BASICS OF HOME LOANS

(Advocates, Property advocates in Bangalore, Property lawyers in Bangalore)

Once you think of buying yourself a house and go looking for that perfect dream house, only to find out that you are unable to finance your new house at the moment.And you realize that you really want that new house.You might at this point consider the option of taking a bridge loan. A bridge loan is the scenario wherein if you have enough equity in your present home, the bridge loan will allow you to avail of a loan so that you can make a down payment and buy your new house. The only catch here is that the interest rates on the bridge loan are much higher than those on the home loans. Another thing to consider is that it is short-term loan, and there are also costs and fees involved.Therefore you might do better for yourself, if you consider applying for a home loan.The procedure is simple and of course you have to meet a certain eligibility criteria. Once you have identified the house that you want to purchase, you can go ahead and approach any financial institution dealing or disbursing home loans.

Though applying for a home loan may seem like a very difficult task, it definitely need not be that way. Given below is some Home Loan Basic that you need to know before you go about applying.The first step to getting a home loan involves filling up the application form of chosen financial institution along with the required documents.Do remember that you will need to pay a one time processing fee at this stage.You will also require some important documents to get through with the loan processing stage. In case your are an employed individual, you will require verification of your employment form, your latest salary slip/salary certificate which outlines all deductions for at least the last 6 months.Form 16 from your employer for the last 3 years. In case you are a self employed individual, you will need a Balance Sheet and profit and loss account of the business/profession along with copies of individual income tax returns for the past 3 years as certified by a CA.

You will also need a note, which gives the information on the nature of the business, year of establishment, present bankers, form of organization, clients, suppliers etc. And of course you will need a statement proving your net worth as an applicant.Once you are past this stage you will need to submit the property documents.After getting the approval from the financial institution where you plan to borrow, the loan will be disbursed to you.

Benefits of Home Loans:  

You can easily avail home loan from various companies which offer home improvement loans to finance the cost of tiling, plumbing, electrical work, grills, woodwork, painting, compound walls and almost all improvements for your house.In fact it must be a good idea to avail of these home loans, because they offer a number of added advantages as well.  One of the most important benefits of taking a home loan is the interest rate that is allowed on the home loan.Fixed and variable interest rate options are also available for home loans.

Many financiers also offer home improvement loans at the same interest rate as they offer the home loans.Most of the prevailing interest rates fall in the range of 7.75% to 8.75%.There is usually processing fee of 1.00% to 2.00% also that is involved. The other benefit of taking a home loan is the security that is to be currently being constructed as the security for the home loans.  Of course, most banks and finance companies do not finance more than 85% of the cost of the property mortgaged.  Perhaps the benefit that is most used is that of the tax benefit.The interest that is paid on home loans are deductible from the annual value resulting in a lower taxable income.For self occupied property, interest to the extent of Rs.30,000/- is deductible from taxable income.The maximum amount of fund that can be received through the home loans varies between 50%-100% of the total cost.

Of course the loan amount is also subject to the repayment capacity of the borrower.The usual rule states that the sum of all the monthly installments a borrower has to pay should not exceed 40%-50% of his gross monthly income. Apart from the income and margin criteria, the applicant needs to be a salaried or self-employed individual. And it is important that the loan is repaid before the retirement stage or before the person turns 65 years in case he/she is self-employed.On an average the repayment term of the home loans can be extended up to 15 years.

Home Loan Agreement: 

With the ongoing flurry of activity and festivity prevalent in the home loan segment of India recently, a large number of people, in the euphoria to acquire that dream house, tend to overlook some of the most important clauses in the home loan agreement.However, what they don’t realize is that these clauses have a significant bearing on wide number of areas ranging from interest rates to repayment schedules.

Some of the simple clauses of the home loan agreement regarding to simple matters, such as how often the housing finance company resets interest rates in a year can make a considerable impact on the floating rate home loans.  The norms in the industry practices suggest that interest rates for home loan consumers are reset only when the bank’s prime lending rate is changed.  Therefore it is the frequency of these resets that is really important. Some of the finance companies offer home loan agreements wherein the interest rates are reset in each quarter. Alternatively, there are other companies who do the revision only once a year. Sadly not many home loan consumers are aware of the clause related to the fixed rate home loans, which the financial companies some times insert in their home loan agreement.

This ignorance can cause the customers unintended losses in case of revision of the fixed rate home loan rates.Most of the customers are not aware that this particular fixed rate clause in the home loan agreement permits the financial institutions to change the loan’s repayment schedule and terms and conditions.

The financial institutions in a rising interest rate environment might exercise this option in order to safe guard themselves and in the interest of their own company. This move is usually not in the best interests of the customer or the home loan seeker as the modification of the repayment schedule, terms and conditions might affect the overall repayment of the consumer. The long list of terms and conditions of the home loan agreement, usually contain clauses which might possibly have a number of significant implications for the consumer and therefore it is important that the consumer is aware and makes an informed choice accordingly.

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Property transfer advisor

property lawyers in Bangalore 

DEED OF COVENANT FOR PRODUCTION OF DEEDS

(Advocates, Property advocates in Bangalore, Property lawyers in Bangalore)

The transfer of immovable property by way of sales, gift, will, releases etc., presupposes that documents to the title of transferred immovable property are delivered to the transferee on completion of process.This is statutory obligation.Section No.55(3) of Transfer of Property Act, puts this responsibility on the seller. But the section has a provision, that in case where only a part of the property is sold and the seller retains a part of the property the seller is entitled to retain the original documents, and copies of such documents are delivered to the purchaser.

In case, where the property is transferred to different persons, in different lots, the transferee of greatest portion is entitled to hold the original documents of title and others are provided with copies of such documents.In the circumstances dealt above, the persons holding the documents, either the seller or one who holds the greatest portion has some responsibilities.He has to keep the documents in safe custody and in good condition.He has to make available the documents for inspection to other buyers and also furnish the true copies of such documents;extract from such documents, whenever required.But the cost has to be met by the buyer who needs such inspection or copies, extracts. These responsibilities of person who holds the original property are required to be recorded properly.

The document, which records such obligations of safe keeping the documents; producing them for inspection, providing copies, extracts is called Documents”. The deed of transfers like sale, gift, will and release may contain such a covenant by the vendor in favor of purchaser or a separate deed may also be executed by the vendor in favor of purchaser (or) after making the same covenants can be incorporated in the sale deed.In case of the person holding greatest portion, a separate covenant deed about his obligations becomes necessary. A separate deed in favor of each transferee of other portions or a common deed in favor of all other transferees jointly may be executed.

In the deed of transfer of the greatest portion or of higher value an explicit covenant, that, the transferee shall safe keep the documents in good condition, produce for inspection of other transferee and furnish true copies or extract should be included.Similar relevant covenant should also be incorporated in deed of transfer of other transferees.

Generally all the portions of the property are not transferred at the same time, and the above suggested procedure may not be possible. In such cases, the transferor should give a covenant of production of documents in each of the deeds of transfer and it should further provide that if and when the transferor hands over the documents to any other transferee at a later date he would procure a similar condition from the transferee. Under a covenant of production of document, the original owner liable indefinitely unless a condition provides that he is no more responsible after he parts with the remaining portion of the property.

Flats are constructed on land and are sold to different purchasers. But the original title deeds for the entire land will be only one and cannot be given to each and every purchaser. Each purchaser will get original sale deed, which is executed in his name and registered. He will get copies of other original documents and not originals. The original title deeds of the land will be in the custody of the Flat Owners Association.The association has the responsibility of maintaining them safely and makes available the documents for inspection by the owners and to provide copies, extracts the promoters or builder shall incorporate such clause in individual sale deeds. The articles of the flat owners association shall contain the clauses relating to safe custody, inspection.

Stamp Duty: In case the conditions is including in the transfer deeds itself, no separate stamp duty is payable. If a separate deed is executed, it attracts the stamp duty as that of an agreement depending upon the stamp duty prescribed by the state.

Registration: this deed of covenant does not require the registration, but it is advisable to get it registered.

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Advocate S Selvakumar

property advocates in Bangalore

HOLDING OF PROPERTY-BY PARTNERSHIP FIRM

(Advocates, Property advocates in Bangalore, Property lawyers in Bangalore)

A “Partnership” is typically defined as a relationship between individuals i.e. two or more persons, who have agreed to share the profits/ losses of the business, which is carried on by all or any one of them acting for all.Such persons are called “partners” and the business concern is known as “partnership firm”.The document containing the terms of the partnership agreement, powers of the partners and objectives of the partnership is known as a “partnership deed”.

 

The Indian Partnership Act, 1932 (hereinafter called the “Act”), governs the conduct of the partnership business and the minimum number of partners prescribed is two, whereas the maximum number is 10 in case of firms doing Banking business and 20 in other cases.A minor can be admitted only to the benefits of the partnership business.The partnership concern is to be registered with the Registrar of Firms and on registration a registration certificate is issued. 

Section 14 of the Act defines what constitutes Partnership property.The property of the firm is nothing but the joint property of the partners held in their joint names as opposed to the properties owned by the individual partners in their personal names.Partnership property consists of property originally brought in by the individual partners as their capital contribution or may consist of property purchased by the partners jointly out of the funds belonging to the partnership concern. 

Issues may arise to determine the ownership/ title of the immovable property, in cases where either the property belonging to a partner is put to firm’s use or in cases where the immovable property is jointly owned by the partners i.e. by the partnership firm and the same is converted and title to a jointly held property is conferred to an individual partner. In such cases the courts have drawn a judicious line to distinguish and differentiate between the two. 

Section 22 of the Act states that in order to bind the firm and all its partners thereof, every act must be done in the name of the firm or expressly on behalf of the firm. It is desirable to make the firm duly represented by one or more of its partners as a party to any such transaction. It is also clarified that a mere description of the signatory that he/ she is a partner of a firm may not be sufficient to bind the firm. In cases where an immovable property is to be acquired or sold off by way of purchase/ sale or byway of lease or otherwise, it is essential to make all or some of the partners as parties and not just the firm in its name. 

A Partnership is not a legal entity and the name of the partnership firm is only a collective expression representing all the partners constituting the firm. Thus a transfer of property can only be made by or in favor of a legal or juridical person as provided in Section 5 of the Transfer of Property Act.

A Partnership firm unlike a Company registered under the Indian Companies Act, does not have a separate legal identity, different from partner and a partnership firm cannot sell or purchase property in its name.A partner has no implied authority to sell or buy any immovable property on behalf of the partnership.The legal entity is the partner himself.All partners in their individual capacity should also join as parties to the agreement to sell or to the conveyance deed and execute it in their individual capacity. When an immovable property is transferred to a firm it vests in all the partners of the firm and not in the firm, since the firm has no separate legal existence.

At certain times, a single partner represents the partnership firm, which is not a correct practice.In such cases, the said partner should have power of attorney or authority of other partners to execute the documents. Even if a partnership is formed between an individual and a partnership firm the deed of the partnership should be signed by all the partners of the firm.Transfer of property by or in favour of a firm without the names of partners is ineffective.However, the distribution of the assets of the firm on dissolution,where a partnership property is divided or distributed among partners or taken over by one or more partners from others, does not amount to transfer of property and needs no registration.Such a deed attracts stamp duty under a separate category Dissolution deed and not as a conveyance deed.

If the property purchased was in the name of a partner of the firm and on his death, his share, right, interest in the property would vest in his heirs or legal representatives.In case of transfer of such property,the heirs/legal representatives of the deceased partner should also join the execution of the document.  

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Advocate S Selvakumar

senior advocates

PLAN WELL FOR A PERFECT HOME

PLAN WELL FOR A PERFECT HOME

To own a shelter is everyone’s ambition. Some may own a home when they are very young, many when they are young, and a few when they are not so young. There are numerous people who do not have their own shelter. They pass their lives in rented premises. Through proper planning anyone can achieve the ambition of owning a comfortable house.

The concept of construction is a little complicated one. It is, therefore, necessary to understand the basics of house construction before embarking on your dream project.

LOCATING THE LAND
When you decide that you need a house, you then need to find a good plot of land. Always remember three important points. They are Location, good location and best location. Before deciding on the plot, you have to make a survey of various plots and then select a suitable of your choice. If you do not like the position or shape of a land, do not buy it. If you exert a little more, you will definitely find a suitable piece of land at a convenient location.

ENGAGE PROFESSIONALS
It is always advisable to engage professionals to get quality work and its timely completion. Architects, civil engineers, structural engineers, real estate agents, banks, plumbers, electricians and building contractors contribute a lot in shaping your dream house. You have to select the right people to carry out the work. Engaging professionals will be a little bit expensive, but it will ensure that you do not have to face problems in the long run. If you do not wish to spend money on the professional, you may save a portion of the project cost but in the long run you might face problems.

Purchase of Land
Once you have selected a piece of land and decided to purchase it, your advocate will take care of all the legal aspects of the land as to its title and genuineness, and prepare a document called Agreement to Sell to be entered in to between the purchaser and the seller. Agreement to Sell is a very important document particularly for buying a property. The period between the Agreement to Sell and the Sale Deed is a crucial period for the purchaser. An eminent advocate, who has long experience in property matters, must deal with such important matters. Most importantly you should not follow a ready-made model agreement or sale deed, or engage a real estate agent or a job typist, as some people do. You may save some money but in the long run particularly when you plan to sell the property; chances of facing acute problems cannot be ruled out.

Vaastu Shastra
The concept of building a house on Vaastu principles has become very popular. Vaastu Shastra is the science of construction. In the present times it has assumed a distorted meaning. People attribute Vaastu to good luck and bad luck.
Whether you believe in Vaastu or not, it is advisable to construct the house on Vaastu principles, since an adverse remark on the location of the rooms might psychologically affect the owner if something untoward happens in the future. The main door, pooja room, kitchen, bath room, toilet, storage space, bed rooms, overhead and underground water tanks and septic tanks must be according to Vaastu Shastra, particularly so when you put up the house for sale at a future date.

House Plan
Making a plan is very important. It is the first step in the entire process before the construction work starts. Once you settle on a budget and spell out exactly what you want, the professionals can take over. The architects will assist you in designing your home, right from the hall, kitchen and bathrooms of the house. The rooms are so designed that they are proportionate to the area available for construction. From the design you can see how each room will look. You may change the plan as many times as you like before making the final drawing. Once the final drawing is prepared it should not be changed. The architect makes the plan with the future in mind. You may do the construction work in stages depending on your budget. If you have money to construct only the ground floor you may do so. You may or may not construct additional floors but it is a must to have a total plan for two or three floors as per the floor area ratio (FAR). Constructing a house without a plan will cause many problems in various stages of construction. Do not take the advice of illiterate ‘maistries’ who do not know the problems that might arise in the future.

Elevation
While planning the house you have to make certain provisions for exterior elevation and interior decoration and furnishing work. These add value to your house for ever.

Sanction Plan
Before taking up the construction work the final drawing must be submitted well in advance to the competent authority for approval. The building construction work must be based on the plan sanctioned by the authority. A minor deviation from the sanctioned plan may be done if required. A copy of the sanctioned plan must be handy at the job site for inspection by the competent authority while the job is under execution.

Housing Finance
Before starting the construction work, you have to mobilize adequate funds for smooth and uninterrupted execution. You have to decide on the budget and raise it from your own sources or from a housing finance institution. Whatever be the estimate you have to provide for an extra ten percent to take care of cost of escalation of building materials and unexpected additional work. If you intend to avail home loan, you will have to approach a finance company well in advance with the sanctioned plan etc., and get the loan sanctioned.

Foundation
The structural engineer does the foundation drawing. Though foundation work is a little expensive you must not compromise with it. A building rests safely on a strong foundation. It is the base on which you construct additional floors at a future date.

Area
From the Floor Area Ratio, the plot coverage area must be worked out. Plinth Area is the total area of construction. This includes all the floors as well as the wall thickness. Carpet area is the area inside the constructed building between the walls and the area actually used. Super built area is generally applicable to apartments. This includes the wall thickness, projected area and the common area.

Solar Heater
Whether you are providing a solar heater or not, there must be a provision for it and you must atleast give pipeline connections to the bath rooms, kitchen and other places from the heater location so that you need not have to spend extra money when you install a solar water heater.

Bath Room 
For bathroom the bolting arrangement must be such that when it is bolted from the inside the door can be opened from the outside by applying a little force in case of an emergency. The bath room must be laid with anti-skid tiles. The fixtures in the bathrooms must be such that they do not interfere with free movement. Also there shall be no projections from the walls.

Woodwork
Though teak wood is preferred, by using other woods and wood substitutes you can save up to 50% on the wood cost. If adequate funds are not available for making built-in cupboards, you may make the provisions for putting up at a future date.

Periodic Inspection
Civil, structural, plumbing, sanitary electrical, carpentry and tiles laying are inter related works which call for proper co-ordination, with periodic inspection and repair. When the construction work is in progress a representative of yours must be on the job site. The architect, civil engineer, and the structural engineer must do periodic inspection. This is a must.

Electrical Wiring and Plumbing
The architect prepares the drawing for electrical, plumbing, sanitary and pipe laying works and pipe laying works and it must be carried out as per the drawing. In case of any deviation it must be incorporated in the drawing. The drawing must be kept safely so that if any leakage or short circuit occurs after some years, the drawing will come in handy to locate the faulty areas.

Painting
This is the last stage. Painting work is done in five phases. After primer coating is given it is allowed to dry. Thereafter the full putty and then the first coating of painting are given. This work must never be rushed. After the first coat you may perform pooja. Thereafter touch up putty work is done and then the final coating. Adequate time must be given for the final coating, which makes the interior visually appealing.

Material 
Do not compromise on the material quality. Always use BIS (Bureau of Indian Standards) certified materials. Electrical wiring materials must be of a well-known and reliable brand. Without proper co-ordination timely execution of work is not possible. For each work phase, a timetable must be drawn up and strictly adhered to. When one phase is over, workers for the next stage of work must step in. There shall be no financial constraints at any stage. If all these are attended to promptly, you can have your dream house without hassles, and peacefully.

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