Home Loan Jargon Explained

                                      Home Loan Jargon Explained
                                                      

Here are a few technical terms that will enable a borrower to clearly understand the conditions and clauses connected with home loans:

Acceptance letter : Letter submitted by the borrower accepting the loan as per the terms mentioned in the sanction letter.
Advance EMI : Number of equated monthly installments in the form of post dated cheques, paid out in advance at the time of disbursement of loan.
Administrative fee : A onetime non-refundable fee, payable before the loan is disbursed. It typically ranges between one and two percent of the loan amount
Amortisation schedule : This gives details of the prin­cipal and interest payments and the amount outstanding at any given point during the amortization period. The period of time for which a bor­rower owes interest and prin­cipal to his lender is called the amortised period.

Annual rest : Here the EMIs are calculated on year­ly basis. The interest is cal­culated on the outstanding principal at the beginning of every year. Once the interest is calculated at the rate charged to the customer for the entire year it is deducted from the EMIs received dur­ing the year. The balance EMI is taken as principal re­paid during the year, and this is deducted from the opening balance of the principal of the current year to arrive at the opening balance of principal for the next year.

Appreciation : An in­crease in the value of a prop­erty due to changes in mar­ket conditions or for other reasons.
Asset : An immovable or movable property or any­thing with a rupee value that you own, which can be used as security against which credit can be offered.
Appraisal : A professional opinion of the current mar­ket value of a property.
Breach : Violation of any legal obligation is termed as breach.
Balloon loan : A loan that has a fixed rate of interest over a period of time. At the end of the balloon period, the borrower must refinance or pay off the remaining bal­ance.
Bounce charges : Charges levied by the housing finance company in case cheques submitted by the borrower get dishonored.
Collateral : Refers to an as­set that can be used to guar­antee the repayment of a loan. The borrower risks los­ing that asset pledged as col­lateral if he defaults on loan repayments.


Credit report : A report of an individual's credit history that is used by a lender to de­termine a loan applicant's creditworthiness.
Co-applicant : A co-appli­cant applies for the loan jointly with you. It is usually the spouse or parent, whose income can be clubbed with yours to enhance your loan eligibility.
Deed : A legal document used to transfer the owner­ship of a property.
Default : Failure to meet legal obligations in a con­tract, in this case, failure to make the monthly payments on a mortgage. If this hap­pens, the borrower can end up losing the property.
Down payment : Housing finance companies normally lend only 80-85 percent of the value of the property. The balance, known as down payment would have to be paid by the buyer, as a pay­ment before he draws the loan amount.
Eligibility : Amount that can be lent to you by the bank based on your repayment capacity. Your eligibility de­pends on the norms set by the bank and computation is based on any of the following : loan to value ratio, install­ment to income ratio or fixed obligation to income ratio.

Encumbrance certifi­cate : Contains details of transfer of ownership of a property in succession up to the current owner. It shows the date, the names of the parties involving the amount of consideration, the extent and schedule of the property. It can be procured from a sub-registrar's office for a fee.
Encroachment : An illegal intrusion onto someone else's property.
Equated monthly in­stallments (EMI) : Loan repay­ments are usually in equal monthly installments over the tenure of the loan.
Foreclosure : This is a le­gal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mort­gage. This is a measure for repossession of prop­erty if the borrower is un­able to keep up his financial commitments.
Fixed rate of interest : An option where the rate of interest remains fixed over the tenure of the loan unless there are some clauses added. It is an ideal alterna­tive in situations when you expect the rates of interest to go northwards.
Guarantee : A guarantee is an assurance by someone to pay a debt contracted by another if the original party fails to pay according to a contract.
Income to installment ratio : Used to compute loan eligibility, this ratio signifies the percentage of the income that can be set aside for re­payment of the loan under the assumption that around 50 percent of the income is required by the person for his own sustenance.
Interest rate : Rate at which the lenders charge interest for the loan amount. 

Insurance for property : The insurance company pro­tects the insured property against specified losses, such as fire, windstorm and floods.
IRR : Internal rate of re­turn is the rate at which the lender accounts for interest.
License for construc­tion : It is the permission in writing to construct that is issued along with the loan ap­plication.
Lien : A legal claim against a property.
Lease : Contract by which the owner of an asset lets it out for use to another for a specified time on payment of a specified amount called rental.
Loan to value ratio : The relationship between the amount of a loan and the ap­praised value of the property, expressed as a percentage of the value.
Margin money : The dif­ference in the total cost of the property and the loan amount sanctioned is termed margin amount. This money has to be invested by the bor­rower even before the loan amount is released.
Market value : Value of the property in accordance to the prevailing market rates.
Monthly rests : Here the balance amount is calculated on monthly basis. The EMI is broken up every month to arrive at the opening balance of the principal for the next month.
Mortgage : A legal document that pledges a property to the lender as security for payment of a debt.
Penal interest : Penalty in the form of interest charged on installments if it is not received as per the repay­ment terms by the end of the month.
Power of attorney : The power you can give a speci­fied person or persons to act for on your behalf. The per­son who is so represented is called principal. The person who is so authorized to do or represent is called agent.
Pre EMI : Monthly repay­ments to the bank in the form of EMI for the loan will begin only after the loan has been disbursed in full. Till such time the borrower has to pay interest for the loan amount disbursed. This amount of interest payable every month is called pre-EMI.
Prepayment : If a borrow­er has surplus funds he can pay back the loan ei­ther in parts or in full. This is called prepayment. Some banks charge a pre-payment penalty while others have a cap on the number of times that a person can prepay his loan amount during a finan­cial year.
Prepayment penalty : This additional fee is charged by most banks in case the borrower decides to pre-pay the loan before the tenure is over.

Refinancing : The deci­sion to switch your loan from one lending institution to another is called refinanc­ing. People generally tend to switch when another lender charges a much lesser interest rate.
Registration Value : This is the value of the property at which the property is registered.
Sale deed : An agreement in writing which transfers the ownership of the proper­ty in exchange for a price paid. It is imperative that this document is registered.
Sanction letter : On ap­proval of the loan communi­cation is sent by the lender to the borrower. This letter con­veys the sanction terms and conditions.
Survey : The determina­tion of the exact boundaries and location of a property.
Tenure of loan : Number of years for which the loan is given.
Title : The right and inter­est over the property evi­dencing ownership. A ti­tle deed is a statement, which confirms that the current owner legally holds title to the property.
Valuation : Valuation is a professional assessment of the property's value, which is required by the lender.
Underwriting : The process of evaluating a loan application to determine if the loan is acceptable to the lender.

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LAW OF LIMITATION

Law of Limitation

Every person has a right to approach courts to seek justice. There are various laws enacted by the central and State governments regulating the rights of citizens and procedure of juridical proceedings. Law of limitation is a restrictive law, where the rights of the persons to approach courts are regulated, with the time factor being important.  A person has to approach the court within certain prescribed period if not his right to seek Justice through courts is lost. Law of limitation is both adjective and substantive law. Though superficially law of limitation seems to curtail the rights of the citizen, it is actually     proactive, forcing to approach the court within the limitation period. If not people would have waited, might have dug out the graves, to open age old litigations and courts would have flooded with cases. One may imagine the situation in the country in the absence of limitation law, as even now there is backlog of cases in all the courts.

Contents:

The law of limitation which was enacted in 1908, had certain inherent defects and shortcomings, which were exposed by various judicial verdicts. The act was revised  simplified, came into force from 1st January 1964. The act contains 32 sections and 137 articles; where as the act of 1908 had 30 sections and 183 articles. The   sections deal with the general principles applicable to the extension of time, whether by reason of disability, acknowledgement and part payment. The sections are divided into five parts; part 1 is preliminary, part IInd deals with limitation of suits,  appeals and  applications, part IIIrd deals with computation of period of limitation, part IVth deals with acquisition of ownership by possessions and part Vth deals with saving provisions. Out of 183 articles, articles from 1 to 149 deal with suits, articles 150-157 deal with appeals, articles 158 to 183 relate to applications. The revised Act has some salient changes; the most  important being the maximum period of limitation is 30 years, which is available to three kinds of suits.

1.   Suits by mortgagors for the  redemption of recovery of possession of immovable property.

2.   Suits by mortgagee for foreclosure

3.   Suits by or on behalf of Central government or State government including state of Jammu and Kashmir.

The old Limitation Act has prescribed 60 years as limitation  period to suits to redeem or recovery possession of immovable property mortgaged.

The second longest period of  limitation is 12 years, prescribed for various kinds of suits relating to     immovable property trusts and endowments. The limitation period for contracts, accounts, declaratory suits, suits relating to decrees, instruments and suits relating to movable property is three years. The limitation period varying from one to three years is prescribed for suits relating to torts and miscellaneous suits and also in respect of suits for which no specific period of limitation is provided in the  schedule to the Act.  A minimum limitation period of 10 days is prescribed for applications for leave to appear and contest a suit under summary procedure from the date of summons.

Important Sections:

We shall discuss some important sections. Importantly, the Limitation Act considers all the instruments be made with reference to Gregorian calendar, where the years are computed from the date of the birth of Christ which is widely used. The present year is 2004 according to Gregorian calendar.

Another Important provision is  legal disability. The person who is   entitled to file a suit may be suffering from legal disability at the time from which the limitation period starts, such as minority, insanity etc.  In case of such persons, the limitation period starts after the legal disability is cured. In case of the legal disability continues until the death, his legal heirs may institute the suit, within the same limitation period after the death. In case the person under legal disability dies after the disability is cured but within the limitation period allowed, his legal representative may institute the suit within the same period, after the death as otherwise would have been available to the   person had he not died. To be more clear we shall study an illustration.  Mr. A has lent some amount to B on the  security of demand pro note.  The limitation period is three from the date of pro note. But Mr. A was suffering some legal disability during the period of three years and recovers in the fourth year. The limitation period of three years starts from the fourth year. But A will nor institute any suit and dies at the end of fifth year. Mr. A had a balance period of limitation of one year.  So his legal representative may institute a suit within one year after the death of A.

Expiry of prescribed period whencourts closed:

The limitation period may expire on a day, when the court is closed. In such cases the suit may be filed on the date when court re-opens. Thus the Court holidays are excluded while computing the limitation period.

Extension of period in certain cases

If a person could satisfy the court, that he had sufficient reasons for not preferring an appeal during the limitation period, the court may admit the appeal, even after the expiry of limitation period.

Any suit, appeal application made after the prescribed period is liable to be dismissed except where specific provisions are made. The dates of instituting suits, preferring appeals or making applications will be considered as follows.

A suit is said to be instituted when the plaint is presented to the properofficer.

In case of a pauper when his application for leave to sue as pauper is made.

In case of a claim against a  company, which is being wound up by the court, when the claimant sends his claim to the official liquidator.

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Legalising building fraud will lead to disaster- High Court

          LEGALISING  BUILDING FRAUD WILL LEAD TO DISASTER-HIGH COURT

                                                                       

The Bombay High Court, while hearing petitions seeking to legalise illegal structures in various parts of the city, has ruled that Regularization of unauthorized constructions will have to be permitted on a case-to-case basis and should not be granted as a matter of course.

A division bench of the High Court held that the planning authority had to consider various factors such as infrastructure, congestion, water supply, and roads before regularizing illegal constructions against payment of a penalty.  If there is an increasing pressure and burden on the existing facilities and amenities then the whole system would collapse resulting in large-scale inconvenience, it was observed. 

The cases before the Hon'ble Court pertained to regularization of various structures in Bandra, Goregaon, Boriveli, and Pydhonie apart from the top 17 floors of Gaurav Gagan, a 24-storeyed building in Kandiveli (West).

The Hon'ble High Court further ruled that it cannot be said as a matter of general rule that unauthorized constructions must be regularized if the floor space index (FSI) is available or can be generated in the form of transfer of development rights (TDR) from other sources by the builder. Although section 53(1) of the Maharashtra Regional Town Planning Act provides for regularization of unauthorized structures, the indiscriminate regularization through TDR or FSI can have disastrous consequences. Before the authorities take any decision about regularization they must not only consider the alleged hardship to individual flat purchasers but also the interest of those living in the neighbourhood and the public at large.

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Latest SC Judgment states Buyers will have to forfeit in payment if remaining installments are not made on time

Latest SC Judgement states Buyers will have to forfeit in payment if remaining instalments are not made on time

                                               

Make sure that you read the agreement carefully before you buy a flat and sign on the dotted line.

Recently in Delhi, a Buyer lost Rs. 7 Lakh to a Builder after he was unable to pay the rest of the amount for the property. As per on October 18, the Supreme Court Judgement, the Builder had the right to keep the initial amount paid and even cancel the deal since the Buyer had failed to make the payment on time. The property was worth of Rs. 63 Lakh.

The Purchaser of an immovable property could forfeit his money if he fails to pay the remaining sum, the apex Court said.

The Realty Experts believes the Judgment could set a dangerous precedent. “Builders who aren’t Professional could collect earnest money and then come up with some frivolous excuses claiming that the Buyer didn’t stick to the agreement, and thus call off the deal and forfeit the money.

The agreement holds the key to the deals. The Buyer will now have to be very cautious before signing and registering an agreement. Even a simple mistake could cost him not only his money but even the deal. This helps the Builders to save themselves from Buyers who give a small amount of money and then not pay the rest, because of which the Builder’s project gets stuck.

The agreement executed by the total amount from the Purchaser should be in conformity with the Law of the land.

A Builder has no right to collect more than 20 percent of the total amount from the Purchaser before executing the registered agreement. The Builders cannot collect more than 30 percent thus, aggregating 50 percent unless he completes the construction of all slabs of the building to be sold. Such rules should be read before signing an agreement.

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HIGH COURT STAYS BUILDING DEMOLITION AT RICHMOND ROAD

           HIGH COURT STAYS BUILDING DEMOLITION AT RICHMOND ROAD 

                                                                   

Armed with Karnataka High Court order, Bruhat Bengaluru Mahanagara Palike (BBMP) east zone officials brought down a portion of a building on Richmond Road, which was built against sanctioned building plan.

The demolition, which was in full swing, however, was stayed by the division bench, comprising Karnataka High Court Chief Justice D H Waghela. 

The building on a 2,400-sq ft plot belonging to Zubeda Nazir, has five floors and violates the set back norms of Town and Country Planning Act. Since it was disturbing the neighbourhood due to violations, Rustumji Residency Owners Association had approached Karnataka High Court seeking its intervention.

In this connection, Justice Ram Mohan Reddy had passed an order on Monday for the demolition of the portion of the building, which was violating the sanctioned building plan, and directed BBMP to submit the compliance report by Wednesday morning. 

The demolition drive began in the morning, spearheaded by the Chief Enginer of East Zone, R Prasad. An earthmover and about ten labourers were engaged to demolish the structure. The demolition evoked curious response from neighbours who gathered to see walls, projections, windows and doors crumbling down with every assault on the structure by the earth-mover. 

The building owner, with his lawyer, was seen pleading with the chief engineer to stop the action but he went ahead expressing helplessness as his inaction, in the presence of media, would attract contempt of court and he was duty bound to initiate action against the illegality.

The work stopped at about 4.30 pm on Tuesday when the advocates succeeded in getting the order copy. In the High Court, hearing the writ appeal by Nazir, a division bench stayed the demolition and adjourned the next hearing to December 11. The appellant has contended that she was never given an opportunity to be heard in the writ petition and that she never received any notice from BBMP about any violation of sanctioned plan. 

She also contended that demolition orders were not issued by the High Court, but was a mere preliminary order by BBMP. BBMP has carried out the demolition only following an oral direction from the single judge bench.  

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Bangalore HC says no time restrictions; the Builders are relaxed

BANGALORE HC SAYS NO TIME RESTRICTIONS, THE BUILDERS ARE RE ELAXED

Granting temporary relief to Builders, the High Court allowed the construction sector in the State to go ahead with its work between 6 am and 8 am and from 6 pm to 8 pm and from 6 pm to 10 pm, the period during which it was restricted from taking up work.

Hearing a Public Interest Litigation (PIL) petition by the JP Nagar 1st Phase Resident’s Welfare Association challenging the permission to a construction firm, the Division Bench comprising Chief Justice Vikramajit Sen and Justice M/s B V Nagarathna granted them temporary relief till March 31, 2013 to carry out works which are not in violation of the Noise Pollution (Regulation and Control) Rules, 2000.

Following an affidavit by the Confederation of Real Estate Developers Association of India (CREDAI), seeking relaxation of time to carry out some of the works which cause no noise pollution or disturbance to the Public, the Bench warned of action in case of violation of the order. The Court observed, “We are optimistic that the respondents adhere to the steps and measures to prevent noise pollution and prevent disturbance to the Civilians”. Stating that the arrangement shall continue till March 31 2012, the Bench said that the same will be reviewed later and if necessary, amendments will be made.

CREDAI had pointed out its affidavit that movement of heavy vehicles had been banned between 7.30 m to 11 am and 4.30 pm to 8.30 pm by the Bangalore City Traffic Police and with the construction activities too being prohibited from 6 am to 8 am and 6 pm to 10 pm, the members under it were facing the problems.

Seeking to im plead itself in the petition, CREDAI had appealed to the Bench to allow them to carry out construction activities and had assured to keep the noise pollution under check in accordance with the noise pollution rules.

According to the CREDAI, works like tying steel, block works, plastering, painting, landscaping and transportation of materials and removal of debris could be taken up. Some of these works could be taken up without noise pollution, while noise pollution of some of the others could be minimized.

The counsel for the petitioners, in his objections to the affidavit, said CREDAI had failed to implement the code of conduct among its members and that the code of conduct was recommendatory in nature and could not be enforced.

Pointing out that CREDAI had no powers to punish; he said the application did not disclose what action had been taken against violators of its code of conduct.

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NATIONAL HIGHWAYS – IN MAHARASHTRA TO HAVE CCTV CAMERAS

NATIONAL HIGHWAYS – IN MAHARASHTRA

TOHAVE CCTV CAMERAS

In response to a public interest litigation by a NGO the Bombay High Court has asked the Maharashtra State government to install CCTV cameras on the state’s national and state highways to monitor and prevent high incidents of accidents.  The petioners had informed the Bench that  providing well equipped ambulances and  paramedical staff on the highways would bring down fatalities due to increasing number of accidents.

In the judgment it was observed that installing CCTV’s will be effective and the government must insist on installation of CCTV’s while floating tenders for construction of roads on BOT (Build-Operate-Transfer) basis. It was also observed that the reasons for increasing number of accidents on the highways are due to the tendency of haphazard driving, not following lane discipline and  also due to heavy vehicles occupying fast lanes. It was further suggested to have the cctv’s alongwith every lamp post. 

 REALTY MARKET IN AHMEDABADSET TO SEE SURGE IN

 ACTIVITIES IN 2013

There was not much activity in the reality sector in Ahmedabad since a long time and had remained almost stable.  It is observed by the experts that there will be major  changes in terms of infrastructure and residential projects.  Infrastructure will improve on completion of Outer Ring Road (ORR), Bus Rapid Transit System (BRTS) etc.,

The improvement in instructure facilities has created more demand in housing sector  in almost all localities, especially on the city outskirts. This has given a fillip to the growth of realty activities in Ahmedabad both in the residential housing projects and also in commercial projects. One of the leading developer says – ”the town planning and infrastructure policy of the state government are the major drivers for the growth of the city and with the completion of many infrastructure projects the city will witness increased activities in the coming years”.

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