Guide

The implementation of regulatory and financial frameworks such as RERA and GST have streamlined and organized the real estate industry in India. As a result of these steps, real estate sale in India has witnessed an upward trend. Here are a few guidelines you should be aware of, for a hassle-free purchase.

Consequent to the introduction of Foreign Exchange Management Act (FEMA), 1999 the Reserve Bank of India has made the following regulation called as the Foreign Exchange Management (Acquisition & Transfer of Immovable Property in India) Regulation with effect from June 1, 2000. The current position is therefore as under: Important Definitions

  • 1. A person of Indian origin (PIO) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who -
     i. At any time, held Indian passport; or
     ii. Who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)

  • 2. A person residing in India means
    i. A person residing in India for more than 182 days during the preceding financial year but does not include
     A) A person who has gone out of India or who stays outside, in either case
       a. For taking up employment outside India; or
       b. For carrying on outside India business or vocation or for any other purpose as would indicate his intention to stay outside India for an uncertain period
     B) A person who comes to or stays in India otherwise than
       a. For taking up employment in India
       b. For carrying on business or vocation in India or
       c. For any other purpose as would indicate his intention to stay in India for an uncertain period.
    ii. Any person or body corporate registered or incorporated in India.
    iii. An office, branch or agency in India owned or controlled by a person residing outside India
    iv. An office, branch or agency outside India owned or controlled by a person residing inside India

  • Person residing outside India means a person who is not residing in India.

He can:

  • Acquire any immovable property in India other than agricultural plantation/ farmhouse; Further, in case of purchase the funds should be received in India by way of inward remittance from any place outside India or from funds held in any Non-Residing Account maintained under FEMA/ RBI regulations.
  • Transfer any immovable property in India to a person residing in India and
  • Transfer any immovable property other than agricultural plantation/ farmhouse to a person residing outside India if he is a citizen of India or person of Indian origin.

He can:

  • Acquire any immovable property other than agricultural land, farm house & plantation by purchase, gift, and inheritance subject to the following conditions:
     i. In case of purchase the funds should be received in India by way of inward remittance from any place outside India or from funds held in any Non-Residing Account maintained under FEMA/ RBI regulations.
     ii. Gift can be from a person residing in India or from a person residing outside India who is either a citizen of India or a Person of Indian origin. However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
     iii. Inheritance can be from a person residing outside India provided that person had acquired the property in accordance with the provisions of the Foreign Exchange Law in force at the time of acquisition or from a person residing in India.

  • Transfer any immovable property in India other than agricultural land, farm house, plantation by way of sale to a person residing in India or transfer residential or commercial property in India by way of gift to a person residing in India or to person residing outside India who is either a citizen of India or a person of Indian origin.
  • Transfer agricultural land, farm house or plantation property in land by way of gift or sale to a person residing in India who is a citizen of India.

In the event of sale of immovable property other than agricultural land/ farm house/ plantation property in India by the above two categories of persons repatriation of sale proceeds is possible subject to the following conditions:-

  • Immovable property was acquired in accordance with the provisions of Foreign Exchange law/ Regulations in force at the time of acquisition.
  • Amount to be repatriated should not exceed (a) amount paid for acquisition of the property in foreign exchange remitted into India or out of Funds held in FCNR account OR (b) the foreign currency equivalent as on the date of payment of the amount paid from funds held in NRE account for acquisition of property.
  • Repatriation of sale proceeds in case of residential properties is restricted to maximum two properties.

In case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. NRI/PIO are also allowed to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau or Hong Kong can take immovable property in India by way of lease for a period not exceeding 5 years without permission from RBI. For all other types of acquisition or transfer of immovable property in India they need to take prior permission of RBI.
Summary of acquisition and transfer of immovable property in India:

Indian Nationals Residing In India Indian Nationals Residing Outside India Persons of Indian Origin Residing Outside India
No Restrictions Can acquire any immovable property other than agricultural land / plantation / farm house. Can acquire any immovable property other than agricultural land / plantation / farm house out of foreign currency funds or by way of gift from person residing in India or from a person residing outside India who is either a citizen of India or a Person of Indian origin or by way of inheritance from person residing outside India provided that person had acquired the property in accordance with the provisions of the Foreign Exchange Law in force at the time of acquisition or from a person residing in India
Can acquire any immovable property other than agricultural land / plantation / farm house. Can sell any immovable property other than agricultural land / Plantation / farm house to a person residing in India.
Can acquire any immovable property other than agricultural land / plantation / farm house. Can gift residential or commercial property to a person Residing in India or to person resident outside India who is a citizen of India or PIO
Can sell / gift any agricultural land / plantation / farm house to an Indian citizen residing in India.
Foreign Citizens Residing in India Foreign Citizens Residents Outside India Indian Branch/ Office of Foreign Concern
No restrictions, except in case of Nationals of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal , Bhutan, Macau or Hong Kong who will require prior permission from RBI in all cases except where the immovable property is acquired by way of lease for less than 5 years. Can acquire only after prior permission from RBI. Can acquire immovable property which is required for carrying on its activities, a declaration in From IPI will have to be filed with RBI within 90 days of such acquisition (the above procedure is not applicable to a liaison office)
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Various varieties of housing loans are offered by different financial institutions. Prominent among these are:

  • Home Loans
    This is the basic housing loan for the purchase of a new home, which covers the cost of the flat.
  • Home Improvement / Extension Loans
    These are for the purpose of undertaking repair works and renovations in a home that is already owned by you.
  • Bridge Loans
    Bridge loans are for people who wish to sell their existing house and purchase another one and need finance for the new house until a buyer is found for the old one.
  • Balance Transfer
    A balance transfer indicates the paying off of an existing housing loan and availing of a loan with a lower rate of interest.
  • Refinance Loans
    Refinance loans are taken to pay off the debt incurred from private sources such as relatives and friends, for the purchase of your present house.
  • Loans To NRIs
    These loans are designed as per the requirements of NRIs who want to buy a house in India.

Any Indian citizen, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.

Yes, depending upon the eligibility criteria and policy of the bank.

Loans are generally disbursed between 70%-80% of the cost of the flat. The balance money is to be funded by the flat purchaser from his own contribution. The percentage of loan would vary from bank to bank.

All projects at Runwal are preapproved for the grant of home loans by leading housing finance companies and banks. The Runwal sales team liaises with the all leading Banks & Housing Finance Institutions for project approvals, processing the loan, documentation and disbursement of loans.

Equated Monthly Installment ("EMI") is the amount comprising a portion of the interest and the principal loan amount, which is payable by a borrower to the lender every month.

Interest rates vary from time to time and from institution to institution. The interest is calculated either on a daily or monthly reducing or yearly reducing balances.

A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.

A floating interest rate loan is a loan where the interest rate payable is linked to the bank's internal prime lending rate (PLR) such as the base rate which rises and falls as per banks policy.

Repayment period options range generally from 5 to 20 years. Some of the banks may give loans up to 25 years also.

  • Processing Fees are payable to the lender on applying for a loan and can either be a fixed amount not linked to the loan or may also be a percentage of the loan amount.
  • Prepayment Penalty Banks, NBFC’s & HCFs are not permitted to charge foreclosure charges/pre-payment penalties on home loans on floating rate basis, with immediate effect.
  • Franking Charges as per prevailing rate of Government Authority.

The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

Yes. Many lending companies require 1 guarantor or a co-applicant.

Varies from bank to bank but usually it is 15 - 20 days for a salaried person and 20 - 30 days for a self employed person depending on the applicant's documents.

Usually loans are disbursed within 10 - 15 days after completion of verification by the institution, documentation (original agreement for sale / lodging receipt) and completion of all relevant procedures. Submission of proof that the borrower's own contribution has been paid by him to the vendor / builder / developer is also an important aspect.

Yes, but this policy varies from bank to bank.
What are the documents required at the time of applying for a housing loan?

The standard list of documents required of all loan applicants is as follows:

  • Photographs
  • Proof of age
  • Identity papers
  • Proof of residence

For salaried individuals:

  • Latest salary slip
  • Last 2 years form 16 or equivalent
  • Bank statements reflecting salary credits for the previous six months

For self-employed individuals:

  • Certified copies of balance sheet
  • Profit and loss statement
  • Tax challans / tax returns for the previous 3 years

For partnership/private limited companies:

  • The Articles of Association
  • Partnership deed and details about the firm

For NRIs

  • Latest salary certificate specifying, name (as it appears in the passport)
  • Date of joining
  • Passport number
  • Designation
  • Perquisites and salary
  • Photocopy of labour card/identity card
  • Photocopy of valid resident visa stamped on the passport
  • Photocopy of monthly statement of local bank account
  • Property related documents

Purchasing a home on a loan is a lot more than pure happiness, you enjoy multiple tax benefits with it too! These benefits and exemptions not only help you save tax, but they also help in managing smooth cash flows. Here are the deductions that income tax authorities offer to individuals who have taken a housing loan from specified financial institutions:

Under Section 24 of the Income Tax Act

The interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. Rs 2,00,000 is the maximum amount eligible for deduction.

Under Section 80C of the Income Tax Act

You can get a maximum Rs. 1,50,000 deduction from the Income, on repayment of principal during a financial year. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assesse is also considered under this amount. All these deductions should not exceed the overall limit of Rs. 1 lakh. However, deduction under Section 80C is not available in respect of payments made towards the cost of any addition, alteration, renovation or repair carried out after the issue of the completion certificate.