Friday, July 31, 2015


The dream of every person on this earth would be to own a house in his life time. With so many financial institutions around, getting a housing loan has become very easy and in fact the aspirant thinks it is a boon. His desire to construct a house drives him crazy to the extent that he may blindly sign any document to get the loan even without reading the loan document.

Seeing the present trend, it is quite clear that banks and Financial Institutions are ready and more interested to provide housing loans.A notable fact here is that there is no prescribed norm or procedure of either RBI or Indian Bankers Association as far as Housing loans are concerned except timely cautions to the banks in respect of over exposure to the housing loan and interest rates. Each bank has its own type of documents related to housing loan and many a times, the applicant is kept in dark about the documents required and the procedures followed for the purpose of housing loan. The Financial Institutions make the borrower to submit himself and gives him no choice other than to accede to its terms and conditions. On many occasions, the applicant is made to sign the documents on the blank papers and also on blank cheques which is highly irregular and it is also not advisable.

There is a meteoric growth in the housing and building construction sector and one of the main reasons is the easy availability of housing finance to all income groups.

Main Categories of housing Finance
Housing Finance Companies, old scheduled banks, and New Generation banks form the three main categories of the housing finance.Though housing finance companies are also in the fray, the competition between the Old Scheduled banks and new Generation banks are rather stiff and both of them have their own positive and negative aspects.

Old Scheduled Banks
All the nationalized banks and private scheduled commercial banks which are rather old can be categorized under the above head. The process to sanction the loan takes a lot of time. But the advantage in these banks is the transparency factor where the transactions are lucid.  Original documents need to be deposited in the bank once the loan is cleared. 

New Generation Banks
There is a radical change in the functioning of the New Generation Banks when compared with old scheduled commercial banks.  They are not very particular about the title or the valuation of the property, and the loan is released irrespective of the registration value of the property. The major disadvantage while dealing with these banks are it is next to impossible to get all the details and other charges imposed by the bank as in many cases they are handed over for outsourcing. There would be a long wait to get back the original documents despite clearing the complete loan amount as the documents will be preserved in some other metro city.

Direct Selling Agents or DSA act as a commission agent between the borrower and the new generation banks. They market the products of the financial institutions on a commission basis which will be charged on the loan of the borrower as service charges. Their job will be to get you the cheque of the loan and once they do that, they will forget the borrower all together as the business relationship with the borrower would come to an end. They are just agents who want to solicit business and make every attempt to satisfy their principle company and to get their commission. Once that is done, it is the transaction just between you and your financier.

Hidden Cost
The borrower should be more prudent and ensure that what other fees are to be paid apart from interest on the loan. In most cases, huge fees are charged other than the interest amount thereby nullifying the benefit of lower interest rates.The other fees may include processing fee, legal fee, administrative fee, inspection charges, notice charges, etc.  Each bank has got its own technique and methods to collect various other charges from the borrower. 

Selecting the financier
Even though there are plenty of home loan lenders, it is always difficult to select the right lender. The borrower should not get carried away by the attractive schemes and colorful advertisement which is just eyewash.  There are a set of parameters which plays a major role in deciding the proper and reliable home loan lender.

It is always advisable to choose the lender whom you know for sometime and also the antecedents of the lender. This is because in a long period of loan repayment of 10-20 years, there is a chance of getting EMI default due to various reasons viz. illness, social commitment, death, job shifting etc. If such a thing happens, the financier with whom you have borrowed the loan may take severe steps and slap hefty fines, interest, and legal notice and may even resort to intimidation. Further, the Securitization and Reconstruction of Financial Assets – Enforcement of Security Interest (SRAFESI) is very strict and if the default of the EMI continues for a period of three months, the account will be considered as a Non performance Account (NPA). The banker will send 60 days notice under the SRAFESI Act. After the expiry of 60 days, the possession of the property will be taken by the financial institution and the property will be auctioned. This may be avoided to a certain extent if the lender is a known person to the borrower and may take a bit lenient step by giving the borrower some breathing time to clear the loan.

Interest Rates
There are normally two types of Interest rates viz. Floating and fixed rates. It is advisable to opt for the floating rate as it goes down further from time to time and the bank will notify duly about the loan amount charged every month and the new EMI is less than the previous month.

Now even fixed rates have increased. Fixed rates are easy to calculate the EMI for entire period of loan.  When the rates are falling, it is advisable to go for floating interest rate but fixed rates are always better to make a commitment for your lender for entire loan period.These days, the Housing loan interest rates are getting increased by all the banks and Financial Institutions.

Negative list
Each home loan financiers have their own set of rules for providing housing loan.  There are some home loan financiers who do not encourage professionals like film artists, TV artists, police, journalists, politicians, Advocates, self employed who do not possess bank statements or who can influence their position and create trouble at the time of repayment. It is better to approach banks who do not ask for income proof or a guarantor.   

Track record of the financiers
It is quite common these days to hear about the confiscation of the property by the banks whenever there is any default of the EMI. Some of the banks employ Goondas and anti-socials elements to recover the property through illegal way. Even though the rate of interest may be a tad above the other financial institutions, it is advisable to opt for such an institution where there is a good policy and customers are treated with respect.

However, it is a good practice to receive acknowledgement of all the original documents you hand over to the lender.


Thursday, July 30, 2015


The long-pending Real Estate Regulatory Bill was amended and approved by the Cabinet. The Bill offers much needed protection for home buyers and would help increase disclosures in the real estate market.

For instance, the Bill makes it mandatory for all under-construction projects to be registered. The Developer has to disclose project details, including layout plan, approvals, names of the Promoters and contractors during registration. Giving all these detailed information will help improve transparency. The Bill also limits the changes a developer can make to the original plan. Any changes require getting the consent of 2/3rds of the customers.  This is a great plus points, as in the past home-buyers were usually kept in the dark about size, floor plan and design changes.  Now, the home-buyers have to be informed about the changes and the home buyers will have the right to withhold consent, if they are unhappy with the proposed changes.

According to the Bill, the Developers must also maintain half of the amount collected for a project in an escrow account, while the share to be held was reduced from 70 percent in the original proposal to a lower share now, the chances of developer diverting the funds collected for one project to buy land or cover costs of the other developments will be minimized now.  Maintaining funds for each project individually will also help increase developer’s accountability.

Besides the developers, the Bill also covers brokers and agents who are in the business of selling the property. They are also required to register themselves with the Real Estate Regulatory Authority – a new agency to be set up by the respective State Governments to oversee compliance.Buyers can take up their grievances and issues to such Regulatory Authority along with using existing options such as approaching Consumer Courts.  The good news for many home buyers who are facing long delays in the legal system is that the dispute resolution by the Regulatory Authority is expected to be fast tracked.  The Regulator will also have rights to punish the offenders.

One important change in the revised Bill is that it covers commercial projects also in addition to residential segment. However, what is still not addressed are the issues faced due to approval delays from government departments, which is supposed to be the reason commonly cited by the developers for not meeting their commitment to the home buyers. 


Wednesday, July 29, 2015


The various modes of transfer of property are Sale,Mortgage, Lease, Exchange, Gift etc., All these transfers are subject to general principles of Transfer of Property and contract under the Indian Contract Act, 1872.  This has been expressly stated in Sec4 of the transfer of property Act, which states that, “The Chapters and sections of this Act which relate to contracts shall be taken as part of the Indian contract Act, 1872.”

Now so far as agreement & contract is concerned, it is very much essential to know,
  1. What is valid agreement?
  2. When agreement becomes contract?
  3. What is the effect of agreements made not according to the law?
The term “agreement” has been defined in Sec 2(C) of the Indian contract Act, 1872 as, “Every promise and every set of promises, forming the consideration for each other, is an agreement”.

One person is said to make a promise to the other, if his /her offer is accepted by the other person. When this promise is supported by consideration, it becomes a contract. Therefore first and foremost requirement of agreement is, it must have been supported by the consideration.However, the consideration is not a determining factor in certain cases as detailed in Section 25 of Indian Contract Act

  1. Gift to near & dear ones,
  2. Something given for past service
  3. Acknowledgement of time barred debt.

The second important requirement of agreement, for an agreement to be enforceable by law, it must fulfill the conditions set out in Sec – 10 of the Indian contract Act.  They are:
  1. Agreement must be made
  2. By competent parties,
  3. With free consent,
  4. For lawful consideration and
  5. For lawful object.

Sec11 of the Indian Contract Act defines competent parties as, those persons who have
  1. Attained the age of majority
  2. Are of sound mind, and
  3. Are not disqualified by any provisions of law.

The age of majority for any person is 18 years under the Indian Majority Act. In case of a person is suffering from any mental disease during certain intervals of time, he or she can enter into Property agreement during the time such person is of sound mind. Now the question that arises for consideration is if person is drunk or intoxicated due to drugs can he enter into an agreement.  In this kind of situation, if the intoxicated person is in position to understand and appreciate the pros and cons of terms and conditions of the agreement, there is no bar for the drunken person to enter into an agreement. However, in case of any disputes, it has to be established to the satisfaction of the court that the person suffering from mental disease, under intoxication was in a position to understand the terms, pros and cons of agreement.

Another requirement for a person to enter into an agreement is that, such person should not have been disqualified by any law in force like insolvency Act.

Free Consent:
The parties to the agreement should have agreed to the terms with free consent. Any consent is said to be free, when it is not given under.
  1. Coercion,
  2. Undue influence,
  3. Fraud
  4. Misrepresentation. 
In case consent is given under by any of above elements then the agreement or contract becomes voidable. The effect of voidable contract is the contract becomes enforceable only at the option of the party whose consent has been taken by coercion or undue influence or fraud or misrepresentation.Under voidable contract if any property is sold, the purchaser gets a valid title so long the contract is not cancelled on the ground that contract is voidable.

Lawful Object:
The third & fourth essential requirement of agreement are:-
  1. Lawful consideration &
  2. Lawful object.
If the consideration and object of contract is not lawful, then such agreement becomes void, Contracts or illegal contracts u/s 23 & 24 of the Indian Contract Act.  If any property is sold under void or illegal contract, then purchaser would not get valid title to the property. Void contracts are not enforceable.

Consequences of void, voidable or illegal contracts.
If a contract is declared as void, the transferee of property would not get valid title to the property, the position of parties is like as if they are not entered into the contract at all.  Therefore realestate of the contract Act, the parties are liable to return the advantages they have taken under void contract.

As stated earlier, in voidable contract the transferee will get a valid title, so long the contract is not cancelled by the party whose consent was obtained under coercion, undue influence, fraud, misrepresentation. Such party has to exercise his option of treating the contract as void within the limitation period, which is three years. In case of illegal contracts, if one party has given or delivered something to the other party the same cannot be recovered at all.


Saturday, July 18, 2015


Man does not live only for food, cloth or shelter or for himself.  He has certain social responsibilities to provide for his family and also for himself in old age. This naturally makes him save some portion of his earnings and invest them in lucrative portfolios. After the basic needs of food, cloth and shelter are fulfilled he strives to improve his standard of living and to enjoy the fruits of hard earned money.

Investment avenues are many.But the investor should be prudent enough to select a proper area, which is safe and secured with assured reasonable returns. Earlier the bank deposits, stocks, mutual funds insurance policies and bullion were most opted.With increased business, globalization of economy has unfolded many more areas.The investment has become very complex which has led to the emergence of specialized investment advisers.

Bank deposits, insurance policies, mutual funds have become unattractive because of low returns and failure of many companies.Stock market is unpredictable and volatile. Moreover, these investment avenues are for short-term which need close monitoring.  Further the quantum of investment is generally small. In recent past real estate has emerged as a safe and high yielding investment opportunity.Investment in real estate is a long-term investment and needs considerable amount.  It is not only a financial but also a sentimental, emotional investment.

The liberalization initiated by the Government, opened up the hitherto dormant Indian economy and many multinational companies set up their offices in major metros.  The improved pay packets of vast middle class population has offered as many investment routes with a desire to own a roof over their head as early as possible The migration of rural people to urban centers in search of assured income jobs, further expanded the real estate market. However, as the demand exceeded supply, many fly by night operators appeared on the stage and indulged in a speculative and artificial price spiral, which resulted in crash of real estate market in later half of 1990’s.  But now the market has regained its potential. Only serious vendors and end-users are operating in the market.

The yield in the realty market has to be calculated on the capital invested and annual rental returns less property tax, income tax and annual maintenance charges.This return varies according to the type of property,residential property, commercial office space. In Bangalore the returns are about 8% for residential, 12% for office space and 15% for commercial space There are certain determining factors, which play a crucial part in property investment. Where to invest? In other words the location. There is equal demand for all types of space in metropolitan cities and market trends and rates are more transparent on account of competition and frequency of deals. But smaller towns have potential of increased returns because of dearth of space.  Local politics also plays its role in determining the returns in small towns.

Amount of investment:
Investment in real estate needs higher amount and the minimum entry level will be in multiples of lakhs; about 15lakhs for residential and more for office and commercial space.

Time factor:
The sale of property requires a long time for finding a suitable purchaser and complying with legal requirements; further the appreciation of capital value of the land is slow but certain and stable unlike in stocks, debentures.

Local Laws:
The realty investment calls for more discretion and involves complicated processes like title verification, land use according to local laws, floor area ratio restriction on sale for some period and many more unexpected laws, rules depending upon the political environment.

Tax factor:
Uncertain tax rules, rates which vary every year needs to be considered. Property tax is an annual commitment which is being increased every year by self-assessment or capital based assessment.  Rental income also attracts income tax to be paid annually; sale of the property attracts capital gains and purchase invites stamp duty and registration charges, property tax & stamp duty varies from state to state.

Type of property:
As stated earlier, the type of the property is also very important.  It may be residential, commercial or office space. The demand and supply position of each sector needs to be carefully examined.  Residential property calls for smaller investment.  Commercial and office space need higher investment

Type of return:
Real estate sector offers two types of return:
Recurring is a monthly return in the form of rentals, or the returns on the lease amount invested in bank, securities or in business.The other type is return on sale of the property. The amount to be invested also depends on the mode of returns expected.Generally leasing of property is attractive only for business people. Lease amount does not attract interest.Commercial property and office space yield high returns to the extent of 15% where as the residential property yield about 8%.

Risk factor & limitations of legal scrutiny:
Tracing the title of property is most important step in purchasing the property which has to be done by an experienced advocate who is well versed in property laws. The property laws are very complex and vary from state to state.  Further many times, age-old records need to be examined, which may not be available with the parties or even in jurisdictional offices. Further legal scrutiny is based on the documents produced for verification.However, it is not the duty of the advocate to certify the genuineness of the documents from concerned departments. The honesty and integrity of the seller is very important. Certain hidden facts like pending cases, prior agreements, and government notification of the property cannot be traced easily by verification of the documents. However, paper notification about purchase of property would help to unearth some claims.


Friday, July 17, 2015


It is the cherished aim of many to have a shelter over their head. But jumping into action for purchase of property without proper calculation of his financial status for the next couple of years requiring expenditure on various counts could put such persons into financial strain upon investing in real estate. The property buyers firstly have to take into stock their financial position, present and the future keeping in mind the financial requirements for the next couple of years which would help them to know the likely budget for the real estate investment. This exercise would help them to search for a suitable property in a locality of their choice within their budget. Searching a suitable property for purchase is not an easy task. Real Estate agents would come to your rescue in this regard.

For Purchase:
Before you purchase a home or make an investment you must begin by knowing your investment capacity which includes your financial reserves and your capacity to borrow.You should let your real estate agent know some fundamental facts about your available savings, income and present debt so that he can refer you to the right lenders.The majority of these lenders are banks and housing finance companies.

The ultimate selection of the right property has to be done by you. It is a time for increased excitement and emotion. You may be helped in the selection process by your real estate agent who provides objective know-how regarding every property. The first thing you will want to know is whether the property has the environment you desire for a home or investment, and the second is whether it will have resale value when you want to sell. Once you know for sure that the property is right for you the process begins of obtaining finance. Different financing choices can be understood with the help of your advocate and in pinpointing financial institutes with the ideal financial terms of payment.

You should complete the evaluation of the property before negotiation. There are several factors for negotiation which include price, financing, terms, date of possession and the inclusion or exclusion of repairs and interiors. However they are not limited to these. There should be a period of time for you to finish all the formalities in the purchase agreement.

Your agent can help you to find a responsible, professional advocate depending on the area and property to give you written opinion on the title of the property. The ownership of property is indicated by title. There will be some limitations in the title to most properties such as easements for utilities. Some matters which cause problems at a later date can be resolved with the help of your advocate.

For Sale:
If you want to get a fair price for your property, it is wise to utilize the services ofa real estate agent who would help you to know the prevailing market conditions, availability of competing properties, the demand for the property in the locality, marketing strategies, etc. After this information, you may have a marketing plan of your own. In order to fetch higher price for your property, your agent may suggest some repairs and cosmetic work. To increase the marketability of your property, it is necessary to expose your property to other real estate agents and the public which is carried out by your agent since in the real estate market throughout the country, more than 50 per cent of real estate dealings are conducted through chain actions.

The sale dealings may be concluded either by your agent or through other agents to whom the information regarding the sale of your property has reached. Thus, your real estate agent acts as a marketing coordinator and furnishes information about your property to other real estate agents through the media of marketing networks, open houses for agents etc. When, where and how to advertise your property sale could best be done with the help of the real estate agent. Most sales in real estate are through the contacts of the agent with earlier clients, referrals, family friends and personal contacts. Sometimes, newspaper advertising of the sale of property leads to phone calls to the real estate agent's office or to the vendor. While advertising through media, care should be taken not to give an impression that the property under notification is a distress sale. Therefore, it may be noted that if a property is overly exposed in any media, the buyer may get an impression that the vendor is distressed or desperate to sell his property and thereby the prospective purchasers would start bargaining.

In the matter of purchase and sale of immovable property, the point at issue are more or less the same negotiation process. Whichever proposal the buyer brings can be objectively evaluated with the help of your agent in a way that does not compromise your marketing position. This beginning agreement only starts a process of appraisal, inspection and financing. With an advocate's help your agent can assist you to write an agreement that is positive from all angles which is legally binding.

Every area has its own special customs for finalizing the sale deed. You can be guided through this process by your real estate agent. The paperwork needed is itself too much for some sellers. The agent can best help you objectively to resolve these matters and take the transaction to closure of sale deed.


Thursday, July 16, 2015



Every person would wish to own a house, whether spacious or a small house according to their financial status. A person desires to own a house since it is not only a concrete structure but also involves an element of emotional bonding towards the same.

Nevertheless, it is not easy to either buy a new house/apartment or to construct on the plot. If a desire of a man is to buy an apartment, then it is necessary to identify the right location and a reputed builder and if the desire is to construct a house, then a reliable and right person, is very necessary. 

Selection of a location
Before acquiring any property, more impetus should be on the location since it plays a paramount role in almost all aspects of the real estate. However, the process of identifying the location for owning any property depends upon the purpose for which such person intends to invest, which could be either for residential or commercial, since the priorities differs according to the purpose for which  the property is  intended to be purchased.

The following are some of the guidelines required to be considered while choosing the desirable location are mentioned below:
1.The first and foremost thing that should be kept in mind at the time of identifying the property is that the property intended to be purchased should not be located within the vicinity of slum area or  place of worship or in  close proximity to a drainage line. It is better if the location is populated with people having diverse culture with cosmopolitan outlook and free from anti-social elements and anti-social activities.

2.If the person wants to own a house or a flat for his own occupation, it is advisable to prefer a purely residential area than a commercial one.

3.It is always appreciated to opt for purchase of an apartment built on a Layout approved by the competent authority, since it would ensure better amenities to such occupants.

4.It is also important that such layout should also comprise of well-laid roads with good sewerage system, along with regular garbage clearance.

5.It is advisable to avoid owning a house in the low-lying areas since such property often runs under the risk of inundation of water during heavy monsoon.

6.Care should also be taken to ensure that the location is not very far from the work place, Market place, Educational institutions, hospitals, Bus stand, Railway station or other basic and important destinations.

7.Apart from the above, it is also necessary banking facility, ATM’s, public conveyance, public telephone booths, Internet Centers and others are also not very far from the property. Last, but not the least that the location must also be free any kind of pollution or congestion.

8.Needless to say, the area should have good and regular supply of water, power and in case of bore-wells, then good ground water table is also necessary.

9.To ensure good sleep and less pollution, pick an area, which is free from any factory or workshop in the precincts of your location.

10.As regards maintenance of good health is concerned, it is also very important to inculcate the habit of jogging or walking regularly, for which Public Parks or gardens having jogging track is necessary in such circumstances, it is preferable to own a house or a flat wherein such parks or gardens are easily accessible.

11.Further, it is also seen that the concept of Vastu has gained much momentum now-a-days, which is subjective. In such circumstances, importance should be given to the size of the plot and the Floor Area Ratio along with the price tag than banking upon the Vastu alone.

12.One thing that always concerns everyone is the parking and other logistic issues, which we should be ascertained before purchase. The infrastructure facilities should be good in all respects.

Necessity of a reputed Builder
Real Estate is booming like never before due to various factors viz. IT Boom, High salaried people, soaring share prices, and wide range of home loans available easily. The Builders/promoters are having a field day, as the demand is mounting. That being the situation, it is very important to opt for the purchase of a flat/apartment constructed by any reputed Builders, because some builders, having no experience in the filed of construction may take undue advantage of the mounting demand and may cause damage to the intending purchasers by making false assurance, with poor result and high prices.

 We get to hear a lot of stories about such bogus builders, whose motto is to cheat the people to a tune of millions, collect money and vanish with them, which situation has to be brought under control.The following are few of the information given to enlighten about the ways to tackle and overcome such instances:

1.At the outset, before making any kind of investment either in apartments or plots or in any type of property, it is very necessary to obtain the list of reputed builders of the city, who are involved in the real estate business from quite few years.

2.Once such list is available, then it is necessary to make a thorough investigation about the antecedents of the short listed builders.

3.The next important aspect after finalizing the builder from whom the property is intended to be purchased, other aspects such as promptness in delivery, construction standards, strict adherence to the agreed costs without any escalation, providing all the basic amenities as promised at the time of booking.

4.It is advisable to try and meet the residents residing in the apartments constructed by such Builder.

5.If an offer to sell a flat/apartment is made for the price which is much less than the prices prevailing in the market, then it is advisable to think it over than getting carried away over the throw away price as such purchasers may be vulnerable to some unknown problems, leading to lot of problems in terms of legal and quality of construction.

6.Investing in an independent house or flat built by any unknown builder is always a risky act.

7.Now a day, many Builders are making use of modern and unique techniques and are creating alluring brochures depicting unbelievable designs just to attract the customers to invest in their projects. On the basis of such brochures, heavy claims are being made by the builders and in turn the purchasers are not benefited in any way.