Anchoring your property

A house is among the most expensive assets an individual owns. Which is why, one can’t be careful enough while purchasing one. From title clearance to getting it registered, there is plenty that one needs to keep an eye on.

Documents
Smooth property transactions depend on the availability of all the documents, current as well as past ones.

Title deed: Confirms the names of people having a stake in the property. Buyers should get a ‘no objection’ letter from all the names mentioned in it, to avoid claims arising at a later date. If it is a second or third sale, then chain documents from the first buyer onwards need to be examined by a lawyer.

“If any of the past documents are unavailable, a public notice is published in an english and vernacular newspaper. Claimants to the property have 14 days to respond against the impending sale,” says Laxmi Murli, housing and real estate advocate.

Share certificate: Will have the names of the original owners. A missing share document again warrants a public notice.

Search report: Shows the property’s past sale and other records. Depending on the total value of the property, lawyers might ask for a 15- or 30-year search, that is done by the sub-registrar’s office.

Society maintenance bills: The latest ones would reflect any pending dues. For further checks, one could ascertain with the particular housing society’s office for any notices relating to the property or any other outstanding dues.

Letter of intent: This is the first draft of the final agreement that is drawn on a stamp paper once both the parties agree on the terms and conditions. It mentions the cost, the advance paid, the time span within which the sale has to take place, besides listing how losses will be covered in case either of the parties default.

No lien: This is needed if the seller had already borrowed against the property. The bank hands over the original documents to the new owner only once its dues are cleared. The document is a must if you ever opt for a loan against the property.

Agreement of sale: This is the final executable agreement between the two parties once the stamp duty is paid in the collector of stamps’ office. Details mentioned in it need to be accurate and changes should be done before registering the document. Property pledged with a housing finance company needs the original document.

Letter of possession: is handed over by the seller once the balance considerations are paid.

If one was buying an under-construction flat from a builder, the payments would extend over the period of construction. The agreement with the builder is done according to state laws and thus a separate title deed, search report and public notice documents may not be needed. The letter of possession will also be handed after the builder has received the Occupation Certificate from municipal authorities.

Financing the house
Homes funded through a housing loan can get you a tax benefit for both principal and interest repayment. Normally, banks sanction up to 80 per cent of the loan-to-value ratio, on the basis of the collateral and income-to-instalment ratio, which should not exceed 40 per cent.

Increasing eligibility: If you need more than the sanctioned amount, you can increase your eligibility by providing additional security to the bank.

S Govindan, general manager, Union Bank of India, says, “These are not really collateral. It helps a borrower to enhance his eligibility, provided it is a source of income for him.”

Banks insist on the borrower having a life insurance cover, as it helps settle the loan in case of the borrower’s death. Investments in shares can also be used. And, as its value increases, it is counted as a source of income. But you need to transfer the ownership to the bank, as these are in the dematerialised form. Similarly, investments in mutual funds can also be used.

In case you are looking for a loan on your second home, showing higher income from a property that has been rented out would help to get a higher loan amount.

Joint loans: You can also combine your income with a brother or spouse or parents or son. But if your co-applicant is your sister or your daughter, then she has to a joint owner to be able to be a joint borrower.