Why a vacant land/empty plot : From an Investment Perspective, a vacant land/plot is always a safe bet, not just in the long term, but also in the short term. If you are dreaming about moving into an Independent House in some locality (be it a colony or a private layout) 5 years down the lane, then a piece of land in that locality is exactly what you need. Further, if you buy it now, you get it a far cheaper price that you would 5 years later. Even if, you don’t have any plans to construct a house of your own on your land, it is still a good investment, as Real Estate Prices continue going upwards and on a resale, you can expect handsome gains.
Now that it is clear, one should own a piece of land, how do we go about financing it ?? What if you need to purchase a land for constructing your sweet home ?? Not just independent home, one can also purchase it for investment purposes. There are number of public and private sector banks and other non-banking financial institutions who give loans for land that is Plot Loan. This blog post lists out all relevant documents and the process involved in applying for a plot loan.
- You should have completed 21 years of age
- You should have a regular income either through your job or a business, which can be validated by banks on the basis of Income Taxes or Revenues.
- Maximum 80-85% of the cost of the plot, depending on which banking/financial organization, you chose for your loan
- May vary depending on the loan eligibility of the customer
Loan Tenure: It varies from bank to bank but in most of the cases, it is 10 to 15 years. However, some banks, especially the private ones, do allow the tenure to be less than or equal to 5 years, but here again, your tenure is dictated by your current income. Most of the financial institutions are somewhat reluctant in granting a loan-tenure < 10 years, so you may want to check this out with bank officials.
Process for plot loan: At first you have to fill an application form with passport size photo for applying the loan in related bank and submit it with proper documents. Bank will charge you 1-2% as processing fees.
Documents required by bank for land loan:
1. Documents related to customer:
- Two passport-size photos , PAN Card, Passport, Employee Id (if you are a salaried individual), visiting card
- Residential Address Proof : Ration Card, Telephone Bills (Land line, some banks only accept bills of government-run telecom operators’, like BSNL, MTNL etc), Mobile Bill (Postpaid) or letter from employer, confirming your residence address.
- Last 4 months payslips along with latest CTC (Cost To Company)
- Appointment letter, relieving letter/experience letter(if your present employment is less then 3 years).
- Form 16 for last 2 years along with acknowledgement from IT .
- Bank Statement of all account for 6 months).
- One cheque from salary account for processing fees.
- Qualification proof.
2.Documents related to plot:
- Mutation Register Extract
- Sale Deed
- Encumbrance certificate
- Document/Title deed in the name of the vendor/buyer
- NOC from the State Pollution Control Board
- Endorsement from the office of the competent authority confirming that the land is free from tenancy claims.
- Tax receipts for taxes paid by the owner of the plot of land.
- Layout plan, if it is a private layout
- Land record for the plot of land
If you have a dream of purchasing a home, but are worried about the Home Loan Amount, bank is going to sanction against your current income, relax… take a deep breathe and calm down. Usually, Banks do not allow a person to borrow to an extent where their monthly EMI(Equated Monthly Installments) payment exceeds more than 40-50% of their monthly income. If you are in a similar situation and your current income is not high enough to ensure the Required Home Loan Amount, there is a smart option that you can exercise. You can (and in fact should) go for a Joint Home Loan with your parents or spouse as co-borrower(s) of the property. With co-borrowers/co-applicants around, for Loan-Amount-Calculations, Bank will take into account the income of all the applicants involved. Some banks even allow siblings as co-borrowers, so you may have to check with your bank, if you can have your brother as co-borrower.
But before you jump to a decision of taking Join Home Loan, it is certainly advisable to be aware of the Pros and Cons of taking a Joint Home Loan.
- If you need a higher loan amount but your salary is not enough to get required loan amount, Joint Home Loans is the way for you.
- All co-applicants are eligible for getting tax rebates under Section 80 C for principal repayment(Subjected to a Maximum Amount of Rs 1 Lakh) and under Section 24 for Interest Repayment(Subjected to a Maximum Amount of Rs 1.5 Lakhs). So if a couple is taking a Joint Home Loan, in theory they could collectively claim Tax Exemptions under Section 80 C for Principal Payment of Rs 2 Lakhs and under Section 24 for Interest Payment of Rs 3 lakhs. Though the Actual Tax Exemption depends solely on the Monthly EMI being paid.
- Both the owners would have to show the Rental Income in Proportion of their ownership. So if your brother has a 40% stake in the house and you have 60%, for tax purposes, 40% of rental income from the house will be added to your brothers’ annual income for that financial year, while you will be responsible for rest 60% amount.
- In case of any dispute arising between the borrowers/owners, it could create problems, so you want to play safe, especially with your wife 😉 you should not go for it.
Apart from these, there are some important points which you need to keep in mind, before taking Joint Home Loans:
- You should be a co-owner to enjoy tax benefits of a Joint Home Loan
- A maximum of 6 co-applicants are allowed to be part of a Joint Home Loan.
- You should be a co-applicant of the home loan to get tax benefits out of it.
- Tax Benefit to individual borrowers is available in proportion of the EMI paid by them. Say for example, you are paying 70% of the EMI and your wife is paying rest 30% , you will be able to claim tax-exemption only on your 70% payment. Similarly, your wife can also enjoy tax-benefits on her 30% payment.
So enjoy your dream house with your spouse as a Joint-Owner as well as Joint-Borrower 🙂
Whenever we go for purchasing a flat, we tend to get confused when we hear a number of jargons, like covered area, carpet area, built up area, super built up area to name a few, by real estate agents. Its not so difficult to be fooled in such rhetorics and these are one of the most common places where you can be(and in fact will be 🙂 if you are not alert) cheated by builders. This tutorial makes an attempt to help all prospective house-buyers in understanding these terms.
- Covered Area : This is the Actual Area under the roof.
- Carpet Area : As its name suggests, Carpet Area is the area where we can spread a carpet, means area calculated from inner wall to wall distance inside the house. This would also include steps if any, inside the house. So essentially, Carpet area is nothing but the net usable area inside the house.
- Built up Area : Built up area is Carpet Area + Area of walls and ducts+ 1/2 the Area of terrace. This is usually 10% more than the carpet area. A terrace is considered as half the actual area for calculating built up area.
- Super Built up Area : This is built up area + area occupied by common amenities like lifts, corridors, awnings, club house, stairs. Super built up is usually around 25% more than Built up area. This is also called as Salable Area.
So next time you go around searching for a house and a property agent talks about these jargons, you know exactly what he is talking about !! If they are selling you a 1400 sq ft flat, then it doesn’t necessarily mean, you are getting 1400 sq ft for personal usage. Here 1400 sq ft is super built up area or salable area. In reality, the actual usable area, that you might be getting, could possibly be only 1000 sq ft !! Let’s do the maths backwards
Carpet Area : 1000 sq ft
Built Up Area : will be ~ 10% more than carpet area, so it comes to 1000+100 = 1100 sq ft
Super Built Up Area : will be ~ 25% more than built up area, so it comes to 1100 + 280(~ 300) = 1400 sq ft.
You can see, even though you are buying a 1400 sq ft flat, you are only getting 1100 sq ft, as the remaining means 300 sq ft is nothing but area of your common usage like lifts, garden, stairs etc !! So if you want to compare two flats rate-wise, a rule-of-thumb would be to calculate carpet area first and then compare, how much you are paying per sq feet. This way, you will be able to do a fair comparison and not get fooled by property-dealers 🙂