Thursday, March 22, 2018

8 mistakes to avoid when buying a home

Author: Sachin Gupta | Find me on Twitter

Home buying is a long term commitment and therefore one should not rush through the things. Going through a well laid down process will eliminate following common mistakes.

Mistake 1



Buying a home in a builder project means there are additional costs to it. External/Internal development charges, Preferential location charges, club membership, fire fighting charges, one time lease rent, Maintenance charges, car parking are some of the charges that are billed on top of base selling price. These charges put together can range from 18 to 20 % of total cost of home. Once possession is given, you will have to pay stamp duty and registrations charges too.


Mistake 2



Borrowing means you will be paying EMIs. And more you borrow, higher the EMI or you pay EMI for longer time period. Do your calculations and make sure you pay as much as possible in down payment and borrow the rest. There is no point in borrowing 80% of property cost when you can arrange for more funds for down payment.


Mistake 3



Plan at least 3 years before you plan to buy a house. That way, you will have enough surplus funds to make the down payment and borrow the rest from bank.


Mistake 4



Home affordability is a key consideration and one should never lose sight of it. Home affordability means what is the value of home that you can afford given your current income levels. You can easily calculate Home affordability here.


Mistake 5



We all dream of living in a house that is big and has all the world class amenities, but can you afford it?


Mistake 6



Do not ever overlook due-diligence part. Ask for approvals, land title certificates, license number form the developer.


Mistake 7



If buying a home for investment purposes, make sure you do not lend in a soup and have enough cover to pay for home installments. When realty market was going strong, investors/speculators entered the market in the hope that they will make windfall profits, but things have become tough. Most of these investors/speculators are willing to offload their purchases at relatively very low rate of returns.


Mistake 8



Make sure your finances are in order and you have pre-approved home loan before you start your search for home. This way, you will not overshoot your budget.


Did you make any of the above mistakes???




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Saturday, March 10, 2018

What are the main approvals you need from the concerned authorities in urban areas while constructing a house in India?

Author: Sachin Gupta | Find me on Twitter

Building one’s own house is what most people dream of. You are always filled with the excitement of designing your bedroom, drawing room, choosing the right set of tiles for the floor, bath fittings, modular kitchen design, etc.  However, in all this frenzy, one might lose track of important approvals that are required from the city planning bodies.

Whether you are looking to construct your own house in Gurgaon, Delhi, Noida, or other cities in India, the approvals you need from urban bodies remain more or less the same. For example, if you are constructing your house in Noida, then, you must focus on these necessary approvals and accordingly design the house including Bedroom Layout, Modular Kitchen in Noida, Bathroom Layout, Open Areas, Fire Fighting Safeguards, Rain Water Harvesting Rules, etc.

To ensure that your dream home takes a concrete shape in a smooth manner, you need to obtain certain approvals from the concerned authorities such as Municipal Corporation, Area Development Authority, Electricity Board, Water Supply and Sewerage Board, etc. You must submit relevant documents/certificates along with the design plan to the concerned authorities.

In case, you are not constructing your own house and rather you are buying it from the real estate developer in a group housing society, then again, you need to verify that your developer has approvals from the concerned authorities such as Municipal Corporation, Area Development Authority, Electricity Board, Water Supply and Sewerage Board, etc.



Here is a quick reference for the main approvals you need from the concerned authorities in urban areas while constructing a house:






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Monday, March 5, 2018

Looking to sell the house or your property? Pay attention to these tips!

Author: Sachin Gupta | Find me on Twitter

In May 2012, one of our colleagues decided to sell his 250 square yard plot in Delhi NCR region. He has bought the plot in 2003 and therefore, the capital appreciation gains were substantial. He wanted to sell this piece of plot and buy another plot in different city. The idea was to build a house on this new plot and live there. Therefore, he has reasons to sell the plot. However, when looking to sell your property, the first question you should be asking is “do I really need to sell?”

  • Do you really need to sell?
There can be in-numerous reasons to sell the piece of property you own and these reasons can range from shifting to new city, family wedding, education, or building/buying a bigger property, etc. Analyze those reasons carefully and discuss within your family members before arriving at the decision to sell the current property you own. Because make no mistake, selling is no easy job, it takes time as well as it incurs unwanted expenses such as brokerage fee, advertising fee, paper work, no-due certificates fee, etc. One can also explore the possibilities of obtaining loan against property (LAP) in order to fulfill the current need for funds rather than selling the property. However, once, you have considered all the possible options and selling is the best bet, then pay attention to the following advice.


  • Verify the prevalent market sentiments

The true value of the property is what a buyer is willing to pay in a transparent and mature market. Therefore, once you have decided to sell, do the quick check of property valuation and this is how you do it:
    • Check the selling price of highly similar properties which have been sold in recent months/days within the same locality. As a seller, you would not like to sell at below market prices. If there is no data available for similar properties, then check the selling price of dissimilar properties and adjust for dissimilarities in the selling price. For more on, property valuation, visit Property Valuation in India
    • Check for the time-duration it took others to sell their property. If it takes longer to sell, then it can be safely concluded that market sentiment is low and you would have to wait for long time period before being able to sell your property. However, one can always 'sell in distress' at high discount. This is what happened to our colleague since market sentiments in 2012 were low and he had to wait for 6 months before selling the property at a substantially lower price.
    • Check for the rental values of the similar properties within your locality and city as a whole. Sometimes, property transactions (sale/purchase) might be slow but there is demand for the housing and therefore, rental values may be appreciating whereas capital values have remained stagnant. This is what is happening in the current real estate market across India. In this scenario, it will be advisable to stay invested in your property and earn decent monthly income by renting it out for some time and sell the property when market sentiment is strong.



  • Selling process
Finding the right buyer for your property is not easy. Because property transaction involves large amount of money, one needs to be careful in advertising the property, dealing with brokers, and prospective buyers. 
    • Online classifieds: list your property on online classifieds portals. Don’t just list the property blindly on all available classifieds portals. Rather select the ones which have high degree of trust among other sellers and buyers and at the most list your property on 2 online classified portals.
    • Brokers: approach the local area property brokers and enquire about current property market sentiments before listing your property with them. One should never list the property with multiple brokers. Rather list with 2-3 trustworthy brokers. "The best approach is to ask some brokers about buying the similar property and ask some brokers about selling the property. If there is substantial difference in the buying price and selling price as quoted by the brokers, then it indicates that there is demand for the property in the market but real estate brokers are downplaying that demand". In that scenario, it is better to wait and strike the deal when you get the best possible price for your property.
    • Agreement to Sell: once you have identified the buyer, check for his/her credential to pay the required amount in mutually agreeable time period. It is advisable to ask the buyer to make reasonable advance payment (say 20% of the property value) with the condition that in case the buyer subsequently backs out from the deal or fails to make full payment and take possession of the property in accordance with the terms & conditions of the deal/agreement, such advance payment will stand forfeited and will not be paid back to the buyer. This is known as “option” and should be included in the “agreement to sell” paper. The time period between “agreement to sell” and “sale deed” can be mutually decided between the buyer and seller. The prevalent trend is about 45 days or 2 months.
    • Sale deed: after the “agreement to sell”, the next step is to formalize the “sale deed”. ‘Sale Deed’ should be signed and title documents handed over to the buyer only on the receipt of full and final payment. Once the deal is concluded, full payment is received and Sale Deed signed, insist on the registration of the property in the name of the buyer with the Sub-registrar of assurances under the provisions of the Indian Registration Act. Consulting and engaging a good lawyer before selling the property to a person or organization is a good and sensible idea.

  • What are the risks in property selling?
As explained in the article above, the property selling process is long and there are inherent risks and one should be careful with the following elements:
    1. Inappropriate valuation of the property
    2. Selling through too many real estate agents
    3. Dubious buyers


  • Taxes

In case of sale of house property, long-term capital gains are taxed at the rate of 20% after availing indexation benefit. The indexation rates are released by the Income Tax department each year, which can be applied to arrive at the indexed cost of acquisition of the property sold. Short terms capital gains on house property, on the other hand, are included in the gross total income and normal tax rate is applicable.

Exemptions from Tax

The Income Tax Act 1961 contains certain provisions that offer exemption from tax on long term capital gain arising on sale of house property, these are as under:
  • If capital gain is invested in new residential property: Section 54 of the Act protects capital gains arising out of sale (or transfer) of a residential house (original asset) in either of the following situations:
    1. One has purchased a new residential house either within a period of one year before the date of sale of the original asset or two years after the date of sale of the original asset.
    2. One has constructed a residential house (new asset) within three years after date of sale of the original asset.
  • If long term capital gain is invested in capital gain bonds issued by specified institutions:
Section 54EC, under various schemes (as listed below), provides exemption to capital gains arising from any long term capital asset (original asset), provided the capital gains are invested in long term specified assets covered by Section 54EC within 6 months from date of sale of the original asset. The said Section requires locking of the funds for 3 years. However, the investments made on or after 1 April 2007 in the long term specified assets during any financial year should not exceed Rs. 50 lakhs.

Section 54EC Schemes for Capital Gains Tax Savings
    1. NHAI Capital Gains Bonds issued by National Highways Authority Of India.
    2. REC Capital Gain Bonds issued by Rural Electrification Corporation Of India.


  • Stamp duty and registration charges:
Stamp duty and registration charges are borne by the buyer and these charges differ from state to state. Visit Stamp duty and registration charges in India for more.


Above all be patient in the entire property selling process!


Data Source For Tax considerations: National Housing Bank




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