How home buyers can raise ‘margin money’ to purchase property

There are various ways in which home buyers can raise the margin money, which can vary from 10% to 25%, depending on the loan amount

While opting for a home loan, lenders will not sanction a loan for the entire cost of the house. Moreover, as per the RBI’s directions, lenders are not allowed to take into account the stamp duty and registration charges, while computing the cost of the property. Consequently, a portion of the total amount, has to be financed with the buyers’ own funds and is called ‘margin money’. The percentage of margin money varies from 10% to 25%, depending on the loan amount. There are various ways in which borrowers can raise this margin money.

By liquidating past savings, or taking a loan against securities

For a majority of home buyers, this is the main source to finance the margin money. The savings may be in different forms (funds in bank accounts, fixed deposits, investments in shares and mutual funds, investments in National Savings Certificates, etc.) and depending on the requirement, the same may have to be liquidated.

At times, the market price of some of your investments in shares or mutual funds may not be good. In such cases, one can try and avail of a loan or overdraft facility against the security of such assets, instead of selling the same at a loss. Please note that all the shares/mutual funds may not qualify, for the overdraft facility. Lenders, generally, have a list of the shares or mutual fund schemes against which they lend.

Loan on your life insurance policies

If you have purchased life insurance policies, which are not pure term plans, you can get a loan against the policy, subject to certain conditions on the number of years for which the premiums have been paid, the minimum loan amount, etc. These loans are relatively cheaper.

Withdrawal from provident fund/public provident fund accounts

Although EPF and PPF are meant for retirement, one can also use these funds to buy a house. If you have completed five years of contribution to your provident fund, the rules allow the employee to partially withdraw money from the account. Likewise, if you have contributed for at least six financial years to your PPF account, you are allowed to withdraw a part of the funds, without giving any reason.

Loans from friends and relatives

One can also borrow money from friends and relatives. This may only be possible, if you enjoy good relations with them or if you have helped them in the past.

Personal loans

As a last resort, you can take a personal loan to fund your margin money. However, you need to be careful about the timing of the loan. If you have availed of the personal loan before the home loan, your personal loan will reflect in your credit report and this will impact your home loan eligibility, as the home loan lender will take into account the EMIs of your personal loan. Conversely, if you apply for a personal loan after the home loan, it may be difficult to get a sanction, as the home loan lender would have already taken into account your maximum loan eligibility. So, you need to time the applications such that they do not cross each other.

The rate of interest on personal loans are very high, as compared to home loans. Moreover, you need to make a realistic assessment of your future cash flow, to ensure that you can service both loans. A default in the payment of EMIs, will spoil your credit score and your future ability to borrow.

Also read: How to improve your credit score before applying for a home loan

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1-BHK Makes A Comeback

October, 2018

The 1-BHK makes its way back into our lives as many opt for it due to favourable market conditions and affordable EMIs

Although it has been overused, the term ‘upwardly mobile’ is a strong driving force in the real estate market, and people who have lived in small homes for most of their lives are daring to dream big.

One of the most important driving factors is the fact that the average Indian earns a net income of Rs 40,000 per month, which demonstrates this mobility; this along with the usual frantic SOS sent out to family and friends in order to help rustle up just enough for a downpayment to book their square feet of heaven.

These factors along with the fact that there has never been a better time for home loan borrowers to make the move. The comfortable Easy Monthly Instalments (EMI) of a 1-BHK, which doesn’t paralyse your quality of life for almost a decade, has made this category one of the most sought-after.

Anita Chitale (29), who is shifting from Mumbai to Pune in order to realise her family’s dream of owning their first home, says, “I grew up in the heart of Mumbai, our living quarters, thanks to my dad’s job. However, now he is retiring soon, and since my sister’s income as a beautician and mine as a teacher would not allow us to afford a house in the city, we did not want to stay and spend our money on rent,” says Chitale, adding, “So we decided to purchase a 1-BHK on the outskirts of Pune, near Kothrud.”

The trend hasn’t gone unnoticed by developers. In fact, as the dust settles on demonetisation and with the economy picking up in tandem with the one-year completion of RERA, there have been significant launches in the compact housing segment in cities like Mumbai, Delhi and Bengaluru.

The trend is not only limited to those who live in one-room houses, but also to those who rent 1-BHK apartments and want to switch to owning their own property such as Jishu Malekar. A resident of Mumbai, this 35-year-old illustrator lived with his family on rent for almost five years before they made the move from Delhi to Mumbai. “I lived on rent in a good housing society, but we knew that we had to buy our own home. The earlier I did it, the better it would be for me,” he says.

While on the other hand, people like Ashok Kamble (45), who bought a 1-BHK in his hometown (Kolhapur) after saving up for almost 15 years, says, “I have three kids and was the only earning member of my family. I lived in a one-room house at Thane, which my employer gave me, free of cost. Saving up all these years finally enabled me to take the plunge and buy a 1-BHK back in my hometown.” He adds, “After I retire, I will shift there with my wife, and hopefully my kids will be well-settled by then.”

Also read: How to improve your credit score before applying for a home loan

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How to improve your credit score before applying for a home loan

September, 2018

Improving one’s credit score has many advantages. Not only does it make it easier to obtain a loan, but it can also help the applicant to get an attractive rate of interest 

It is advisable for home loan seekers to obtain a credit report, before applying for a large loan, such as a home loan. This report, which provides a person’s credit score, can be obtained from any one of the four credit bureaus operating in the country – CIBIL, Experian, Equifax and Crif High Mark. A score between 750 and 900 is considered as excellent. However, if the score is below 675, one may need to improve the credit score before applying for a home loan. 
“A good credit score can help you get a loan at a more attractive rate of interest. This can lower your interest burden by lakhs of rupees, during a loan tenure of 15-20 years,” asserts Sujit Kumar, a Delhi NCR-based lawyer, who improved his credit score, before applying for a home loan.

Immediate tips to improve your credit score

When it comes to improving your credit score, first check for any error in your lender’s record books. While you may have repaid a loan, the bank’s records may still be showing some credit outstanding against your name. Rectifying such mistakes, will improve your credit score.

Disagreements between a lender and a borrower may also be the cause of a poor credit score. Resolving such disagreements, paying the dues and closing the loan account can boost your score.

The most important thing for a good credit score, is to make all the payments on time. If you have missed a particular payment, make amends right away by paying up.

Consolidating your credit will also help. You may have taken five personal loans. Consolidating all these loans, into a single one, will look better on your records, by indicating that you are not excessively credit-hungry.

Also, when it comes to credit card bills, many borrowers pay up only the minimum amount and revolve the rest of their credit card loan. This is a bad practice, as the rate of interest on credit card loans is very high. If you have been doing so, replace the credit card loan with a personal loan, which will bring down your interest charges and enable you to meet your dues.

Long-term tips to improve your credit score

In case you have a delinquent loan against your name and you don’t have the ability to repay right away; this is a situation that can only be remedied over a period of time. If you have a high proportion of unsecured loans, vis-à-vis secured loans, you should try to alter the mix over a period of time.

Another behavioural change that you must make, is to avoid shopping for loans excessively. In trying to bag the best possible deal, do not apply or make enquiries at 15-20 banks. Each time you make an enquiry, it gets registered against your name and indicates that you are credit-hungry.

“If a person is too hungry for credit, it reflects poorly on his credit score,” cautions Arun Ramamurthy, director, Credit Sudhaar Services.

Suppose that your credit card provides you with a credit limit up to Rs 2 lakh, don’t use up the entire limit as this is also perceived as a sign of credit hunger.

Despite your best efforts, if you are not able to achieve a good credit score on your own, then, there are professional agencies that you can turn to, such as Credit Sudhaar, etc. These agencies can help you to achieve the right mix of secured and unsecured loans. They tell you about the right number of credit cards you should own, given your economic status. They also inform you about the maximum percentage of credit on your credit card, beyond which you should not go.

Also read: PMAY Home Loan – Pradhan Mantri Awas Yojana

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Six states keen on replicating MahaRERA path

September, 2018

The government representatives of six states — Goa, Gujarat, Uttar Pradesh, Telangana, Chhattisgarh and Karnataka — have sought a detailed outline from the Maharashtra Real Estate Regulatory Authority (MahaRERA) for implementing RERA in their states.

The state housing department confirmed the development. MahaRERA Secretary Vasant Prabhu said the representatives of the states had discussions with the MahaRERA officials. A workshop would be arranged for these states on September 10 at Yashwantrao Chavan Academy of Development Administration to showcase the functioning of MahaRERA. The minister of housing and urban affairs Hardeep S Puri would attend it.

With over 17,000 projects having been registered with MahaRERA, the other states are drawing flak from the Union government for the non-implementation of RERA.

Prabhu said, "In the past two years, we have been able to not only get more than 17,000 projects registered but also issued several orders, mainly for delay in completion of projects. The appellate tribunal and the counselling helped the customers."

The ratio of registrations and addressing grievances is much higher and more effective in Maharashtra than other states. "No wonder our model has turned out to be very successful," said an official of the housing department.

He said the developers in Maharashtra were also displaying their MahaRERA registration numbers in their projects' advertisements and more than 80% of the buyers were being addressed at the primary-level.

The Confederation of Real Estate Developers' Association of India (Credai), Maharashtra, President Shantilal Kataria said many other states should take a leaf out of how Maharashtra initiated the rules in time. "In two years, several credits go to the authority," he said.

The software for putting up all the details on the MahaRERA website should be an added attraction.

A recent report of Anarock property consultants stated that out of all the states and Union Territories in India, Maharashtra takes the first place when it comes to proactive RERA adoption, its implementation and integration, followed by Uttar Pradesh, Gujarat and Madhya Pradesh. 

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All You Need To Know About Conveyance Deed

August, 2018

While buying or selling any property, you must have come across various legal documents that are required to prove the ownership of that property. Conveyance deed is one such document that is required when there is a transfer of ownership of any property from one person to another.

Here's everything that you need to know about a conveyance deed –

What is Conveyance Deed?

The term "Deed" means a written legal contract that binds the parties to its terms and can be proved in the court as evidence.

The term 'Conveyance' is used when there is transfer of ownership or legal title in a property from one person to another. Hence, a conveyance deed is a legal document between a transferor and a transferee, which proves that a title or ownership in the property along with all other rights related to the property have been transferred from one person to another.v It informs that the property is free from any restrictions and disputes. Both parties sign it and it can be produced in a court if any dispute relating to the agreement arises in future.

However, a conveyance deed is a wide term which not only includes a sale of the property but also other kinds of transfers such as gift, exchange, lease, mortgage, relinquishment and other transfers.

A conveyance deed is valid only when the property is sold for a valid consideration (usually money) except in the case of a gift deed which results out of love and affection.

It can be signed for either movable or immovable property.

A conveyance deed is executed in accordance with the legal provisions under the Transfer of Property Act 1882, Registration Act 1908 and Indian Stamp Act, 1899.

Essential Elements in a Conveyance Deed

In order to be valid and acceptable in a court, a conveyance deed needs to contain some essential elements. For instance, it must:

• Establish exact boundaries of the property to avoid any dispute relating to land ownership,


• - State that all the rights relating to the property have been transferred along with the property,


• - Provide details regarding delivery and acceptance of the property,


• - State all terms and conditions relating to the transfer,


• - Be made on a non-judicial stamp paper and signed by both parties,


• - Mention full names, addresses and other requisite details of the seller and the buyer,


• - State that the property is free from any disputes and restrictions,


• - Be signed by at least two witnesses


• - Be in writing and notarized, and


• - Be registered through the local registrar’s office by submitting appropriate registration fee. Registration is proof that the property is free from any disputes and has been transferred to the buyer permanently with a clean title.

Once the registration is complete, the buyer becomes the absolute owner of the property and the conveyance process gets over officially. A lawyer and a real estate agent can help two parties compose, sign, and register a deed of conveyance during a transaction. The government obtains its revenue from the stamp duty and registration fees.

Why is it important?

For instance, your uncle gives you a piece of land without any written legal document and verbally states that the property belongs to you. Now, you build a house on that land but unfortunately, your uncle suddenly passes away. His son files a case against you stating that the land belongs to him after the death of his father. Since there is no Will or any legal document by your uncle which proves that you are the owner of that property, the only option left is to move the Court for getting the ownership of the land. But there is a possibility of losing the property as you have no document to prove that it was given to you by your uncle.

Now consider the other situation where you have a proper written legal document signed by you and your uncle which states that you are the absolute owner of the property. This document can be easily produced in any court to prove your ownership and other rights over the property.

Having a conveyance deed saves you from legal battles that can be filed against you and gives you full rights over the property including the right to sell, rent, mortgage and construct upon. It is advisable to sign a conveyance deed not only when you are entering into an agreement with a third party but also with your friends or relatives. A conveyance deed is also helpful in protecting you from fraudulent transfers of property.

What happens if you don't have a Conveyance Deed?

Not signing a conveyance deed can lead you to great trouble. You won't be able to save yourself from legal disputes in the absence of any written legal document which can prove your legal title in the property.

In the absence of the conveyance deed, you may face the following:

• - You cannot become the absolute owner of the property;


• -You cannot claim a valid title and interest in the property;


• - Your property won't be registered in the government records due to which all bills including electricity, tax and other bills will be issued in the name of the original property owner;


• - You may have to apply for costly and lengthy deemed conveyance process in case of non-cooperation by the builder;


• - You may lose your rights of renovating / reconstructing the property even in circumstances such as natural calamities, without permission of the original owner of the property.

Therefore, it is advisable to sign a conveyance deed if you are planning to transfer your property to another person.

Necessary Documents required for conveyance deed –

There are various documents that you require in order to execute a valid conveyance deed :-

1 Final copy of the conveyance deed

2 Society's registration certificate, if any

3 Power of attorney, if any

4 Identity card & address proof

5 Clearance certificates

6 Signing authority’s identity card

7 PAN card of both parties

8 Copies of electricity bill and property taxes paid

9 Authorization certificate and Occupancy Certificate

10 Proof of stamp duty paid

11 Registration charges

12 Area specification and building plan

13 List of facilities provided

14 Commencement Certificate

15 Mutation extracts

16 Development or purchase agreement b/w land owner and builder

17 Agreement between builder and buyer

At what stage does the conveyance deed come into play?

The Conveyance process begins when a buyer expresses interest in purchasing a property and makes an offer to the seller for it. If a seller accepts the offer, both are required to make and enter into an agreement for the sale of property which is called a conveyance deed. The deed is made with mutually agreed terms between the buyer and seller and once both parties sign, it turns into a valid contract enforceable in a court of law. After signing and exchanging the conveyance deed, the buyer is required to pay stamp duty, arrange necessary documents, & inspect for any claims or disputes that might affect the title of the property.

After the above formalities are over, the buyer and seller are required to conduct a meeting to exchange the transfer documents, stamp duty form and other legal documents. The buyer will also have to pay the remaining purchase price and other legal fees.

After the settlement between the buyer and seller, the buyer is required to submit the conveyance deed and other documents for registration in the local sub-registrar's office and sign it in the presence of two witnesses. The sub-registrar then inspects the documents submitted and after his satisfaction gives a registration number and registers the deed.

Remember that all original documents need to be submitted in the sub-registrar's office within four months of the execution of the deed. At this stage, there will also usually be a discharge of existing mortgages, withdrawal of any existing caveats, transfer of title, and transfer of the mortgage to the new mortgagee, if need be. The buyer is also required to inform other authorities that he is the new owner of the property.

Why do you need the help of a Lawyer?

You can now understand why the process of transfer of the property is so complex and lengthy. Starting from obtaining of title, examining the property, collecting the tax information and details of any liens on the property, reviewing the building or plot plan to preparing the loan documents, recording the documents, inspecting the property for any mortgage information and registering the final conveyance deed in the local sub-registrar's office requires a lot of patience, time, money, energy and obviously the help of a legal expert. Therefore, it is advisable to take the help of a lawyer to prepare a conveyance deed and also during the conveyance process, instead of doing things on your own, especially when you don't have any knowledge about the real estate laws.

Also read: Home Warranty Under RERA: All You Need To Know

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5 Financial Aspects To Consider Before You Decide To Buy A Home

Buying your First Home? It is evident that you will have several questions in mind as a first time home buyer. We have compiled 5 most important financial aspects to consider before you buy your new home.

Credit : Freepik.com

Financial Planning

The first step towards a proper financial planning for your dream home would be to review your current financial obligations such as other loans, insurance amount etc. This will provide you the right picture of your true income. Your budget will be a factor of the EMI that you can pay off and what your monthly expenses are. Apart from this, you should also account for the hidden charges such as registration, stamp duty, maintenance etc, when finalizing your budget & loan amount.

Once you have decided the loan amount, move on to check how much would you be able to put as down payment. Typically, these range from 15 to 20% of the property value, and offer a confidence to the bank about your credibility. You can also choose to take a loan with zero down payment, but this will result in an increase in your monthly EMIs.

Improving Your Credit Score

This plays a critical role in your loan application. Once you have applied for the loan, the lender checks for your credit score, as this is a clear indication of the credit worthiness of the applicant. So it would be advised to check your score with any of the credit bureaus like CIBIL, TransUnion etc. before applying for a loan, and ensure that it is in the better range.

Choosing The Right Loan?

It is important that you do your market research thoroughly, as it will help you select the most suited financing option. With a variety of options now available for loans, one always has the privilege of negotiating rightly with the bank, thus reducing your interest rate and save yourself a lot of money.

But before selecting the right loan, just keep few important parameters in mind: how much loan are you eligible for, what will be the interest rates, how can I get the loan processed with minimal fee, what should be by EMI, what other expenses do I have.

Additionally, you always have the option to choose between the floating interest rate and the fixed interest rate.

Selecting The Right Location & Builder

While choosing the location, keep softer aspects such as connectivity, safety, proximity to markets, schools, public transport in mind. You should also be aware of the future developments planning in that area.

Also, before finalizing a property, do a thorough background check of the builder, as to how many projects he has done, what has been the delivery record, quality of construction, rate of appreciation of previously developed projects etc.

Home Inspection & Legal Due Diligence

Do a thorough inspection of the property you are planning to buy to spot defects, if any. There are many professionals who would do this on your behalf and provide you a detailed report on the current defects as well as the potential damages, if any.

Additionally, there are a lot of legal documents that are required to be verified without which the sale of property is incomplete. Make sure that these are verified and signed. These include Sale agreement, registration, encumbrance certificate etc.

Also read: PMAY Home Loan – Pradhan Mantri Awas Yojana

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A History of Credit

August, 2018

The two parameters that define the credit worthiness of a borrower are one's ability to pay and the intention to do so. Hence, by building a good credit score, you can negate the chances of your home loan application ever getting rejected

It's been six months since Harsh Shetty, a working professional, has been scouting for his dream abode. And finally when he zeroed in on his house, there was another speedbreaker awaiting him, which he did not foresee. “My loan application was rejected as my credit score was weak, thus costing me my home,” mentioned a dejected Shetty.

Have you been in a similar situation before? Or do you fear that you could also land in a soup like Shetty and lose on the opportunity of securing your ‘home sweet home’? If yes, let the experts guide you along – as building a good credit score is definitely in your hands.

Credit : pixabay.com

What is a credit score?

The credit score of a borrower indicates the credit worthiness of the applicant. In short, it is a numeric rating, which signifies the certainty of you repaying the loan. So, a high score means that a person has the capacity to repay the loan and shall do so well within the specified timeframe. Likewise, a low credit score raises concerns about the financial credibility and management skills of the borrower.

WHAT INFLUENCES AN INDIVIDUAL’S CREDIT SCORE?

An individual’s credit score is determined by the credit behaviour and performance of the borrower. Hence, the factors contributing to the credit score are:

• • The loan or card dues repayment history;


• • For how long have you had the credit;


• • The credit limit of the borrower and how he is faring along the repayment line;


• • Enquiries on the credit report;


• • The banks and financial institutions would also look at other parameters like demographics, employment profile and in a few instances, the saving habits and assets owned by the individual.


• - Sachin Chaudhary, COO, Indiabulls Housing Finance

FACT FILE

The banks and financial institutions generally source the credit score from the credit bureaus calculated by Credit Information Companies (CICs) like CIBIL, Experian, Equifax, High Mark, etc who have the repository of all borrowings along with the repayment history of an individual.

MY CREDIT SCORE IS LOWER THAN EXPECTED…WHY?

Lack of any repayment trends. For instance, you have never borrowed in the past;

Too many attempts to avail a credit line in the last few months;

Missed payment in your utility bills like electricity, telephone, mobile, etc.

HOW CAN AN INDIVIDUAL BUILD A GOOD CREDIT SCORE?

Honour your debt obligations on time i.e. within the due date assigned by the lender; Build a credit pattern by availing a few credits (some of which are not interest bearing). For example, if you fulfill your payments before the due date, there is no interest outflow, but still builds a strong repayment behaviour for the borrower. However, be wary that you do not revolve the credit;

Maximise your payment for your expenses through banking channels;

Improve your savings and exhibit consistency in the form of SIP, recurring deposits, fixed deposits, etc;

One should also avoid making needless enquiries for credit, as multiple credit queries will have an adverse impact on one’s credit score.

- Rajaram Manian, risk head, Aspire Home Finance Corporation Ltd

Impact of a good credit score:

There is a higher probability of getting the home loan sanctioned

The scope for negotiating a competitive rate of interest increases for borrowers

The bank would not seek a security/ guarantor when you apply for the home loan

Consequences of a bad credit score:

The chances of your home loan being rejected increases

A higher rate of interest may be charged over and above the normal

The financial institution could seek credit enhancement like personal guarantee and/or additional collaterals

In conclusion:

An individual should always borrow within his repayment capacity; considering his expenses and income flow. And if he maintains financial discipline by meeting all his credit obligations on time, not only would his credit worthiness improve; but also his credit score shall remain strong.

Any score above 600 is considered good enough if you wish to qualify for a home loan application.

Also read: PMAY Home Loan – Pradhan Mantri Awas Yojana

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Source - propertytimes.in

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