Buyers Guide

Purchase Guidelines
1 ) Which documents are to be verified before Purchase of a Flat?
Before you purchase a flat, you need to have a title and document search conducted by a competent advocate. You cannot do it yourself. You have to use the services of a competent advocate. It is a professional job to be done with professional assistance.

2 ) What are all the important documents one should check before buying any property?
If you want to purchase a property, you have to look at the approved layout plan, approved building plan, ownership documents, carry out search, etc. Contact an advocate before you purchase a property so that he can advise you.

3 ) Who is liable to pay Stamp Duty to the Buyer or the Seller?
The liability of paying Stamp Duty is that of the buyer unless there is an agreement to the contrary. The Stamps are required to be purchased in whose name?
The Stamps are required to be purchased in the name of any one of the executors to the instrument.

4 ) What is meant by the market value of the property and whether Stamp Duty is payable on the market value of the property or on consideration as stated in the agreement?
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, which ever is higher.

5 ) Which are the instruments that attract payment of Stamp Duty on?
The instruments like Agreement to sell, Conveyance Deed, Exchange of Property, Gift Deed, Partition Deed, Power of Attorney, Settlement and Deed and Transfer of Lease attract Stamp Duty on market value of the property.

6 ) What are the risks associated in buying a flat on Power of Attorney (POA) basis?
Purchasing a flat on a POA basis is not permitted under the law of the land.
Who is the appropriate authority for knowing the market value of the property
The Sub-Registrar of the area in whose jurisdiction the property is located is the appropriate authority for knowing the market value of the property.

7 ) Is a POA Revocable?
Yes, POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

8 ) What exactly do we mean by a Free Hold Flat? What are the advantages and disadvantages, if any?
A freehold property (plot or a flat) is one where there is a whole and sole owner(s). Ownership is full and unconditional (within the provisions of the laws of the land) and there is not lessor / lessee involved.

9 ) How to convert a POA flat into a Free Hold one?
POA cannot be converted into anything. Leasehold properties of DDA in Delhi can be converted to freehold, as per provisions.

10 ) How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party?
Regarding authenticity of documents, again you have to take the help of an advocate to verify.

11 ) Do we have any agency which can provide a comprehensive service under one roof for hassle free purchase of society flats for its customers?
Comprehensive services in the real estate sector are provided by several brokers in various cities of India.

12 ) A flat in a Co-op. Hsg. Society is to be gifted. What are the legal formalities? What about Stamp Duty?
Gift of an immovable property is considered as a 'transfer' under the provisions of the TOP Act and you need to have the transaction registered through a Gift Deed and pay Stamp Duty as per provisions of the relevant Stamp Act depending in which state the property is situated.

13 ) Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the genuinity of the builder?
When you are buying a flat from a builder in a building under construction, you have to check the following : Approved Plan of the Building along with the number of floors. Ensure that the Floor what you are buying is approved. Check if 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 advocate. 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 Specifications given in the Agreement to sell off the Sale Brochure. Is he providing the same actually on the ground or not? Check the Reputation of the Builder. Ensure that Urban Land Ceiling NOC (if applicable) has been obtained or not. NOC from Water, Lift Authorities and Electricity Authorities also have to be obtained.
House Loans
1) What are the types of housing loans available?
Various housing loans are offered by financial institutions. Prominent among these are:
a) Home Loans: This is the basic housing loan for the purchase of a new home which covers cost of the flat and parking space, deposits and charges, stamp duty and registration charges.

b) Home Improvement Loans: A Home Improvement Loan is one that is made available for you to do certain external work like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting etc.

c) Home Construction Loans: For the construction of a new house.

d) Home Extension Loans: A Home Extension Loan is a loan which helps you to meet the expenses of any alteration like extension / expansion or modification of your home. You can avail of a Home Extension Loan, after obtaining the requisite approvals from the Municipal Corporation.

e) Home Conversion Loans: The existing loan on a house is transferred to a new house, including the extra amount required, eliminating the need for pre-payment of the previous loan.

f) Land Purchase Loans: For both home construction or investment purposes.

g) Bridge Loans: For people who wish to sell the existing house and purchase another and need finance for the new house, until a buyer is found for the old house.

h) Balance Transfer: To pay off an existing housing loan and avail of the option of a loan with a lower rate of interest.

i) Refinance Loans: To pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present house.

j) Loans To NRIs: As per requirements of NRIs who want to buy a house in India.

2. Who can apply for a housing loan?
Any person, 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.

3.Can a Non Resident Indian avail of housing loans?
Yes. Repayment of loan should be made within a period not exceeding 20 years out of inward remittances or out of funds held in the borrower's NRE/FCNR/NRO accounts.

4. How much can a person borrow?
Loans are generally disbursed upto a maximum of 85% of the cost of the flat. The balance 15% cost of the flat is to be funded by the flat purchaser from his own contribution.

5. How is the rate of interest calculated in India?
Interest rates vary from time to time and from institution to institution. The current trend ranges from about 9% to 11% pa. The interest is calculated either on a daily or monthly reducing or yearly reducing balance.

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

7. What is a floating interest rate housing loan?
A floating interest rate loan is a loan where the interest rate payable is linked to the market conditions such as the bank retail prime lending rate and rises and falls with the bank rate varies. Hence a borrower bears the risk of interest rate fluctuations. Floating interest rates offered are usually lower than the fixed interest rates.

8. What is the difference between monthly reducing interest rate and yearly reducing interest rate?
In a monthly reducing interest system, the principal on which interest is paid reduces every month as EMI is paid. In the annual reducing system, the principal is reduced at the end of the year, and the borrower pays interest on a certain portion of the principal, which is actually paid back to the lender. The EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating interest.

9. What are the repayment period options?
Repayment period options range generally from 5 to 20 years.

10. What are the charges for availing a housing loan?
Processing Fees: payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount.
Commitment Fees: in case the loan is not availed off within a stipulated period of time after it is processed and sanctioned, then some institutions levy a commitment fee.
Prepayment Penalty: between 1% and 2% of the amount being pre paid is charged by some institutions when a loan is paid back before the end of the agreed duration.
Stamp duty and registration fee on a deed of mortgage.
Miscellaneous costs: such as administrative costs, legal documentation charges, technical consultant charges.

11. What security is required for a housing loan?
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.

12. Do lending companies require guarantors?
Yes. Many lending companies require 1 guarantor.

13. What is the time required for approval of a loan application?
About 15 - 20 days

14. What is the time required for disbursement of loans?
Usually loans are disbursed within 5-7 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower's own contribution has been paid by him to the Vendor / Builder / Developer.
Stamp Duty
1) What should be the procedure of payment of stamp duty if the document has not been adequately stamped and had been executed about three months ago? What is the position if the document has been executed one year ago?
The applicant should apply to the Collector under Sec. 40 of the Pune Stamp Act and should submit the original agreement with two xerox copies of the same. The applicant should also give reasons why he could not pay the stamp duty before the execution of the document. In all such cases the Collector may not impound the document and might instead of proceeding under Sec. 33 and / or Sec. 39 of the Pune Stamp Act may proceed to rectify the same as per the provision of Sec. 41 of the Pune Stamp Act. The Collector can recover the stamp duty amount under Sec. 40 and can endorse the instrument as per Sec. 41 of the Pune Stamp Act and shall certify that proper stamp duty has been paid. On such endorsement the document shall be admissible in evidence and may be registered and acted upon and the authenticated as if it has been duly stamped and shall be delivered to the person who produced the document. If the document has been executed one year ago then the collector will impound the document and shall proceed under Section 33 and / or Section 39 of the Pune Stamp Act. The penalty previously was from Rs. 5/- to an amount not exceeding ten times the amount of the proper duty. However now as per the recent amendment 2% penalty per month will be levied by the authorities.

2) Can one obtain refund if the agreement has not been signed and the parties have paid the stamp duty?
When one person possessing stamp or stamps in his possession which have been spoiled or rendered unfit or unless for the parties intended or the person does not require immediate use of the said stamps then such person should deliver the above said stamps to the Collector. The person has to make an application under Sec. 52 of the Pune Stamp Act and the person should also submit the affidavit mentioning the reasons for which the stamps had been purchased and the reasons why the refund application is being made. If the applicant can convince the Collector then refund of the stamps could be obtained only if : The application is made within six months from the date of the purchase of stamps. The Stamps should have been purchased by such person with a bonafide intention. None of the parties should have signed the paper on which the stamps have been fixed. On receipt of such application, the Collector is empowered to refund to the said person the value of said stamp deducing there from said amount as prescribed by the competent authorities.

3) In case of resale of the flat who has to pay the stamp duty, the purchaser or the seller?
The parties can them selves decide who shall pay the stamp duty. If nothing is mentioned in the agreement then as per Section 30 of the Pune Stamp Act if the transaction relates to resale of flats then the stamp duty will have to be paid by the purchaser.

4) What are the important judgements which refer to determination of market value?
Some of the judgements which can be of assistance in determining the market value are: 1) Reghubans Narain v/s Government of U.P. (AIR 1967 SC 465) which arises out of land Acquisition Act where the Supremen Court has held that market value on the basis of which consideration is payable under Section 23 of the Act means, the price that a willing purchaser would pay to the willing seller for a property having due regard to its existing advantage and its potential possibilities laid out in its most advantageous manner excluding any advantageous due to the carrying out of the scheme for the purpose for which the property is compulsorily acquired.

5) What are the consequences of under valuation of document?
It must be noted that if the collector has reason to believe that the instrument does not mention the true market value and such instrument has already been presented for registration, he can take a step for recovery of the duties by coercive measures only after giving reasonably opportunity to the opposite party of been heard. If the collector determines that the proper stamp duty has not been paid penalties can be levied on such instruments. The penalty can be levied at 2% per month for the period of default, till the time the proper stamp duty has not been paid as stated in this section the instruments are liable to be impounded.

6) What is an "Instrument" under the Act?
"Instrument includes every document by which any right or liability is or purports to he created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt

7) Which documents are required to be compulsorily registered?
Documents listed in Section 17 of the Indian Registration Act, 1908 are to be registered compulsorily. Registration of documents listed in Section 18 of the Indian Registration Act, 1908 is optional. An agreement for leave and licence is required to be compulsorily registered under the Maharashtra Rent Control Act, 1999.

8) Is there a time limit within which documents should be registered?
Yes. Documents must be registered within 4 months of the date of execution. There after, documents can be registered within the next 4 months on payment of penalty.

9) Who is required to pay stamp duty and registration fee on purchase or lease of a flat or office?
A purchaser (whether on first sale from a developer or on resale of a flat) or a lessee of a flat or office is required to pay stamp duty and registration fee.

10) Is there a restriction on the name in which stamp paper must be purchased?
Yes. Therefore the stamp paper should be purchased in the name of one of the parties who would be signing the instrument.

11) Is there a time frame within which the stamp paper must be used?
Yes. Stamp paper should be used within 6 months from date of purchase. Any stamps not used within this period are invalid.
Society Information
Practically every developer has to form a Co-operative Society at one point of time or another. With the limited amount of options available with regard to management of the affairs of the building i.e. (a) condominium (b) Private Limited Company and (c) Co-operative Society, (excluding the unrealistic rental housing), it willnot be an exaggeration to state that in at least 90% cases particularly in Mumbai, the Promoters and / or the Builders have formed a Co-operative Society. The basic requirements for Registration of Co-operative Housing Society normally is not known to the flat purchasers. It is here that apart from the statutory obligations cast upon the builder, the builder as a friend, philosopher and guide of promoters helps in forming a Co-operative Society.

1 ) What are the different types of Housing Cooperative Societies?
There are basically four types of co-operative Societies connected with the housing. (a) Open Plot Societies (b) Flat Owners Societies (c) Tenant Societies (d) Housing Board Societies. In Open Plot Societies, members purchase or take on lease a plot of land and themselves construct the building. Due to bureaucratic formalities and lack of specialized knowledge, a few societies are formed under the head of Open Plot Societies. When a builder constructs flats and sells them to Flat Owners, the Society when formed is called Flat Owners Society. When Landlord forms a Society of tenants, it is called Tenants Society. When a Society is formed by Allotters of flats and building is constructed by the Housing Board Authorities, i.e. Mumbai Housing and Development Board, then the Society so formed is of the type of Housing Board Society. The procedure that should be followed for formation of societies of the above said types is different for different types of Societies. Members who wish to form Co-operative Housing Societies are generally ignorant of the procedural aspects and as a result of the same they have to run from place to place and get entangled in bureaucratic delays.

2 ) What is the procedure for Registration of a Society?
The procedure for Registration of a Society begins with electing a Chief Promoter in a meeting of the Promoters. The builder under the Flat Owners type of Co-operative society has the first right to act as the chief promoter. The developer / flat purchasers should call for a meeting of the Promoters by issuing the notice under Agenda of the meeting giving at least 14 days notice to the Promoters. In this meeting, a Chief Promoter is elected who can exercise such powers and carry out such functions as are mentioned in the minutes of the Promoters of the proposed Co-operative Society. After electing the Chief Promoter, the proposed name of the society has to be decided by the Promoters. Normally, the same reservation proposal should be accompanied with the signature of at least 10 Promoters who have attended the meeting. It is a common belief that the Society should consist of at least 10 members. If the number is less than 10 then special permission from Government has to be taken. In such cases, the garages / car parking may be allotted to other relatives of the promoter to reach number of 10. it would be of interest to note that the model bylaws define flat as a "Flat means a separate set and self-contained set of premises used or intended to be used for residence, or office or show-room, or shop, or godown and includes a garage, or dispensary, or consulting room, or clinic, or flour mill, the premises forming part of a building and includes an apartment". On allotment of name and permission to open a bank account by the Registrar, the Chief Promoter has to collect Share Capital, Entrance Fees from promoters and deposit the same in the branch of the bank permitted by the Registrar. It should be noted that the amount cannot be withdrawn from the Bank till the Society is Registered or its Registration is refused, except with prior written permission of the Registrar. The Chief Promoter should submit Registration Proposal to the Registering Authority within a period of 3 months from the date of issue of Letter of Reservation in the name of the proposed society.

3 ) What are the documents required for Registration of a Society?
The documents that are normally to be submitted to the Registering Authorities are as under :
Application for registration of Society in Form A along with Statement A. Enclosure to application for Registration as per Rule 4(1) of Maharashtra Co-operative Societies Rules, 1961.
Information about proposed society in Statement 'B' (vide Govt. Circular dated 2-5-1980)
Information about promoter members of the proposed society in Statement 'C' (vide Govt. Circular dt. 2-5-1980).
A Statement of Accounts as per Form D.
Model Bye-Laws.
Bank Balance Certificate.
R.B.I./Treasury Challan for payment of Registration Fee of Rs. 500/-
Title Clearance Certificate from an Advocate.
A true copy of the approved Building Plan.
Letter of Authority granting permission to commence construction work / Completion Certificate (if applicable).
Affidavit on Rs. 20/- Stamp Paper from at least 10 promoter members to the effect that they are residing in the area of operation of the Society (Proposed), made before a Competent Authority.
Affidavit from the Chief Promoter on Stamp Paper of Rs. 20/- executed before the Competent
Authority in Form 'Y'.
Certified True Copy of Agreement made on Stamp Paper and Registered between the builder,promoter and purchasers of flat.
Where the promoter members are firms/companies, a letter of authority from such firms /companies authorizing the promoter to sign on behalf of firm / company.
In case of such proposed societies, names of 60% of the flat holders of the total number of flats constructed or proposed to be constructed as per the plan approved, must be included in Statement 'A' to be attached to the Registration Proposal.

4 ) What happens after submission of documents?
It is the duty of the Registrar to register the society and on registration of the society, it becomes a seperate legal entity. Thereafter, the management of the affairs of the society is carried out by the managing committee which is elected by the general body meeting of the society. It may be of interest to note that in a co-operative society, the principle is one member one vote. In a co-operative society, the right to be exercised in the general body meeting is a personal right. This is one of the reasons why even a person holding a power of attorney cannot attend the general body meeting of the society. The quantum of the capital being introduced by the member is not of much importance. Preference should be given for formation of a private limited company if one member proposes to acquire majority of the flats.
Real Estate Regulatory Authority (RERA)
  • Every developer planning a residential project with area of over 500 sq m or eight apartments, has to register it with Real Estate Regulatory Authority (RERA) and upload project details on the RERA site before initiating any sale

  • The RERA will perform the same role for property transactions as SEBI does for security transactions in capital markets

  • Developers have to deposit 70 % of the amount received from buyers, in a separate bank account earmarked for each project

  • In case the builder wants to change the layout or plans after the sale, he will need the approval of two-thirds of the buyers in that project

Subjective Note
The details and specifications contained here in are purely of symbolic and informative nature and the same are strictly subject to variations, changes, amendments and/or modifications as may be applicable and required throughout and the Company reserves its entitlement to the aforesaid without any restrictions compulsions, in entirety

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