first financial investment in Bangalore real estate venture. The fund while expecting around 25 per cent profits on their investment, in three years, is additionally looking for financial investment proposals in prime high-end and mid-market residential projects in Ahmedabad, Surat, Vadodara and a few other locations at Mumbai, Bangalore including the NCR.

Advocate S Selvakumar

The Confederation of real estate developers association of Indian (CREDAI) has time and again approaching the Government and requesting the Ministry to consider changes in the real estate market to boost development. In a letter to MPs, CREDAI’s National President Mr. Lalit Kumar Jain opined that even though the government is taking all factors into consideration and showing its inclination to take effective steps which would certainly boost-up the Real estate sector.  However, he felt that much more can be done without any debate or running into additional cost just by concentrating on the real estate market. The Confederation added that there are some disadvantages in the suggested Land Purchase and Actual Property Regulating Bills which hopefully would be sorted out in the ongoing session of Parliament, and before final approval of the proposed Bill.

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AKRAMA SAKRAMA

AKRAMA SAKRAMA

Akrama means violation and Sakrama means regularisation. In this scheme, only violations of building and urban development is included. Violation from sanctioned building plans, unauthorised buildings, unauthorised layouts and land use violations have taken place on a large scale in Bengaluru Metropolitan Area due to lack of enforcement by Bengaluru Mahanagara Palike (BBMP) and Bangalore Development Authority (BDA). The Scheme is made applicable to all urban areas in Karnataka. In this article details about the bad situation prevailing in Bengaluru is dealt with. There are too many cases of unauthorised developments within the built up area of the city and suburbs. 

Advocates

The helpless State Government without action to prevent unauthorised developments and the officials who colluded with the violators proposed the Akrama Sakrama Scheme during the S.M. Krishna’s Government in the year 2004. The Karnataka Town and Country Planning Act, 1961 (KTCP Act),  which has overriding provisions compared to the Bangalore City Corporation Act, 1964, and the Bangalore Development Authority Act, 1976, was amended to provided for regularisation. 321-A of the Karnataka Municipal Corporations Act was also amended to implement the amended provisions of the KTCP Act. The Act and rules framed specified the nature and extent of unauthorised developments, constructions that would be regularised, the procedure and fines to be levied for regularization of various violations. Since then, though the successive governments pursued the scheme, it was not possible to implement the scheme due to agitations by the rule minded citizens, Citizens Action Forum (CAF), and the residents welfare associations (RWAs). The BJP Government got the Bill passed by the legislature. The Governor of Karnataka rejected BJP government’s request for consent to the bill. The BJP government also tried to get an ordinance passed by the legislature in the year 2010, consent for which was again rejected by the Governor. The present Congress Government proposed an ordinance in May 2013 which was approved by the same Governor with riders. Government is said to have incorporated the Governor’s directions and also the directions of the Supreme Court in Judgements of such schemes by the Orissa and Tamil Nadu Governments. The scheme is pending in the High Court of Karnataka since the year 2007. The Law Minister of the present Government stated that the scheme as modified, will be people friendly. How it is people friendly is not understood as the citizens are affected with lack of ventilations, privacy, traffic problems, etc. The scheme is only violators friendly. Decision of the High Court will have to be seen. The High Court directed on 23.3.2015 that the applications to be received may not be processed till the decision of the court on the scheme.

The present revised scheme provides that the applications are to be made from 23.4.2015 upto 22.3.2016 (One year). The applications should be in respect of buildings built earlier than 19.10.2013. Regularisation will include violations in respect of:

-          Land Use

-          Unauthorised layouts

-          Set back violations, and

-          F.A.R violations

For residential buildings, only upto 50% violations will be considered. For non-residential buildings, only upto 25% violations will be considered.

Applications for land use violations will be available in BDA, and for other urban areas with the respective urban development authorities. This will be one time regularisation based on self declaration by the violator. If the application is rejected, the fine remitted will be refunded within a period of 60 days. If there are so many violations, the applicant will have to get the land use violation regularised first and later apply for regularisation of building with other violations.

A.      Fine for unauthorised layouts

Site area	Bangalore urban	Other corporations	Other
Less than 60/sqmtr	Rs 40/sqmtr	Rs 30/sqmtr	Rs 20/sqmtr
60-120 sq.mtrs	Rs 160/sqmtr	Rs 80/sqmtr	Rs 50/sqmtr
Above 120 sq.mtrs	Rs.600/sqmtr	Rs.250/sqmtr	Rs.150/sqmtr

B.  Regularisation of set back and FAR violations in residential and non-residential buildings.

% of Violation	Regularisation fee/sqmtr of total violated area as percentage of market value of land
Residential upto 25%	6%
More than 25% upto 50%	8%
Non-residential upto 12.5%	20%
More than 12.5% upto 25%	35%

Conclusion:

All the efforts made by Government since 1960 for planned development of urban area by preparation of statutory master plans is defeated as the violations are affecting the land use zoning, building regulations, etc.

The Effects:

Definitely, the Scheme is not going to be one time measure but many times affair by successive state governments.

During construction, violating the sanctioned plan or land use zoning, the violators may tell the officials, if at all a strict official is working in BBMP, that he will get the violations regularized under the Akrama-Sakrama Scheme.

The expected revenue of Rs. 5000 Cr by levy of fine will be a dream. Majority of the violators may not come forward to get the developments/buildings regularized. What Government may get will be hardly Rs.1000 Cr, that too over a period of time. In the suburban areas, the applications will be for buildings here and there and not according to a compact area to enable redevelopment.

It is difficult to expect that BBMP will provide/improve the infrastructure for the benefit of the people living in such sites. The bad position will continue as existing. They can expect only street lighting after a few years. Many of the existing suburban areas in the BBMP limits have no water supply and sewage connections, parks and playgrounds, etc.

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How the violators can expect improvement in the unauthorised colonies even if some of them get regularised.

The officials who collude with the violators will not have discipline as so far such officials are not punished. Even if one batch of officials are transferred from BBMP, new batch of such officials only will come to BBMP to continue allowing violations. They will have no fear of disciplinary actions for allowing violations.

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Can we expect quality of life in Bangalore if such regularisation schemes are considered by Government? Citizens welfare associations and civic analysts will approach courts against such schemes. Media’s awareness reports will have to be continued in the interest of planned development of the City at least in the future.

Last but not the least, the Government must act stringently against erring officials and take strict disciplinary actions against them.

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Advocate Selvakumar

Bank legal Opinion

ABOUT A SALE DEED

ABOUT A Sale Deed

SALE DEED

Sale Deed is also known as conveyance deed. This is the document by which the seller transfers his right to the purchaser, who, in turn, acquires an absolute ownership of the property. This document is executed subsequent to the execution of the sale agreement and after compliance of various terms and conditions detailed in the sale agreement.

Before the execution of the sale deed the title of the seller is to be established beyond doubt. Copies of the documents of title must be scrutinized by an advocate, well versed and experienced in property dealings.

If there is any encumbrance on the property, such encumbrance is to be cleared by the seller at his cost.All statutory payments like property tax, water and power charges and any other payments due on the property should be cleared before the execution of the Sale Deed. Any previous charges or mortgage should be clear before execution of the Sale Deed.

Clearances, and permissions required to be obtained by the seller should be obtained prior to execution of the sale deed.Latest encumbrance certificate of the property, subsequent to the date of the sale agreement up to the proximate date of sale deed should be obtained, and such certificate should be of nil encumbrance.All the persons having interest in the property should be made parties to the deed. Particular attention needs to be paid in case of purchase of properties from a Limited Company, Partnership Firm, Hindu Undivided Family, Trust, Power of Attorney Holder and Minor.

Draft Sale Deed

A draft Sale Deed, containing full details of the parties, advance amount paid, mode of balance amount payable, receipt of the balance amount by the seller, handing over the original documents of the property, handing over the possession of the property, handing over the authorization letter to transfer power and water meters, signing of the application for transfer of khatha, title of the seller of the property, indemnifying the purchaser in case of defect in the title, easement rights, will be prepared by the purchaser’s advocate. Such draft Sale Deed should be captioned as draft Sale Deed and shall be signed by the purchaser’s advocate.

A copy of the draft Sale Deed will be given to the seller for his approval. The seller and his advocatewill verify the draft sale deed and approve it, or may suggest suitable deletions, additions or amendments. The purpose is to bring forth the correct intention of the parties to the Sale Deed.

On approval of the draft Sale Deed, the same has to be prepared on a quality or a document paper. In Karnataka it may be prepared on good quality paper like bond paper or green paper and the stamp duty may be paid by way of demand draft or pay order or cash. The exact amount of stamp duty should be ascertained from the Sub Registrar office. Purchaser is liable to pay the Stamp duty as per value stated in the documents or as per the Sub- Registrar office value whichever is higher.

Execution

After the Sale Deed is prepared all the parties to the deed shall execute it by affixing full signatures. Each page should be signed by all the sellers. Any overwriting, cancellations, erasures and additions have to be authenticated by full signatures of the parties.The execution of the Sale Deed requires to be witnessed by two witnesses. The witnesses shall give their full particulars and addresses.

Sale Deed of immovableproperty of value more than Rupees one hundred needs compulsory registration. The duly executed sale deed should be presented at the jurisdictional sub-registrar office. All the parties, including the confirmation witnesses shall be present at the time of registration and admit the execution. Purchaser also has to be presented for the execution of the documents at the Sub Registrars office. In case the purchaser is not in position to be present before Sub Registrar, he can give Power of Attorney to any of his persons to sign and present the documents on his behalf. In case seller signs the Sale Deed, it is compulsory that through the registered Power of Attorney holder only can represent for him to present the documents before the Sub-Registrar.

Registration

In Karnataka, the Sub-Registrars office, take the photos of purchaser, vendors, witness and also their thumb impressions and print the same on the Sale Deed.The vendors has to produce all the original documents pertaining to the property to the purchaser. If the property is divided into one or more portions, the seller has to give certified copy or Xerox copy of the documents to the purchaser and has to give declaration to that effect. Generally, the larger portion holder should get the original documents.

There is a time limit for presenting the documents for registration. The time limit is four months from the date of execution.  Thereafter a grace period of another four months is allowed on payment of penalty. The maximum penalty is ten times of registration charges.

At times, the registering authorities may dispute the stamp duty paid. In such cases, the purchaser has an option of paying the additional stamp duty by way of cash or payorder. The purchaser may contest it in which case the Sub Registrar will do the pending registrations and send it to the Registrar of Under Valuation to arrive at proper Stamp Duty.

Parties have to quote their Income Tax Permanent Account Number in case the transactions are done in cash for the property which values more than Rs 5,00,000. Parties, who have not yet been allotted Permanent Account Number, will have to file Form No.60 or Form No. 61 in case of Agriculturists.

The purchaser’sadvocate has to take all precautions while preparing Sale Deed. It is a most important document and decides the fate of the purchaser.  The purchaser has to preserve the Sale Deed very safely.

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VOID AGREEMENTS AND CONSIDERATION

VOID AGREEMENTS AND CONSIDERATION

Void Agreements

Clause (e) of Section 2 of Indian Contract Act 1872, defines an agreement as every promise and every set of promises forming consideration of each other in an agreement. Agreements are instruments wherein two or more parties agree over something, to do some work, to sell or purchase a property. The essential requirement of an agreement are consideration and objects.

Void Agreements are those agreements which cannot be enforced in any court of law. An agreement not enforceable by law is said to be void. An agreement which does not comply with the mandatory provisions of a statute is void. If, in an agreement,  consideration or  a part of consideration or the object is unlawful,  such an  agreement is a void agreement. Neither of the party to the agreement can seek remedy for violation of such an agreement in any court of law.

The status of an agreement without consideration

In general, any agreement without consideration is void. Section 25 of Indian Contract Act 1872, has certain exceptions to this general rule and the following agreements without consideration are not void:

a) An agreement which is made in writing registered and made out of natural love and affection by a person standing in a near relationship;

b) An agreement which is promise made to compensate for something done for the promisor by a person voluntarily. The compensation may be  whole or in part; and

c) An agreement which is a promise to pay a debt which is barred by limitation. Such a promise must be in writing and signed by the concerned person or his authorized agent. The debt may in whole or in part.

Whether a gift without consideration is Void ?

By gift one transfers the property without consideration. It is a unilateral act of one person. It is not a contract between parties. Section 25 of the Indian contract Act provides that the provisions of the section do not affect the validity of any gift actually made as between the donor and  donee, through no consideration is passed.

Consideration at most times is the market value of the property. The Indian contract Act simply states that  agreements without consideration are void. The Act does not refer to adequacy of consideration. It is matter between the parties to the agreements to decide the amount of consideration. The testing factor is whether the consent was given freely for inadequate consideration. The courts will take inadequacy of consideration in determining whether consent was given freely or not in resolving the disputes. But the agreements cannot be void on the basis of inadequate consideration alone.

Can an agreement restrain a person from seeking legal remedy ?

As stated earlier, if the object of an agreement is unlawful, such an agreement is void. Any agreement which restrains any party to the agreement from enforcing his rights by the usual legal proceedings in the ordinary courts or tribunals or which limits the time within which he may enforce his rights is void.

The consideration and objects are lawful unless,

1) They are forbidden by laws in force.

2) They are of such nature that if permitted they would defect the provisions of any law.

3) They are fraudulent.

4) They involve or implies injury to the person or property of another.

5) The courts regards them as immoral or opposed to public policy.

Suppose in an agreement to sell, there is a clause that the vendor shall complete the sale transaction within three months of the date of agreement to sell, but fails to comply with this requirement.Whether the agreement would become void and unenforceable?

Non-compliance of a clause in the agreement to sell would not make the agreement void. The vendor has legal remedy open to him upto three years from the date of such a lapse.

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SCRUTINY OF TITLE DEEDS

SCRUTINY OF TITLE DEEDS

Scrutinising the title deeds of the involved property is that the foremost and obligatory exercise needed to be done by the intending purchaser’s advocate before negotiating and getting in any reasonably agreement with the seller. excluding having the possession, whether or not physical or constructive, clean and marketable title, free from all types of encumbrances is incredibly necessary. The advocate shall additionally ascertain the genuineness of such title deeds made for scrutiny. However, there's no yardstick to trace out the title, it rather depends upon the diligence and application of mind of the advocate in an exceedingly logical manner. 

Generally, the origin of the property, sequent transfers and also the gift standing of the property are the 3 most significant steps needed to trace the title. 

Advocate

Origin of property 

The Vendor could have noninheritable the property by numerous modes like government grant land, allotment created by the government/ numerous autonomous bodies/ housing societies, etc or perhaps by virtue of can, sale or inheritance, etc. If the property may be a granted land or assigned by any authority, then the grant certificate or allotment letter issued by the competent authority is important, excluding the opposite connected documents, that ar thought of because the origin of the property. 

In case of succession or transfer from one hand to the opposite by manner of can, sale, gift, exchange, partition, release, settlement deed or inheritance, we tend to need documents of a minimum of forty two years to be scrutinised and verified within the written account order and organized examination of all the events or transfers involved to the property. 

Subsequent transfers 

The second necessary facet is to look at the mode of transfers created by the previous homeowners of the property.At constant time, genuineness of the relevantdocuments at the time of transfer, in any mode, has got to be diligently examined. 

Present standing 

The next necessary purpose is to look at {the gift|this|the current} standing of the property on UN agency is that the present owner, whether or not his/her name has been recorded within the revenue records of the involved authority and whether or not property taxes are being paid by the owner sporadically. After completion of the higher than 3 necessary stages, scrutiny of assorted alternative aspects ar to be verified. 

Identification
Identification and outline of the property is additionally another necessary facet and also the correct details referring to the quantity allotted to it explicit property, its extent, boundaries and name of the village or municipal council or any autonomous bodies among whose limits the same property comes, and also the involved registration sub district are to be observed. 

If the building exists thereon explicit property, then the main points referring to the prevailing building and whether or not the building is built in accordance with the building sanction arrange and relevant bye-laws of the involved authority have to be compelled to be mentioned. Measurements mentioned within the document ought to tally with the physical measurements. In case, the physical measuring mentioned within the document is a smaller amount than the particular physical space on the market has got to be thought of for the aim of payment and alternative documentation. Generally, emptor additionally has the liability to pay either for the measurings mentioned within the documents or the particular physical measurement, whichever is lesser. 

Nature of title 

Nature of the title like residency right, occupancy right, possessory right, full possession or the other sort is additionally another necessary facet which needs search and examination since all the persons having any reasonably interest or right over the property ar needed to be enclosed at the time of execution of sale deed or perhaps the deed of conveyance. 

Tenanted property 

If the property is inhabited, then it's important to verify from the tenant that there's no proceeding unfinished between the seller and also the tenant referring to the possession or the residency rights. Further, it's additionally necessary to tell the tenant concerning the planned sale. 

Minor interest 

If the property planned to be sent is an ancestral property, then the involvement of minors interest is incredibly common. In such case, getting the court’s permission before transference the property is obligatory and needed underneath the availability of Guardianship and Wards Act. If the property is sent in violation of the same provisions, then constant may be challenged by the minor among 3 years either from the date of accomplishing majority or from the date of information of such sale. 

Conversion
If the property is essentially associate degree agricultural land, then it's obligatory to convert it for non-agricultural purpose if the intention is to construct residential homes on the same property. If it's not reborn, then the bottom on that conversion may be exempted has got to be verified. Any special enactments that ar applicable to the property and poignant the title where it's applicable, to be looked into. Further, if the property is subject to any government acquisition notification, then the main points referring to such notification, each preliminary and final, has got to be verified completely in numerous land acquisition department. 

Bank legal Opinion

ECs ar necessary to rule out any subsisting encumbrance over the property. But, that can't be the sole document to rule out any encumbrance since there are instances whereby transactions punctually registered within the involved sub registrar offices, aren't mirrored within the ECs. In such a case, the advocate has got to do the search within the workplace of the sub registrar, on the payment of the prescribed fees. 

Further, the advocate has got to clearly mention on that document has got to be collected in original, certified copy, xerox copy. If it's composite property, then most of the homeowners can retain the originals and solely xerox copies of the title documents are delivered to the emptor. 

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Advocate S Selvakumar

Advocate at Koramangala