HOUSING DREAMS…..AND FULFILLING THEM
All of us have a dream - of making our 'dream homes' become a reality.
Residential properties, be they flats, plots or bungalows, are advertised in different media,
including local newspapers, radio, television and the internet. Then, there are property
exhibitions. There are many options for a first home seeker, but the smart first home seeker is
one who picks the right one.
Maharashtra Chamber of Housing Industry (MCHI) organises exhibitions where 'smart' home
seekers can rely on exhibitors who will treat them not as customers, but as friends. MCHI and
the developers who are the exhibitors at such property expos share your aspirations, your dreams
and help make these come true.
It is an open fact that owning a house remains the average Indian family's biggest goal. There
were times when one couldn't even dream of buying a house till one was into the middle age.
These were days, when years were spent stashing away money for 4 walls and a roof – but that
holds true no longer.
The real estate market has options galore, plus funding options that make it attractive enough -
and bring your dream house within reach. The best time to buy a house is when you are young,
when you have enough time left to enjoy that home and see it grow as an investment, to live at
least half your life with the confidence that comes from owning property.
And it can be done. It is our fond hope that this booklet will be the friend that shows you how. It
is a brief example of issues and explanations about the process of buying a home. It is meant to
be a starting point, which will help you clear the fundamental issues and help you figure out how
best to start the process of selecting your first home.
Here's wishing you all success in the process, and MCHI would like to remind you that we are
here, as your friend, philosopher and guide - to help you make your dream home a reality.
ADVANTAGES OF OWING A HOME
Owning your own home provides a sense of security, builds equity, provides stability and is an
asset you can fall back on in times of need
FISCAL ISSUES: As the average age of a home buyer keeps reducing, it would seem easier to
buy property at present, because of ‘value for money’ prices and tax benefits that can accrue.
APPRECIATION: International trends suggest that real estate gives between 6-10 per cent
annual returns. In effect, barring unforeseen events, appreciation is guaranteed over a period of
MAINTENANCE: Owning your own home gives you a free hand to make alterations in the
property. You are also not dependent on the landlord to maintain the property.
HOME LOANS: The rate of mortgage interests i.e. the interest charged by the housing finance
company on home loans is still at affordable levels, and this has made owning a house a reality
for the middle class.
INCOME TAX: The Income Tax Act provides for deduction on interest payable on capital
borrowed for acquisition or construction of a property. For most of us, such tax concessions
make sense to own a home by availing a housing loan.
RENT vs OWN: Experts and Market Research-based data suggests that on an average, house
rent can be estimated to be about 20 - 25 percent of the resident's monthly income as compared
to the 35 - 40 per cent that goes towards a resident's EMI. However, the annual tax saving on
EMI means that the actual figure comes down to roughly 30 per cent of the resident's monthly
THE HOME-BUYING PROCESS
This process is broken up to three main sections: budget, home loan and searching for the exact
Step 1: THE BUDGET
First of all, assess your post-tax monthly income, deduct tax saving contributions. Similarly, do
so for other earners in the family.
Next, provide for credit card debt and other loan payouts, as also provide for monthly household
expenses. After this, set aside around 5% for contingencies.
Add up the savings you will need to put down your contribution of 10-15% as Housing Finance
Companies will fund only between 85-90% of the property value.
Now check if you have enough for the EMIs plus maintenance expenses. Don't forget to budget
for the tax breaks you get on your loan repayment. Typically, lenders will ensure your EMI's
doesn't exceed 50% of your take-home pay, post-taxes and other deductions.
Step 2: THE HOME LOAN
Screen lenders on total financing cost and convenience.
Get pre-approvals from short-listed lenders.
Check out property fairs for better rates
Check if your employer has a tie-up with a lender, corporate discounts can lop off more than 1%
in interest alone
Today, lenders are vying for customers, so play them hard against each other for the best
Get a list of pre-approved properties from lenders. Borrowing will be a breeze if the property you
zero in on is on your lender's list.
Step 3: THE SEARCH
When you go house-hunting, consider:
How far you'd be from place of work
How far the home would be from your kids’ school
How far you'd be from reliable medical help
The quality of civic amenities (water, electricity, waste disposal etc)
How accessible social amenities like markets, clubs and parks are.
Now, the reality of life is that the ideal in the list given above may not match your budget. So,
now you need to match your budget with your requirements and what's available - and make the
To know what's available, scour advertisements, ask friends and neighbours, and check out
Once you have a short-list of projects, check the past record of the builder and visit their
Important points to keep in mind while buying your home
These are points that are more from a practical aspect rather than fiscal or legal
About the locality, watch out for proximity to workplace, educational institutions,
hospitals, shopping areas, entertainment centres, transportation, and pollution levels etc.
Quoted area of the flat i.e. compare whether it is carpet, built up area or super built up
area. Understand the difference – ask your builder/ developer to explain.
Car parking space: whether compulsory to be bought or open to home buyer’s needs,
more than one slot required by a family, whether parking slot is stilt/ open/ covered/
Quality of construction
Reputation of the builder or seller
Sufficient water and electric supply, as also other utilities
Cost components: price, stamp duty, registration charges, transfer fees, maintenance
charges, any other payments
Appreciation of the property value in terms of resale value, and/ or rental value.
Any other distinguishing features or advantages of the property
Documents and checklist while buying a home
List of all the important documents one should check; and the checklist before buying any
If you want to purchase a property, you have to look at the approved layout plan,
approved building plan, ownership documents, carryout search, etc. Contact an advocate
before you purchase a property so that he can advise you.
This is a checklist: when buying commercial or residential property you would need to
check for the following documents/ information:
Before you start on documents, you need to understand market trends; identify the exact
property you want to buy and formulate the commercial terms.
Market Trends is all about prevalent rates of property in the vicinity and last known
transactions, so you do not pay too much for your home.
Identify the property you wish to purchase, from all aspects – funding, requirements in
present day as also future.
Formulate commercial terms, put everything in writing as far as possible..
Distinguish between terms and conditions of the contract which are negotiable and those
which are fixed - e.g. price, payment schedule, time of completion etc.
Avail of a helping hand - like buying your home from an MCHI member and/ or from an
MCHI property exhibition.
Previous encumbrances and loans, if any, on the property must be cleared before
completion of purchase of the property.
The Title of the Vendor to the property must be clear and marketable.
Finalise commercial terms of purchase of the property. Ascertain transfer fees, stamp
duty and registration charges to be paid on purchase of the property.
Ascertain outgoings to be paid for the property i.e. property tax, water and electricity
charges, society charges, maintenance charges.
Request Vendor to obtain, if applicable, consent, permission, sanction, no objection
certificate of various authorities such as the (a) society (b) the income tax authority (c)
Municipal Corporation (d) the competent authority under the Urban Land Ceiling and
Regulation Act (e) any other authority.
If you require a loan for the home, ask for a pre-approval letter from the lending
Permanent Account Number of Vendor and Purchaser is necessary under Income Tax
Payment of stamp duty on the formal agreement or document for transfer of the
property, signing by both the Vendor and Purchaser and registration
After payment of the entire sale price, take over legal possession of the property along
with documents of title in original from the Vendor of the property
Change name of the holder of the property to the purchaser in the records of the society,
electric supply company, municipal corporation, Index II etc.
When buying a flat from a builder in a building under construction, you have to check the
Verify the approved plan of the building, along with the number of sanctioned floors.
Verify whether the floor on which you are buying a home on is approved.
Whether the land on which the builder is building is his; or he has undertaken an
agreement with a landlord. If so, check the title of the land ownership with the help of an
Check the building byelaws as applicable in that area and ensure that the builder is
building without any violation of front setback, side setbacks, height, etc.
Check if the specifications given in the agreement to sell of the sale brochure match the
ground reality or not.
In locations where any sort of NOC is applicable, check whether the same has been
Whether an NOC from water, electricity and lift authorities have been obtained.
PROCEEDURE FOR BUYING A NEW FLAT
Firstly the Purchaser has to enter into a Registered Agreement of Sale with the Builder and pay
the requisite margin money. Then he has to approach the Financial Institution and collect the
necessary details including application form from them.
On application, copy of registered agreement, registration receipt, receipt of payments made and
NOC from Builder have to be handed over to the Financial Institution.
In case of purchase of a new flat, loan will be disbursed in instalments depending on stage wise
progress of work.
Requirements for Salaried Applicants:
Employer's salary certificate in requisite format/and latest salary slip.
TDS certificates, ESIC/ PPF certificate
Requirements for Businessmen / Self-employed
3 years IT returns together with P/L account, etc duly certified by a Chartered Accountant
What is an EMI?
You repay the loan in the form of Equated Monthly Instalments (EMIs) which is made up of 2
parts- principal and interest. Loan repayment EMI begins from the month in which you take full
What is pre-EMI interest?
Pending final disbursement, you pay interest on the portion of the loan disbursed. This interest
called pre-EMI interest. Pre-EMI interest is payable every month from the date of each
disbursement upto the date of commencement of EMI. Some Financial Institutions, on you
request, could consider to start the EMI before the loan is fully disbursed.
What are the different interest rate options available?
Floating Rate of Interest- the Rate of Interest is reviewed periodically every six months based on
the prevailing market conditions and RBI policies. The revised Floating Rate of Interest could
increase, decrease or remain the same.
Fixed rate of Interest- The Rate of Interest ordinarily remains the same throughout the term of
2 in 1 rate of interest- This Home Loan provides customers with a choice of breaking up the loan
requirement into Floating and Fixed Rate loans.
What is the method of calculation of Interest Rate?
Methods of calculation would include
- Flat Rate - Total interest calculated for the term and then divided by the number of months
- Reducing Balance (monthly/Quarterly/Annually)- Compounded
Can I repay my loan ahead of schedule?
Yes, you can repay the loan ahead of schedule but some companies have prepayment charges.
How much does a Housing Finance company lend?
Loan amount is determined on the basis of the repayment capacity of the applicant/s. Repayment
capacity takes into consideration factors such as age, income, dependents, assets, liabilities,
stability of occupation and continuity of income, savings etc. The maximum loan varies from
company to company. Most companies extend loans upto 85 % of the cost of property (including
Stamp duty, Registration charges, and other govt. charges).
What is the period for which one can get a Loan?
The maximum period of the loan is 20 years subject to age of retirement or completion of 70
years whichever is earlier.
What Is Security For The Loan?
The security for the loan is the first mortgage of the property to be financed by way of deposit of
the title deeds, subject to local laws. Guarantors are usually asked for.
Does the applicant get a tax benefit on the loan?
Resident Indians are eligible for certain tax benefits on principal and interest components of a
loan under the Income Tax Act, 1961. In effect, this reduces the actual cost of your home loan
interest - if you write off the taxation benefit across the home loan interest, it actually becomes a
MARKET VALUE, STAMP DUTY, REGISTRATION
Market Value means the price at which a property could be bought in the open market on the
date of execution of such instrument. The Stamp Duty is payable on the agreement value of the
property or the market value, whichever is higher.
Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must
be paid in full and on time. A stamp duty paid instrument/document is considered a proper and
The liability of paying stamp duty is that of the buyer unless there is an agreement to the
contrary. Section 30 of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.
Formalities and forms may vary from State to State depending on where the property is situated.
Every State has its set forms under the Registration Rules that are required to be filled and filed
along with and at the time of Registration of Sale Deed/Transfer Deed.
TIME LIMIT FOR REGISTRATION: T
he property agreement should be registered with the Sub-registrar of assurances under the
provisions of the Indian Registration Act within four months of the date of its execution.
From the point of view of taxation no special formalities are required for completing while
buying the property. However, proper Agreement to Sale etc. must be done and the ownership
and the title should be verified to ensure that one does not have a problem at a later stage in
respect of such property.
Under the provisions of the Income Tax Act and Rules for a transaction of sale, it is now
compulsory for the Purchaser and Seller to give their Permanent Account Number and in the
event of either the Seller and/ or the Purchaser would be required to fill Form 60 of the Income-
CAPITAL GAINS TAX
For the purpose of Real Estate, the Long-term Capital gain would be only if you hold the
property for more than three years, then it is subjected to tax.
In case you sell the property in less than three years time then it would become short-term
Capital Gain and the same is required to be taxed at the prevailing tax schedule of the rate
applicable to the assessed depending on his other incomes.
There are innumerable ways and options available for saving capital gains. For example, invest
in a residential house property or a flat to make investment so as to see that capital gains are
exempted. Likewise, if a person were to make the investment in REC or NHAI bonds then also
he enjoys complete exemption from the long-term capital gain payable by him in respect of
capital gains due.
FOREIGN CITIZENS OF INDIAN ORIGIN
Formalities that need to be completed by foreign citizens of Indian origin for purchasing
residential immovable property in India under the general permission: they are required to file a
declaration in for IPI and with the central office of Reserve Bank at Mumbai within 90 days from
the date of purchase of immovable property or final payment of purchase consideration, along
with a certified copy of the document evidencing the transaction and the bank certificate
regarding the consideration paid.
LEASEHOLD & FREEHOLD PROPERTIES
Leasehold properties (plot/built-up) are those in which perpetual leasehold has been granted by
the title paramount in favour of the lessee. Leasehold properties are not freely transferable.
Depending upon the covenants of the lease deed, prior permission of the lessor is required to
transfer the property.
Freehold properties are those where title paramount has conveyed the property in favour of the
purchaser by conveyance/sale deed with no restriction on the right of the holder of the property
to further transfer the property. Record of ownership of the freehold property can be ascertained
from the office of the sub-registrar. It can be transferred by registration of sale deed.
INCOME FROM HOUSE PROPERTY
Broadly speaking, most of home buyers who rent out their property can claim deduction in
respect of income from house property.
WHAT ADDS UP?
Interest paid during the construction period would enjoy tax benefit in total five years as per
Section 24 of the I.T. Act, 1961. The Loan processing fee, the brokerage, the stamp duty can be
added to the cost of the property. The misc. expenses if they can be attributed directly to the
purchase of the property then they would form part of the cost of the property.
OWNERSHIP, AS PER INCOME TAX LAWS
Ownership, for Income-Tax purposes, would be when one receives the possession. Even if
payment is not made but possession is received, it will be treated as a sale transaction.
COMPLETION OF SALE
The transfer of a flat is concluded when you have a sale deed/ agreement for sale coupled with
actual possession. Generally, in all cases the entire amount is paid simultaneously with the
handing over of physical possession and signing of the transfer documents.
When you buy your home, due diligence is a must. One should take advise from experts in the
respective 'domain', be they lawyers, chartered accountants, investment and real estate advisors
SERVICE TAX, VAT:
These are newly introduced out-gos while buying a home, which have been announced in the
Budget Speeches of both, the Hon'ble Indian F.M. Pranab Mukherjee as also the Hon'ble
Maharashtra State F.M. For more clarity on these, or in case of any doubt, please consult your
The Maharashtra Chamber of Housing Industry is a representative body of leading developers
within the Mumbai Metropolitan Region (MMR) engaged in Housing & Real Estate
Developments. MCHI's primary task is to be a common link/ platform, and liaise between
members (real estate developers and builders) and local authorities, Central & State
Governments. This goes a long way towards making 'housing for all' a reality. MCHI Members
create 80 to 90 per cent of houses/ flats in Mumbai and in its vicinity.
As a body representing real estate developers and builders, we at MCHI look forward to helping
make your dream home a reality.
Nothing mentioned hereinabove creates any sort of legal liability or responsibility on MCHI.
We at MCHI have done our best to ensure accuracy as also update the information, but in a
dynamic real estate environment, things may change even as this booklet goes to print. Given
this scenario, MCHI suggests that you should cross-check and verify before making any decision
based on the above-mentioned matter.
We also suggest your taking legal/ expert advise, as also, for your own advantage, cross-check
and verify facts before entering into any deal.
In the event that any term or technical usage of such terms in this booklet creates doubts or
confusion, it is recommended that such issues be checked up/ verified with experts, to ensure
correct understanding of the terms/ words.
Buying a home at times, requires the support of a friend you can trust and rely. We hope that
MCHI and its members can be such a friend for you, and help your dream for a home come true.