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11 key facts about home loans in India

While it is a well-known fact that housing finance is a boon for modern-day home seekers who face financial limitations, there are various misconceptions attached to these facilities. Before a buyer plans to opt for a home loan to buy a new home, they must be familiar with certain facts about this product.

How much home loan you can get on the property value?

There could be cases where banks would offer you 90% of the property cost, as loan. However, there is no blanket rule about this. The lender would check a variety of factors, including your repayment eligibility, before they agree to grant you that kind of loan.

Can you claim tax benefits for loans from family members?

Tax benefits on interest payment under Section 24 of the Income Tax Act, are available to the borrower if he takes a loan from personal channels –friends, family, etc. The borrower must, however, note that they cannot claim deductions under Section 80C on repayment of the principal component. The borrower also cannot claim benefits on interest payment under Section 80EE or Section 80EEA.

Can you claim tax benefits on stamp duty and registration?

Under Section 80C, a home buyer can not only claim rebate on the home loan principal repayment but also on stamp duty, registration charges and other additional expenses. However, the limit stands at Rs 1.50 lakhs in a year.

Can you repay a housing loan in cash?

You can repay your home loan taken from any housing finance company (HFC) or non-banking finance company (NBFC) in cash, provided each installment is less than Rs 2 lakhs. According to a notification issued in 2017 by the Finance Ministry, the prohibition of cash payment applies to repayment of a single loan installment in cash and not to the aggregate amount. On the other hand, according to the income tax laws, cash payment of over Rs 2 lakhs is illegal.

Is it mandatory to have a co-borrower for a home loan?

When you apply for a home loan, most banks would encourage you to apply for a joint home loan, enumerating its various benefits. This may lead you into believing that co-applying is mandatory, which is incorrect. While there are several benefits of jointly applying for a home loan, there are disadvantages too.

How will credit score affect your loan eligibility?

Among the many factors based on which a bank may or may not approve your home loan request, is your credit score, which is a rating assigned to you by the credit bureaus based on our borrowing history. While a good credit score might get you a cheaper home loan, it is not the only factor that financial institutions consider, while processing your home loan application. More importantly, you could easily improve your credit score, by following some simple methods.

Do all borrowers get the same interest rates?

Banks offer varying rates of interest to different customers. The gender of the applicant also plays a role in deciding the interest rate. Most banks offer lower interest rates to women borrowers. Also, the rate of interest for the salaried class is lower than that for the self-employed, because of the higher risk perception. Similarly, banks offer cheaper rates to people with good credit scores.

Will the bank repossess home if you default?

This is generally the last resort for banks, as they are not in the business of claiming homes and selling it in the market to make profits. They are in the business of banking where they want to earn benefits by way of regular EMIs. Even in the worst-case scenario, banks would prefer to find an option that is most suited to all parties concerned.

Is home loan insurance compulsory?

Banks often nudge buyers into buying home insurance and home loan insurance as part of a package deal. Buyers often venture into buying such products, without analysing whether it is suited to their individual needs. Unless you are certain about the home loan and home loan insurance product that is being sold by the lender, do not buy them. You can always buy any of these products at a later stage, on completion of due diligence.

Can you transfer your loan more than once?

There is no rule that limits a borrower from transferring his home loan. Consequently, a borrower has the choice to change his lender as and when he thinks it is proper. However, changing your lender comes at a cost – each time you go through the process, you have to pay for expenses such as processing fees, stamp duty, legal charges, etc.

Do you have to pay penalty on prepayment?

The RBI has prohibited banks from charging any penalty, if borrowers pre-pay their housing loans. However, this remains true if the home loan interest is linked with floating rates. In case a home loan is linked with a fixed rate of interest, the bank can charge a penalty on prepayment.

What is land tax and how to pay it online?

Real estate ownership comes at a cost. You also have to continue to pay a price for the ownership of the title, once it is attached to your name. Under the specific state laws, the owner has to pay a bi-annual or annual property tax on various types of real estate possessions – land, plot or any improvements made on these pieces of land, including buildings, shops, houses, etc.

Who imposes land tax?

Also known as land tax, property tax is one of the major sources of income for city municipal bodies. Municipalities use different methods to arrive at the annual value of your real estate asset and impose a tax rate, depending on that value. This tax has to be paid one or twice in an assessment year, to the local municipal body in your area. The revenue generated through land tax collection, is used by the civic body to build and improve the infrastructure in the area, apart from offering and maintaining amenities including water and power supply, sewage systems, lighting and cleanliness. As civic bodies have different rules and valuation methods, the rate of land tax is different from one area to another area and one city to another city.

Who should pay land tax?

Note that the owner does not have to pay any land tax, as long as the plot is vacant. This is, however, not true for a vacant house.

Also, land or property tax is not the same as the annual tax that you are liable to pay every year from your income, under the income tax laws. On your annual income, you have to pay taxes on your real estate assets under the head income from house property, under the IT Act.

How is land tax calculated?

Based on several factors, such as the size, location and amenities, civic bodies attach an annual value to properties in their area, for land tax collection purposes. However, they use different methodologies to arrive at this calculation. There are primarily three land value calculation methods applied by the many municipal bodies in India, to establish this annual payment liability.

Annual rental value system

Municipal bodies in Chennai and Hyderabad use this method, to calculate annual property value. Every property has the potential to generate a particular monthly rental, irrespective of whether or not it is actually rented out. Based on the annual rental value of your property, a certain percentage of your earning has to be paid as land tax.

Unit area value system

Municipalities in Ahmedabad, Bengaluru, Delhi, Kolkata, Hyderabad and Patna use this system, to calculate land tax. Under this method, a per-unit price is attached, based on its built-up area or carpet area. While deciding the value, the location and usage of the property plays a vital role and a tax rate is applied, depending on the expected returns on the property.

Capital value-based system

The Brihanmumbai Municipal Corporation (BMC) intended to frame rules for levying property tax, based on the capital value of a property. However, the Bombay High Court scrapped the order in April 2019. Under this system, the market value of the property, which is revised on an annual basis by the civic body, is used to determine the land tax.

How to pay land tax?

Most civic bodies in India have now switched to the online mode, for payment of land tax. So, you can pay land tax online on the website of the municipal body, or by downloading the app of your municipal body on your mobile phone. Land tax payment can be done online, using your property’s unique ID and PIN allotted to you. The payment can also be done using net banking, debit/credit card and mobile wallet credentials. Alternatively, you could also pay property tax offline, by visiting the municipal office, where you can fill and submit the suitable form and make the payment through cheque.

Rebates on land tax

Municipal bodies across the country offer various rebates to tax payers, based on a variety of factors.

Depending on the age of the owner: Rates are lower for senior citizens.

Depending on the nature of the area: Rates are lower for properties in flood-prone areas.

Depending on the usage of the property: Rates are lower for properties meant for public use or owned by charitable trusts.
Depending on the age of the property: In some cities, old properties attract lower property tax.

Depending on the property’s occupancy: In some cities, the longer you have stayed in the property, the lower the rates.

Depending on the income of the owner: Land tax rates are also lower for people from the economically weaker sections and low income groups.
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All about India’s Enemy Property law

The movable and immovable assets left behind by people who left India after the Indo-China war of 1962 and the India-Pakistan wars of 1965 and 1971, are known as enemy properties

What is enemy property?

After the Indo-China war of 1962 and the India-Pakistan wars of 1965 and 1971, the Indian government took over the ownership of movable and immovable assets left behind by the people who left India after the wars. These properties, spread across several states in India, are known as enemy properties.

The Custodian of Enemy Property for India (CEPI), an office established under the Defence of India Act, 1939, is in charge of enemy properties in India. Through the Custodian, the centre is primarily in possession of all enemy properties in India. Following the 1965 war, India and Pakistan signed the Tashkent Declaration in 1966 and promised to negotiate the possible return of assets taken over by either side after the war. Breaching that promise, Pakistan disposed of all its enemy properties in 1971.

What is the enemy property law?

In 1968, India enacted the Enemy Property Act, providing for the custody and control of enemy property. The centre was, however, forced to amend the 50-year-old law in 2017, amid rising claims of succession by the legal heirs of the original owners of enemy properties. “Of late, there have been various judgments by various courts, affecting the powers of the CEPI (Custodian) and the government of India as provided under the Act, adversely,”.

A Supreme Court verdict of 2005 has been particularly instrumental, in pushing the number of such claims up remarkably. While giving its verdict on the ownership of the estate of the erstwhile raja of Mahmudabad, the top court ruled in the son’s favour, who claimed ownership over the property after his father’s demise in 1973. His father, who owned various heritage estates across Sitapur, Lucknow and Nainital, had left India for Iraq following the Partition. He took Pakistani citizenship in 1957 and later shifted to London, where he eventually died. Even though the raja’s wife and son stayed behind in India as Indian citizens, the raja’s estate was declared enemy property, under the provisions of the enemy property law of 1968. After a legal battle that lasted for over four decades, the SC restored the ownership of the raja’s estate with his son. The order was, however, made null and void when the rules of the 2017 law came into force retrospectively.

The Enemy Property (Amendment and Validation) Bill, 2016, was introduced, with an aim to amend The Enemy Property Act, 1968 and The Public Premises (Eviction of Unauthorised Occupants) Act, 1971. The Bill was approved in parliament after the Lok Sabha, in March 2017, passed it. By way of making the definition of ‘enemy’ and ‘enemy subject’ more inclusive, the 2017 law established that irrespective of their nationality, heirs of those who departed from India after the wars of 1962, 1965 and 1971, cannot claim ownership over enemy properties.

Enemy property in India: Key facts

In-charge: Custodian of Enemy Property for India (CEPI)
Number of properties: 9,406

Estimated worth: Rs 1 lakh crore (immovable assets)

Estimated worth of enemy shares: Rs 3,000 crores

Estimated worth of enemy jewellery: Rs 38 lakhs

Key features of the enemy property law 2017

Definition of enemy

The definition of ‘enemy’ and ‘enemy subject’ includes the legal heir and successor of any enemy, whether a citizen of India or a citizen of a country which is not an enemy. It will also include the succeeding firm of an enemy firm in the definition of ‘enemy firm’, irrespective of the nationality of its members or partners. It also says that the law of succession or any custom or usages governing succession, will not be applicable in relation to enemy property.

In-charge

Provides for the continued vesting of enemy property with the Custodian under the Defence of India Rules, 1962. The enemy property will continue to vest in the Custodian, even if the enemy or enemy subject or enemy firm ceases to be an enemy due to death, extinction, winding up of business or change of nationality. This applies, even if the legal heir or successor is an Indian citizen or a citizen of a country which is not an enemy.

Only the Custodian, with the prior approval of the central government, can dispose of such properties. “No enemy or enemy subject or enemy firm shall have any right and shall never be deemed to have any right, to transfer any property vested in the Custodian and any transfer of such property shall be void,”.

State-wise break-up of enemy properties in India

Of the total 9,406 enemy properties in India, 9,280 are left behind by Pakistani nationals and 126 properties by Chinese nationals.

Properties left by Pakistan nationals: 9,280

Uttar Pradesh: 4,991
West Bengal: 2,737
Delhi: 487
Goa: 263
Telangana: 158
Gujarat: 146
Bihar: 79
Chhattisgarh: 78
Kerala: 60
Uttarakhand: 50
Maharashtra: 48
Tamil Nadu:34
Rajasthan: 22
Karnataka: 20
Haryana: 9
Assam: 6
Diu: 4
Andhra Pradesh: 1
Andaman: 1

Properties left by Chinese nationals: 126

Meghalaya: 57
West Bengal: 51
Assam:15
Delhi: 1
Maharashtra: 1
Karnataka: 1

No registration fee, stamp duty for first sale of apartments in Tamil Nadu

The move comes in the wake of some sub-registrar offices demanding to register the apartments attracting stamp duty and registration fee. However, it is applicable only on the first sale of the property

In a relief for , the in Tamil Nadu has clarified that ready to occupy new apartments and buildings need not have to pay stamp duty and registration fee.

The move comes in the wake of some sub-registrar offices demanding to register the apartments attracting stamp duty and registration fee.

However, it is applicable only on the first sale of the property.
Inspector general of registration on Monday issued an order that confines undivided share (UDS) of a property under the bracket of stamp duty and registration fee.

"If a document is presented for registration for first sale of undivided share of land, the registering officers are instructed not to demand or insist on inclusion of building in the subject matter of sale document for the sole reason that completion certificate has been issued by the competent authority to the project,".

This would help homebuyers not pay the combined 11% stamp duty and registration fee for new apartments.
The order paves way for subjecting only UDS for stamp duty and registration fee.

"For instance, a new flat costing Rs 60 lakh, of which UDS is Rs 20 lakh and rest Rs 40 lakh is the price of the apartment. Homebuyers need not shell out stamp duty and registration fee on the building. It is a welcome move for those buying properties in completed projects because it does not attract GST,".