Terms and conditions

Take a break : Legal Knowledge

Owning a house, is an investment and a dream come true. It is a remarkable milestone for many families. Given the significance of investing in a home there are certain facts that needs to be checked before committing your investment. We as responsible builders would like to present a few guidelines that will be of help to become a buyer.

First Things First

The legal status of the land should be confirmed above anything.

Advance should be made only after confirmation of legal documents.

Before Buying a Land

Check for clear marketable title.

Find out the tenure or possession right. (Freehold/Leasehold/Grant or Sanad)

Note: Freehold is always preferred.

Legal right of the holder of the land in Govt Records. The seller should provide these documents to the buyer.

Title Deeds

Confirm that land is in the name of the seller The right to sell the land lies with only the seller and not anyone else.

Always request for the original deed. Don’t entertain photocopies.

Possible option : Original can be pledged.

Have a lawyer approve the original.

Check for any suppressed or undisclosed facts in the document.

Previous deeds of land can also be verified.

Tax Receipt and Bills

Property taxes due to government and municipality are made with proof of bills and receipts.

Up-to-date tax bills need to be checked.

Heck for columns containing.

Owners Name 2). Tax Payers Name Sometimes the owner may not have the tax receipt, In case we need to contact the village office with the survey number of the land and confirm the original owner of the land.

If buying a house with a property, then house tax receipt should be checked.

Check for the water tax bill and electricity bill. If any balance request the seller to get it paid.

Encumbrance Certificate (EC)

Confirm that the land doesn’t have any legal dues.

The encumbrance certificate can be obtained from the sub registrar office where the deed is registered.

The EC should state that the said land doesn’t have any legal dues and complaints.

The EC must be obtained for 13 years and for more clarification we can demand 30 years certificate also.

In case of any doubts we can take possession certificate of the ownership of the particular land from the village office.

Pledged Land

When buying a pledged land ensure that the seller has paid back all the amounts due.

Do request for the release certificate from the bank, to ensure that the debts are cleared.

Land can be bought without the release certificate, but to take a loan in future may not be possible without it.

If the land is owned by more than one owner, get RC from the other owners involved.

Measuring a Land

It is advisable to measure the land before registering the land in your name.

Ensure that the measurements of the plot and its borders are accurate using a recognized surveyor.

Hold a survey sketch of the land from the survey department and compare for accuracy.

Buying land from NRI land owners

An NRI can sell his land in India by giving Power of Attorney to a third person authorizing the right to sell the land on his behalf.

In cases like this the Power of Attorney should be witnessed and duly signed by an officer in the Indian embassy in his province.

No legal support can be claimed for Power of Attorney signed by a notary public.

Agreement

Once all the matters, financial/otherwise are settled between the parties, it is better to give an advance and write an agreement.

This is to ensure there is no change in dealings.

The agreement should be written in Rs.50 stamp paper.

The agreement should state the actual cost, the advance amount, the time span within which the actual sale should take place and how to proceed in case of any default from either parties, to cover the loss.

The agreement can be prepared by a lawyer and should be signed by both the parties and two witnesses. After signing the agreement if one of the parties makes a default, the other party can take legal action against him.

Registration

The land can be registered in a sub registrar office, after preparing the title deed and other needed information.

The title deed can be hand written by a government licensed document writer.

Even lawyers can prepare the deed, but the document can only be computer printed or typed, not hand written.

A draft should be prepared before actually committing the document to stamp paper.

Make sure all the details mentioned are accurate. If there is incorrectness in the document after registering, a secondary document with the correct details has to be registered and depending on the incorrectness, the registration expenses will be repeated.

The deed should be registered within the time limit mentioned in the agreement.

Original title deed, previous deeds, Property/House Tax receipts, Torrance Plan (optional) etc. Plus two witnesses are needed for registering the property.

For land costing more than Rupees five lakhs, the seller should submit either his Pan Card or Form Number 16 during registration.

The expenses involved during registration include stamp duty, registration fees, document writers/ lawyer’s fees etc.

The stamp duty will depend on the cost of the property and varies from Municipality to Corporation to Panchayat.

Stamp Duty – In Panchayat it is 4% of the cost of the land In Municipality it is 5% In Corporation it is 6%.

Two percentages will be charged as the registration fees. Document writer’s fees also depend on the cost of the property and vary with individuals. There is a percentage prescribed by the government as document writer’s fee and they cannot charge more than the prescribed limit.

After registration, the registered document will be received after 2-3 weeks, from the registrar office.

Changing the title in Village office

The whole legal procedure of buying the property will be complete only if the new owners name is added in the village office records.

An application can be made along with the copy of the registered deed to the village office to get this done.

Guidelines for NRI * and PIOs* for acquisition and transfer of Residential and Commercial Property in India

I. Acquisition of Immovable Property in India.

II. Transfer of immovable property in India.

III. Mode of payment for purchase.

IV. Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO.

I. Acquisition of Immovable Property in India.
Who can purchase residential or commercial property in India?

Under the general permission available, the following categories can freely purchase residential or commercial property in India.

i) Non-Resident Indian (NRI) – that is a citizen of India who stays abroad for employment / carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad.

ii) Person of Indian Origin (PIO) – that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

1. At any time, held Indian passport, or

2. Who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Note: The general permission, however, does not cover purchase of agricultural land / plantation property / farmhouse in India. Such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.

Do any documents need to be filed with Reserve Bank of India after purchase?

No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.

How many residential / commercial properties can NRI / PIO purchase under the general permission?

There are no restrictions on the number of residential / commercial properties that can be purchased.

Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?

No.

Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank.

Can a foreign national who is a person resident in India purchase immovable property in India?

Yes, but the person concerned would have to obtain the approvals, and fulfill the requirements if any, prescribed by other authorities, such as the concerned State Government, etc However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

Can an office of a foreign company purchase immovable property in India?

A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgage with an Authorized Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it cannot acquire immovable property. In such cases, Liaison Offices can take property by way of lease not exceeding 5 years.

Whether immovable property in India can be acquired by way of gift?

Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from

i) a person resident in India or

ii) an NRI or

iii) a PIO.

However, the property can only be commercial or residential. Agricultural land / plantation property / farmhouse in India cannot be acquired by way of gift.

A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Whether a non-resident can inherit immovable property in India?

Yes, a person resident outside India i.e.

i) an NRI

Tii) a PIO and

iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.

From whom can the non-resident inherit immovable property?

A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

(a) a person resident in India.

(b) a person resident outside India.

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.

II. Transfer of immovable property in India.

Transfer by Sale

Can an NRI / PIO/foreign national sell his residential / commercial property?

NRI can sell property in India to

i) a person resident in India or

ii) an NRI or

iii) a PIO

PIO can sell property in India to

i) a person resident in India.

ii) An NRI or

iii) a PIO – with the prior approval of Reserve Bank

Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of Reserve Bank to

i) a person resident in India

ii) an NRI

iii) a PIO

Can an agricultural land / plantation property / farm house in India owned / held by a non-resident be sold?

a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

(b) Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property / farm house in India

Transfer by gift

Can a non-resident gift his residential / commercial property?

Yes.

(a) NRI / PIO may gift residential / commercial property to-

(i) person resident in India or

(ii) an NRI or

(iii) PIO.

(b) Foreign national of non-Indian origin needs prior approval of Reserve Bank

Can an NRI / PIO / Foreign national holding an agricultural land / plantation property / farmhouse in India gift the same?

(a) NRI / PIO can gift but only to a person resident in India who is a citizen of India.

(b) Foreign national of non-Indian origin needs prior approval of Reserve Bank

Transfer through mortgage

Can residential / commercial property be mortgaged?

i) NRI / PIO can mortgage to:

(a) an authorized dealer / housing finance institution in India –without the approval of Reserve Bank.

(b) a party abroad – with prior approval of Reserve Bank.

ii) a foreign national of non-Indian origin can mortgage only with prior approval of Reserve Bank.

iii) a foreign company which has established a Branch Office or other place of business in accordance with FERA / FEMA regulations has general permission to mortgage the property with an authorized dealer in India.

IV. Mode of payment for purchase.

How can an NRI / PIO make payment for purchase of residential / commercial property in India?

Payment can be made by NRI / PIO out of

(a) funds remitted to India through normal banking channel or

(b) funds held in NRE / FCNR (B) / NRO account maintained in India.

No payment can be made either by traveler’s cheque or by foreign currency notes.

No payment can be made outside India.

What shall be the option if there is refund of application money / payment made by the building agencies / seller because of non-allotment of flat / plot / cancellation of bookings / contracts?

The amount of refund, together with interest (net of income tax) can be credited to NRE account. This is subject to condition that the original payment was made by way of inward remittance or by debit to NRE / FCNR (B) account. (Please refer to A.P. (DIR) Series Circular No. 46 dated 12.11.2002)

Can NRI / PIO avail of loan from an authorized dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account?

Yes, such loans are subject to the terms and conditions as laid down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB dated May 3, 2000 as amended from time to time. However, banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and FCNR (B) deposits either to the depositors or to third parties [cf. A.P. (DIR Series) Circular No. 29 dated January 31, 2007].

 

Such loans can be repaid

(a) by way of inward remittance through normal banking channel or

(b) by debit to his NRE / FCNR (B) / NRO account or

(c) out of rental income from such property.

(d) by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.

 

Repatriation

(a). In case the amount has been received from inward remittance or debit to NRE/FCNR(B)/NRO account for acquiring the property or for repayment of the loan, the principal amount can be repatriated outside India.

For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorized dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorized dealer from which it can be converted in foreign currency

 

(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.

NRI/PIO are also allowed by the Authorized Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account for all bonafide purposes to the satisfaction of the authorised dealers, subject to tax compliance.

Can NRI / PIO, avail of housing loan in rupees from an authorised dealer or housing finance institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?

Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing finance institution subject to certain terms and conditions. (Please refer to Regulation 8 of Notification No. FEMA 4/2000-RB dated 3.5.2000 and A.P. (DIR) Series Circular No. 95 dated April 26, 2003).
Such a loan can be repaid

 

(a) by way of inward remittance through normal banking channel or

(b) by debit to his NRE / FCNR (B) / NRO account or

(c) out of rental income from such property.

(d) by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.

Can NRI/PIO avail of housing loan in rupees from his employer in India?

Yes, subject to certain terms and conditions (Please refer to Regulation 8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003).

IV. Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO

Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what are the terms?

NRI / PIO may repatriate the sale proceeds of immovable property in India

(a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account

The amount to be repatriated should not exceed the amount paid for the property:

1. in foreign exchange received through normal banking channel or

2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties. Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.

(b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?

From the NRO account, NRI/PIO may repatriate up to USD one million per financial year (April-March), which would also include the sale proceeds of immovable property.

If a Rupee loan was taken by NRI/PIO from Authorised Dealer or housing finance institution for purchase of residential property can an NRI / PIO repatriate the sale proceeds of such property?

Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts (Please see A.P. (DIR) Series Circular No. 101 dated 5.5.2003)

If the property was purchased from foreign inward remittance or from NRE / FCNR (B) account, can the sale proceeds of property be repatriated immediately?

Yes,

Is there any restriction on number of residential properties in respect of which sale proceeds can be repatriated by NRI / PIO?

Yes, sale proceeds of not more than two residential properties can be repatriated.

If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale?

The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?

Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. NRIs/PIO may repatriate an amount not exceeding USD one million, per financial year, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.10/2002 dated October 9, 2002. [cf. A. P. (DIR Series) Circular No.56 dated November 26, 2002].

In case of a foreign national, sale proceeds can also be repatriated even if the property is inherited from a person resident outside India. But this is allowed only with prior approval of Reserve Bank. The foreign national has to approach Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate as mentioned above.

The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of Reserve Bank.

As FEMA specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.

Avail tax incentives

Did you know that tax laws assure incentives to encourage people to buy homes? Go on. Check out these incentives and make the most of them.

Incentive 1 :

Interest on housing loans are exempted upto a ceiling of Rs.1,50,000 (sec 24).

Incentive 2 :

A Deduction of Rs.1 Lakh from taxable income is available for home loan principle re-payment.

Incentive 3 :

Exemption from Capital Gains (sec 54f) : Capital gains resulting from the transfer of any capital asset not being a residential house, will be exempt of the net consideration is used to purchase a residential house within a period of 1 year before or 2 years after the date of transfer or construct a residential house within 3 years after the date of transfer.

Some guidelines for working professionals to plan their loans.

The ideal loan an investor should avail of is Rs.20 lakh. Here’s how…

Let’s presume that a senior executive receiving a salary of Rs.5 lakh per annum takes a loan of Rs.20 lakh. The rate of interest charged on this loan is 7.5% per annum. Thus the total interest payable for one year on Rs.20 lakh comes to only Rs.1,50,000.

The maximum amount of interest that will be allowed as a deduction while computing the income of the individual from all sources taken together is restricted to a maximum sum of Rs.1,50,000/- per annum. So, the entire interest payment of say Rs.1,50,000/- would be allowed as a deduction to this executive from his salary income of Rs.5 lakh!.

This implies that the executive would be saving income tax on Rs.1,50,000/- which is the payable interest. The tax saving would be at the rate of 33% being the maximum marginal rate of income tax applicable to him. Thus, the saving on account of deduction of interest from the total income for salaried executive comes to Rs.49,500.

Hence, we find that from the total interest payment of Rs.1,50,000/- payable by the executive on loan of Rs.20 lakh @ 7.5 % interest has actually been paid by the income tax department by granting him full deduction in respect of such interest payment on loan.

There by the net outgo of interest on the loan comes to Rs.1,00,500/- (Rs.1,50,000 – Rs.49,500). Thus the net impact of interest on the executive’s loan of Rs.20 lakh comes to Rs.1,00,500/-. This in fact, is just 5.02% rate of interest per annum.

If we go a step further and take into consideration the impact of tax saving as a result of the deduction from taxable income on account of home loan principal repayment. We find that the said executive is able to save income tax to the tune of Rs.30,000/-.

Hence from the above amount of Rs 1,00,500/- if we deduct Rs.30,000/- the net impact comes to a mere Rs 70,500 – Rs.1,50,000 interest Rs.49,500/- tax saving on interest payment Rs.30,000/- cash flow saving as a result of principal repayment.

Thus, on a total loan of Rs.20 lakh, the net impact of out flow after tax comes to Rs.70,500/- which means effective interest rate of merely 3.525% in respect of a Rs.20 lakh loan.

So keep in mind the golden Rs.20 lakh mark and you will reap rich benefits.