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Before Buying Immovable Property

Buying immovable property in India is fraught with difficulties due to a combination of factors. Residents/ Non-Resident Indians are further handicapped by distance and their inability to visit sites for this purpose. Meticulous planning at the investment stage could avoid hassles and sleepless nights later on. Though the list provided below is not exhaustive, some of the pre-requisites indicated below would immensely assist property seekers.

Scrutinize all original documents. The title to the property may be on a single or joint ownership basis. In the event of any difficulty, a certified copy can always be obtained from the local sub-registrar’s office on payment of a nominal fee.

Refer the documents to a lawyer who may certify that clear title can be passed on to the buyer.

Obtain a ‘No encumbrance certificate’ for the past 30 years to ensure that no mortgage has been outstanding on the property to be purchased. This will also enable the buyer to ensure that the title belongs to the rightful owner who wants to sell it.

Obtain required clearance under the Urban Land (Ceiling and Regulation) Act.

In the event of a sale by a third party viz. Real-estate promoter, check whether he is the absolute owner or holds a registered power of attorney to sell the property. It is better to buy from an established developer with an unblemished record.

Seek the assistance of a reputed consultant to ensure that the price quoted is the correct market value.

Controlling Your Home Loan Emi:
A lot of people are borrowing today to create various assets. A home loan is a very important component of the overall financial security of a person and his family, and due to this a lot of calculations need to be done before a decision is made regarding the purchase. The financial implication of this decision will continue for a long period of time and hence it is not just the present financial condition but also the developing future financial condition that will have to be considered.

One way of looking at this is by considering the amount of the home loan emi (Equated Monthly Installment) that a person has to pay with respect to the earnings that he/she generates. This will give an idea about the extent of the income that will be spent in a particular area. One major mistake that is commonly made is that in many cases the person takes an individual look at a particular loan and then makes the entire calculation.

The real way in which a person will be able to understand the pressure on his/her finances is by taking all the loans that he/she has together and then comparing the total EMI that he/she pays each month versus the income being generated. This will give the borrower a better picture because each of the EMIs has to be paid and there cannot be a default on any of them. Looking at just one item in isolation might not send the necessary warning signal to the borrower when action could have been taken at the start of the process.

Every person should ensure that the percentage of the income paid as EMI does not go above a certain figure, say 35%-40% of the total income. The appropriate figure for a person will depend upon the position that he/she is in and the kind of expenses he/she has to make with respect to his/her other living conditions. This will ensure that even in the future if the rise in income is not as per expectations, there is still some margin available for them whereby they could avoid a default. There can be other calculations like earnings from some other member of the family that would help in paying off the loan but even this might be affected and hence this will not require much of an effort for borrowers who will find that their position is manageable.

A similar position has to be considered when the loan chosen is not a simple equal monthly payment loan. There are loans that might suddenly increase in terms of the amount to be paid after a certain time period or there might be a large repayment coming in at certain time intervals. Adequate preparation and planning has to be undertaken so that the necessary funds are available for the borrower to honour these payments. With a credit database being prepared, borrowers should ensure that they do not spoil their credit scores.

Categories: Home Loans