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Select one of the frequently asked questions below to learn more about buying and selling real estate. Also, begin to think about important things to consider when diving into your real estate search.

Question about selling

Are Any Conditions Required To Be Fulfilled If Repatriation Of Sale Proceeds Is Desired?

Applications for repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.

Can Sale Proceeds Of Such Property If And When Sold Be Remitted Out Of India?

In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993 will have to be credited to the ordinary non-resident rupee account of the owner of the property.

Can Such Property Be Sold Without The Permission Of Reserve Bank?

Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

What is the difference between being prequalified and preapproved for a loan?

If you’re prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information you provide to the bank is accurate and true. This is not as strong as a preapproval.

If you’re preapproved, it means that you have undergone the extensive financial background check, which includes looking at your credit history, previous tax returns and verifying your employment – and the lender is willing to give you a loan, basically meaning you’re approved!

You will usually be provided an accurate figure which shows the maximum amount that you are approved for.  Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.

Are There Any Formalities Required To Be Completed By Foreign Citizens Of Indian Origin For Purchasing Residential Immovable Property In India Under The General Permission?

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

In What Manner The Purchase Consideration For The Residential Immovable Property Should Be Paid By Foreign Citizens Of Indian Origin Under The General Permission?

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.

How is interest calculated on a mortgage loan?

Most mortgages originated today calculate interest in arrears, unlike consumer loans which calculate interest to the date of payment receipt. As an example, when borrowers pay their February mortgage payments, they are paying the January interest. This method of calculating interest is based on a 360 day year in which each month has 30 days.

Question about Home Loan

How Instantly Can A Home Loan Be Taken?

Most lenders would consider any property bought during the last 3 -6 months as a regular home loan application. You would be eligible for the same rates and income tax benefits as any other home loan. However, if you delay and the property purchase becomes more than 6 months old it will be treated as Loan against Property. The rates for the same are higher and there would be no tax benefits as well.

I Intend To Co-Own, The Property With My Brother, Sister, Father, Mother. Will I Be Eligible For A Loan?

You would not be eligible for a loan as most home loan lenders allow only immediate relatives to co-own a property. This means that a parents-son combination and a husband-wife combination are only allowed. The reason for this restriction is that if some dispute arises between the joint borrowers, their incomes might not be pooled any longer and there might be a problem in repaying the loan to the bank.

Can A Single Woman Get A Loan?

A Yes, a single woman can get a loan. Till a few years back, banks hesitated to give loans to single women fearing loss of income after marriage. With double income families becoming the norm rather than exception, lenders now are lending to single women as well. Many lenders also have special schemes for women offering them a discount up to 0.25%.

Can I Get Two Home Loans Against Two Different Properties?

Yes, you can have as many loans against different properties. The only criteria being that you should be able to repay all the EMIs every month.

Is There Any Loan Provision For Purchase Of Land?

Yes, loan for land purchase is available as long as it is for residential purposes only.

  • Many mortgage lenders like HDFC and State Bank of India offer this loan. You can get up to 85% of the purchase amount based on your credit profile and paying capacity.
  • You get no tax breaks if you take a loan to buy a plot of land. But, if you take a loan for construction, that means a loan to build a house on that plot of land, then you can get a tax break.
  • In such a case, the tax benefits are available on both portions of the loan the one to purchase the plot and the one taken to construct the house thereon.
  • Please note that the benefits under Section 80C and Section 24 can be availed only when the construction of the house is complete.

Can A NRI (Non Resident Indian) Avail Of A Housing Loan?

Yes, Non Resident Indians can avail of a NRI housing loan to buy a property in India. However, the loan disbursement process as well as the terms & conditions for a loan taken by a NRI are different than regular home loans granted to Indian residents.

What Is Pre EMI?

You’ve chosen a property that’s yet under construction. So the lender makes the disbursement in parts based on the progress of the construction of your property. However till the housing loan is fully disbursed you have to pay simple interest at the rate you have agreed upon with the lender. This is known as the Pre EMI. And from the month following in which the full disbursement is made you will start paying your EMI.

What Is Floor Space Index?

Floor Space Index refers to the ratio of the built up area of a property to the area of the land on which it is built. An FSI of 60% would mean that the total built up area of the building can be equal to only 60% of the area of the land on which it is being built. There are FSI specifications released by the relevant municipal body or development authority for all construction in its area. It is also known as Floor Area Ratio (FAR).

What Is A Fixed Rate Home Loan? When Should One Opt For A Fixed Rate Home Loan?

Fixed rate home loan is one where the interest rate on home loans charged by the lender is constant over the tenure of the loan. It is advisable to go in for a fixed rate only if you feel that the rate of interest prevailing in the market have touched rock bottom and the rates can only move upwards. Here are the latest offers on a 10 year fixed rate home loan and 20 year fixed rate home loan from the leading banks and housing finance companies in India.

What Is A Floating Rate Home Loan? When Should One Opt For A Floating Rate Home Loan?

A floating rate home loan is one where the home loan interest rate charged by the lender keeps changing with respect to the rates in the market over the tenure of the loan. Typically, the rate charged is on the basis of their cost of funds and the prevailing market rates. These rates change periodically. Accordingly the tenure increases or decreases or alternatively the EMI increases or decreases based on whether the rates move upwards or downwards. Every home loan lender decides whether to change the rate of interest or change the tenure at the time of sanction. It is advisable to go in for the floating rate if you feel that the interest rates have reached its peak and can only go downwards. Here are the latest offers on a 10 year floating rate home loan and 20 year floating rate home loan from the leading banks and housing finance companies in India.

Can I Convert My Loan From Fixed Rate Loan To Floating Rate Loan & Vice Versa?

Yes, you can convert floating rate home loan into a fixed rate one with no extra charges. However, to convert a fixed rate product to a variable rate product, most banks will charge a small fee. The swap can be done any number of times and at any point of time.

Can The Fixed Rate Of Interest Change During The Loan Repayment?

The Fixed Rate of Interest ideally remains fixed over the tenure of the loan. This rate does not change after the final disbursement has been made. It is ideally suited for situations where you expect the rates of interest to go up in the future and this fluctuation in the rates does not affect you adversely. In cases where the disbursement is spread out over a period of time and the rates might have changed in the interim. The rate of interest would remain fixed at the final weighted average rate at which the loan was disbursed. Nowadays, many lenders are reserving the option of changing the rate on a fixed rate home loan after 3 or 5 years. So please read the fine print before you sign up for a fixed rate home loan.

What Happens To Processing/Administrative Fees If I Don't Avail Of The Disbursement?

Most lenders do not refund the fees that you pay to them if you cancel the loan after taking the offer letter from them. However, there are few Govt. owned banks which do offer full or partial refund. Almost all the lenders refund the money in case the loan is not sanctioned.

What Is The Difference Between Monthly Rest & Annual Rest?

In a monthly rest, the interest is calculated on the outstanding principal at the beginning of every month. Once the interest is calculated at the rate applicable to you for the month it is deducted from the EMI received during the month.

Annual rest works on the same principal only the interest is calculated on your outstanding principal at the beginning of every year. It is also commonly known as “Yearly Reducing Balance”.

Monthly reducing balance is a better option all other things being equal as you get immediate credit for repayment and the interest component keeps reducing almost immediately on a monthly basis.

What Are The Tax Benefits That I Can Avail Of For Repaying A Home Loan?

You will be eligible to claim both the interest and principal components of your repayment during the year.

  • Interest can be claimed as a deduction under Section 24. You can claim up to Rs. 150,000 or the actual interest repaid whichever is lower. (You can claim this interest only when you are in possession of the house)
  • Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C. This is subject to the maximum level of Rs 100,000 across all 80C investments.
  • You will need to show the statement provided by the lender showing the repayment for the year as well as the interest & principal components of the same.

I Have Two Housing Loans On Two Different Properties. Can I Get Tax Rebate Under Sec 80 C Of Both The Loans?

Yes, you can get the 80C benefit on both loans. However, the total amount that you will be entitled to will be a total of Rs 100,000 across both the homes. The interest paid on a home loan is not directly deductible from your salary income for either of your flat loans. Income from house property will be calculated for each flat you own. If either of theses calculations shows a loss, this loss can be set off against your income from other heads.

As for Section 24 deduction, on your self occupied house you can take advantage of interest payments up to Rs.1, 50,000. For the other property, you can claim actual interest repaid, there is no limit for the same.

Is It Necessary To Get Property Insurance, While Availing A Home Loan?

Most lenders do not insist on a property insurance when disbursing a loan. However, it is strongly advised to buy an insurance as your home would be one of your most valuable assets. The home insurance rates are very affordable especially when bought for a long duration say 10 years. It would cost close to Rs. 50 per lakh of property value per year.

As for Section 24 deduction, on your self occupied house you can take advantage of interest payments up to Rs.1, 50,000. For the other property, you can claim actual interest repaid, there is no limit for the same.

Can I Sell The Property, Even When The Home Loan Is Outstanding?

Yes, you can sell the property with the consent of the lender. This consent letter usually mentions the amount at which the home loan can be considered fully paid off. This amount is inclusive of prepayment charges as applicable and calculated at a future date to give you enough time to find a buyer. Based on this letter, you can negotiate with potential buyers.

If the buyer, wants to take a loan to purchase the property the process is much simpler if he approaches the same lender. Then the lender does not need to release the title papers to another lender before getting the payment.

If the buyer wants to make an outright payment- he can make the payment out to the bank directly based on the consent letter. And the balance amount is paid out to you. The property papers will be released only after the bank has recovered the entire amount including prepayment charges.

Can I Increase Or Decrease The Amount Of The Loan Even After It Has Been Sanctioned?

Yes, the change in amount can be done at any point before disbursement. Any increase in loan amount will however be subject to the eligibility conditions. The bank might also charge you excess fees on requesting an increase in the loan amount. The bank is not obliged to return excess fees paid in case you are requesting for a reduction in the loan amount.

Is It Advisable To Transfer A Home Loan From My Existing Provider?

Please be clear on why you wish to change your loan provider?

  • Is it because you want a better interest rate and change in EMI?
  • Is it because of service?
  • Or, any other reason?

There is usually a pre-payment penalty for the loan, so please understand that you will lose some money when you transfer out of your present lender. Additionally, the new lender might also charge you a loan processing fee. So, you might end up paying two types of fees during this transfer. Ask both the lenders what the fee will be. Make sure that you do the calculations of whether you will really save money with the transfer or not. The last thing you want to do is pay all these hidden charges. Also, practically speaking, you want to make sure that you are not going to add to your headache on the service levels.

Home loan Interest Rates

After the approval of the loan, you need to choose whether you want to take a fixed rate home loan or a floating rate loan. This is a critical decision that can affect your payments over the tenure of the loan.

In a floating rate loan, the interest rate on the loan depends on a benchmark rate fixed by the home loan lender. This benchmark rate varies as per the market. This change can happen as frequently as once in three or six months. You must choose a floating rate loan, if you are anticipating the interest rates to decrease in the future. However, even within these categories of floating and fixed rate loans there are terms which differentiate one loan from another. Below are a set of key questions that you must ask your lender to know these differences, and then make an informed choice thereafter.