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Gurudev Estate
Explore the world of Real Estate Investments
One platform to invest in income generating commercial properties, plots, REITs
and real estate debt – backed by data you can trust
COMMERCIAL REAL ESTATE
LEASING | INVESTMENT | PRELEASED
OFFICE | RETAIL | INDUSTRIAL
WHAT WE CAN DO FOR YOU
1. ACQUISITION & DISPOSAL OF COMMERCIAL SPACE
a. Lease / Outright of Commercial space i.e Office / Retail / Warehouse
2. PRELEASED INVESTMENT SALES
a. Acquisition & disposal of revenue generating real estate assets
b. Corporate asset disposals & acquisitions
3. RENEGOTIATION & RENEWALS
a. Lease renewal management
b. Mark to market comparative
c. Renegotiation of lease contracts
d. Restructuring of contractual terms
4. COMMERCIAL SPACE & PROJECT MARKETING
a. Exclusive & non-exclusive tie ups
5. WORKSPACE CONSULTING
a. Space utilization study
b. Optimization via efficient space planning
6. LEASE ADMINISTRATION
a. Critical date & Event monitoring
b. Abstracted database
7. Invest
8. Industrial Area Land
9. Loans
Services
Our diverse areas of expertise are planned to fit the
changing needs of our clients
Success Stories (If needed)
What type of investment are you looking for?
We offer various types of real estate investments. Choose one that matches your
requirements and investment attitude!
Properties
1. Pre-leased Commercial Properties
a. Earn rental income from day 1
b. Starting from 50 Lakhs
c. Low risk with grade A tenants
2. Vacant Commercial Properties
a. High capital appreciation
b. Earn upto 14% IRR
c. Start from 50 Lakhs
3. Plots
a. Earn upto 22% IRR
b. Start from 15 Lakhs
c. Situated in Prime Investment hotspots
4. Buyback Guarantee
a. Earn upto 12% yearly returns
b. Invest with just 50 Lakhs
c. Guaranteed buyback from developer
5. Small Investmets
a. Co-Own a grade A commercial property
b. Earn upto 15% IRR
c. Invest with just 25 Lakhs
6. REITs
a. Invest like stocks backed by real estate
b. Earn upto 15% IRR
c. Invest with just 350 Rs.( this is just a concept we can discuss on this
7. What are REITs?
8. Real estate investment trusts are nothing but a real estate investment portfolio. This portfolio
is listed on the stock market which makes it possible for individual investors like you to earn
dividend income.
We can add PROPERTY KNOWLEDGE if needed – BUY
.Why should you invest in real estate.
Have you ever wondered if the House you staying presently or the assets you own today, which was
either bought by your father, grandfather or yourself years back, what is the value of the same today
and you will get the answer to the above question to a good extent.
Real Estate – Tangible Asset
Real Estate is a tangible asset class and unlike other investments like stocks, bonds and other mutual
funds etc. you can feel and use it. Most of the financial products available in the market are bound by
a certain amount of projected or fixed returns and they may be even 100% safe. Stock markets we all
know there is volatility and you can be up or down and there is no guarantee of returns or safety of
your principle neck down to zero. On the other hand, if the real estate market falls, it will fall at max
not more than 20-30% in any grave eventuality and too the factors pulling it down should be grave
like a Government Collapse, Bankruptcy of the City Council or poor infrastructure and a socio
economic collapse. In today’s date and time, there are so many buyers waiting on the fence
that the moment they hear of a 20-30% discount, they want to sign up immediately. So no
worries on that end at least in the Indian Economy.
Capital Gains + Lease Rent Returns
An investment in Real Estate should always be considered for more than 3 years and better to sell the
property either before possession but after 3 years so that you have the right in property intact and
save on Capital Gains tax and reinvest the proceeds into the next property. If one is able to do this and
revolve the funds around in a strategic way then all is good, in a matter of 7 years you could at least
triple your base investment that too with a SIP (Staggered Investment Plan), this is a term we use,
when you are making the payments over a period of time. Sometimes, Capital Gains + Lease Rent
Returns can give you a far more yield on your Invested Capital.
Portfolio Diversification
Each one of us understands that we cannot put all eggs in one basket. So advisable would be to be
liquid as to what you require say in the next 1 year as your expenses, travelling, car buying, home
renovation and some more and balance you stack it away in Real Estate, Fixed Income Bonds, Fixed
Deposits etc. This way you are not stressed.
Inflation Hedging
The inflation hedging capability of Real Estate stems from the positive relationship between GDP
growth and demand for real estate. As economies expand, the demand for real estate drives rents
higher and this, in turn, translates into higher capital values. Therefore, real estate tends to maintain
the purchasing power of capital, by passing some of the inflationary pressure on to tenants and by
incorporating some of the inflationary pressure, in the form of capital appreciation
Exit Issues
Real Estate as a category to sell when you really want to, can be a little tiring. It all depends on the
cycle of Demand and Supply, Time of the Year, Bullish or Bearish Stock Markets, Liquidity Crunch
position or New Developments in the area taking being preferred. There could be factors, which could
be beyond your imagination and hence it also advisable to take max bank loan permissible on the
property and use a Smart Home, HSBC offers an exciting proposition for people who want to buy
property and yet stay liquid.
2.Buying Tips
Buying property anywhere in the world can be a long and drawn out experience. However in India,
buying property is a particularly demanding task with several possible hurdles along the way such as
inexperienced brokers, title defects, complicated tenancy laws, the condition of the property itself,
and financing, to name just a few. It is therefore important that the entire procedure be dealt with
systematically to reduce the hassles that accompany it.
Identifying a Realtor
A realtor can assist in locating and evaluating the right property, providing useful market information
and resources, and eventually guiding the buyer through the whole process until the purchase is
complete. However real estate broking firms in India are often not institutionalized, and therefore it
is essential that the buyer proceeds cautiously and chooses a broker who is experienced and
knowledgeable about the market, transparent and informative through the entire process, and
objective while providing information.
Budgeting
While determining the budget for the purchase of property, there are several expenses besides the
purchase price that must also be accounted for, such as: ? Stamp duty ? Registration fees ? Legal fees
? Brokerage fees ? Society transfer charges (in buildings with societies) ? Cost of renovation/improving
the property ? Cost of furnishing the property ? Future house tax/property tax payments ?
Maintenance fees, whether at actual or in the form of monthly payments to a society For newly
constructed properties, it is also possible that the builder/developer may not be fully transparent at
the time of booking with regards to the gross pricing of the property. The gross price should typically
be a sum of the base price, external development charges (EDC), infrastructure development charges
(IDC), preferential location charges (PLC), car parking charges, club membership if applicable,
electricity and water connection charges, maintenance charges service and any other applicable taxes,
etc. While external development charges are levied by the developer on the buyer for developing
infrastructure within the complex, infrastructure development charges are levied by the government
on the developer and, in turn, passed by the developer on to the buyer. This charge includes
development charges for water supply, sewerage, storm water drainage, roads, street lighting,
community buildings, horticulture, public health, road maintenance, and street lighting maintenance.
Electricity and water connection charges are levied by the developer on the buyer for availing of
electricity and water connection on behalf of the buyer.
Identifying a Property
There are numerous factors a buyer might consider while purchasing property, each with its own
benefits and disadvantages. Independent House vs. Apartment in a Co-operative Housing Society:
Setting aside advantages related to independence and privacy, some of the most important factors to
consider while making this decision in India are maintenance costs and responsibilities, amenities that
may be provided by housing societies such as swimming pools, health clubs, and gardens, and
arrangements for parking, security, power backup, etc. Old vs. New construction: Sale price is
generally determined on the basis of built-up area i.e. the measurement of the residential unit at floor
measurement, including projections and balconies, and is measured from the external perimeter of
the walls, whereas the carpet area i.e. the total area of a premises measured from the internal walls,
is the area that is actually usable. In new constructions, the difference between the two might be
substantial, and a buyer can end up paying a hefty sum for a smaller apartment, whereas in old
constructions this difference is far lower. Further, property and municipal taxes on new constructions
are assessed at a higher rate and therefore the monthly outgoings would be higher. However,
maintenance standards of new buildings are generally better than those of old buildings, and new
buildings often provide amenities such as swimming pools, health club, garden, earthquake resistant
designs, etc. which an old building might not possess. Location, Location, Location: This is an oftrepeated mantra, which in India is taking on new meaning with the construction of new infrastructure
such as highways, bridges and metros which has generally resulted in appreciation of values in
neighborhoods being served.
Investigate before executing sale deed:
? Title is free from defects ? There are no encumbrances on the property ? Property is not locked in
litigation ? Inherited property has a probated will ? Utilities ? Property Tax ? No Objection Certificate
(NOCs)
Assessment of Value
Another factor while choosing a property is whether the price is commensurate with existing market
values. Information on previous transactions can be obtained from the market (brokers, residents of
the neighborhood/complex, registrar’s office, etc.), but the best option would be to consult a good
realtor for advice on the last transacted sale price, comparable sale transactions etc. However it is
pertinent to state that brokers may be motivated to inflate prices, and it is therefore not always easy
to accurately determine the value of a property in India.
Legal Aspects of Purchasing Property
When a buyer has found the property that is the right fit for his needs and budget, there are several
legal intricacies that must be dealt with to complete the purchase. It is highly recommended that the
buyer instruct a good lawyer while purchasing property. Once the buyer has agreed upon a price with
the seller, the rest of the process should be handled by his lawyers. Buying property in India involves
lots of paperwork and diligence, and the lawyers should be well equipped to handle the entire process.
To that end, the lawyers should ideally be those who are proficient in transactions in the region of
India in which the property is located as rules, regulations and procedures can vary between states
and also between districts.
Buying from a Developer
There are several factors to consider when buying property that is still under construction. Reliability
of the developer is paramount, and the buyer should enquire as to his reputation and record before
committing to buying any property still in development. Financial institutions and banks funding the
developer can help the buyer with his enquiries and to gain a better understanding of the developer’s
financial status. It is important that the buyer look into aspects such as timely possession, quality of
construction, compliance with the buyer’s agreement (especially penalty clauses), providing the
amenities mentioned, etc. It is also important for the buyer to gain first-hand knowledge and the
perspective of a previous buyer who has dealt with the developer. If the buyer is convinced that the
developer is reputable, a lawyer should be instructed to commence a search of necessary
documentation, such as: ? An approved plan of the building along with the number of floors, and that
the floor on which the apartment intended to be purchased is approved or not, as sometimes
developers exceed the permissions granted to them. ? Whether the developer owns the land on which
the building is located, or whether he has undertaken an agreement with a landlord. If so, the title of
the land ownership, development agreement with the landowner, and power of attorney executed by
the landowner in favour of the developer must be checked. ? That the land is not designated as
agricultural land, else the construction will be illegal. ? The building byelaws as applicable in that area
and whether the builder is not in violation of front setback, side setbacks, height, etc. ? Whether the
specifications given in the “agreement to sell” or the sale brochure correspond with the plans of the
construction. ? Whether urban land ceiling NOC (Non Objection Certificate), if applicable, has been
obtained, and whether NOC from water, electricity and lift authorities has been obtained. As the
property being purchased is as yet incomplete, there are several options a buyer can choose from as
far as the remaining payment is concerned. Down Payment Plan: In a down payment plan, the buyer
would be required to make a payment of 10% of the purchase price upfront with another 85% within
30 days of the booking date. The remaining 5% has to be paid at the time of possession, which could
take several years. The advantage to this plan is that the buyer would almost certainly avail a discount
of 10 to 12% on the Basic Sale Price. However, a down payment plan is not generally recommended
as construction – and consequently possession – might be delayed, but the buyer would have already
parted with the bulk of the purchase price. Construction Linked Payment Plan: In this plan, payments
are made to the developer in installments over a period of time spanning the time taken for
construction of the building. The buyer pays 10% at the time of booking and another 10% after 30
days from the booking date, and thereafter installments of 8 to 10% at each stage of construction.
This is the most practical payment plan as the installments are linked to stages of construction, and
therefore the buyer’s capital is not blocked if the developer delays construction. Time Linked Payment
Plan: This plan is also based on payment in installments, usually with payments being made
approximately every 2 months over a period of 20 to 24 months. However, the payment schedule is
decided by the builder and is structured based on time and not the stages of construction, and the
buyer would have to pay the installments on schedule irrespective of whether the construction is
proceeding on schedule or not. This option is not as viable as opting to pay under a construction linked
payment plan and should ideally be avoided. Flexi Plan: The flexi plan includes features from both the
down payment and the construction linked payment plan. Under this plan, the buyer would, as in a
down payment plan, have to pay 10% at the time of booking and another 30-40% within 30 days.
Thereafter the payments are structured as with the construction linked payment plan. A flexi plan can
earn a buyer a discount of 5 to 6% of the purchase price.
Due Diligence
Once the property has been identified, and a price agreed with the seller, the buyer’s lawyer will
conduct a ‘due diligence’ or a search of all the documents related to the property to ensure that there
are no deficiencies with the property that will hinder the proposed sale. Prior to due diligence the
buyer and seller may sign a letter of intent or memorandum of understanding, accompanied by
‘earnest money’ or deposit. Title: Probably the first – and most important thing – the lawyer will check
is the title of the seller with respect to the property. It is essential to know that if the seller does not
have perfect title, he cannot transfer the same to the buyer. For example, if the seller is not listed as
the owner of the property, he cannot sell it. Similarly, if the property is jointly owned by more than
one person, each joint owner would be required to sign the agreement to sell and sale deed, unless
any one of them is authorized to act on behalf of the others by way of power of attorney. A title search
is taken at the office of the local sub-registrar. The buyer should ask for all title documents (and copies
of the same) right from the first owner of the property or, in the case of property that is extremely
old, title documents thirty years prior to the search. This process can take between 8 and 10 days. The
lawyer should also ascertain the survey number, village and registration district of the property as
these details will be required for registration. Encumbrances: The office of the local sub-registrar
would also have to be searched to see if there are any encumbrances on the property, such as a
mortgage, lien, or claim from a third party. Although mortgaging properties is not an exceptional
practice, one needs to consider the implications of purchasing a mortgaged property very carefully. In
case the seller defaults in paying his debt, the mortgagee – usually a bank – can attach the property
and sell it to recover the debt, despite the fact that the mortgagor/seller no longer owns the property.
Also, the mortgage deed might contain a stipulation that the property cannot be sold unless the
mortgagee gives a no objection certificate and in the case of mortgaged property the buyer must insist
that the seller clears the mortgage or obtains a NOC from the bank. Alternatively, the buyer may
contract with the seller to make payment directly to the bank and remove the encumbrance. Property
Tax: The lawyer must also check tax receipts for the past three years to determine whether the seller
has paid the requisite property tax to the housing society or, in the case of independent houses, to
the municipal authority. Litigation: It is also essential to ensure that the property is not the subjectmatter of any litigation, as cases pending before the courts can take several years, if not decades, to
be finally decided. Probated Will: In case of property that the seller has inherited, the lawyer must
check the will by way of which the property was acquired. Although Indian law does not require a will
to be probated (i.e, authenticated by a court), this is preferable as a probate ensures legitimacy of the
will and is valid against any claims thereafter made against the seller’s right to inheritance of the
property. Although challenging a probated will is not unheard of, it is extremely difficult for someone
to do so successfully if the will is not fraudulent. A buyer must also release an advertisement in a
newspaper stating his intention to buy the property from the seller, and for our sale properties
Cushman and Wakefield will assist with this. This is done so that any objections to the proposed sale
are raised in advance and may be dealt with accordingly. The objections may bring to light certain
hidden facts, such as an encumbrance, or title defect which might significantly impact a buyer’s
decision to purchase the property. In case there is a defect in the title, the entire sale can fall through
if not rectified. Buyer may back out of the final sale for the following reasons: ? Defect in title ? Nonpayment of property tax (if not remedied) ? Material structural defects in the property ? Zoning/ land
use related issues ? Constructing unsanctioned floors ? Unsanctioned construction on
agricultural/coastal land ? Unsanctioned construction plan ? Previously undisclosed encumbrances on
property such as mortgages, liens, or claims ? Absence of probated will (if previously undisclosed)
Note that the seller has the right to back out of the final sale if the buyer delays the process
unnecessarily. Once the buyer’s lawyer is satisfied that the seller’s title is free from defects, he will
issue a title certificate, which is a document stating that the seller has the necessary title to sell the
buyer his property.
Buyers’ rights:
? To examine all documents of title that the seller possesses or can produce ? To be informed of any
material defect in the property of which the seller is aware ? To the execution of a proper conveyance
upon payment of purchase price ? To possession of the property as per the agreement of sale Once
the buyer’s lawyer is satisfied that the seller’s title is free from defects, he will issue a title certificate,
which is a document stating that the seller has the necessary title to sell the buyer his property.
Agreement to Sell
After the buyer’s lawyer has issued the title certificate, the seller’s lawyers will draw up a document
known as an ‘agreement to sell’ (in certain geographies like Rakot, a deposit may be required from the
buyer prior to the title search and agreement to sell; the buyer’s lawyers will furnish the exact details).
The agreement to sell will contain the terms and conditions of the sale, and while there is no standard
format for the same, it usually contains the following vital information: Description/location of the
property ? The purchase price for the property ? The amount of deposit payable by the buyer – usually
it would be in the range of 10% to 20% of the purchase price to be paid in advance ? Date of closing –
the date on which the purchase price is to be fully paid to the seller and the sale deed executed and
registered by him ? Date on which the buyer will be given possession of the property The agreement
to sell might also contain provisions to deal with breach by either party – e.g. forfeiture of deposit in
case of buyer’s default, or return of deposit along with interest in case of seller’s default – an
arbitration clause or a clause specifying the court which would have jurisdiction in case of a dispute,
and provisions for inspection or investigation of title, such as the time in which this is to be completed.
The agreement to sell must be attested by the signatures of at least two witnesses and must be
registered by the seller’s lawyers. It is imperative that a buyer not sign any documents unless both he
and his lawyer are satisfied with its contents.
Sale Deed
When the agreement to sell is duly registered and the purchase price (or a portion thereof, if so agreed
upon), the seller’s lawyer will draw up a document known as a sale deed. This is the document by
which the buyer will acquire ownership of and title to the property. There are certain fees that are
required to be paid with respect to the sale deed. Stamp duty, a levy imposed by the government on
certain instruments, is payable on the property under the Stamp Act of the state in which the property
is located (see box for the applicable stamp duty in various states). The stamp duty is payable either
by printing the sale deed on stamp paper of the appropriate value or by franking of the sale deed for
the value. In case the buyer has paid the stamp duty and the sale falls through, he would need to apply
for a refund, which could take 4 to 6 months. Like the agreement to sell, the sale deed too is required
to be attested by two witnesses and registered, and the PAN cards of the buyer and the seller will be
required. Registration of the sale deed is carried out by lodging the original stamped agreement with
the relevant registration office. Registering the sale deed is crucial as the title to the property does
not pass to the buyer unless it is duly registered in accordance with the Registration Act. Please bear
in mind that stamp duty and registration fees are two entirely separate costs, both of which are to be
borne by the buyer unless otherwise agreed between the buyer and the seller If the property
purchased is in a housing society, the buyer would need to complete certain forms of the society once
the property is registered in his name. Once the forms are submitted the society president will raise
the issue in the next AGM and admit the buyer as a member. In certain cases, a NOC (no objection
certificate) from the society may be required.
3.Home Loan Guide
One of the prerequisites of buying a new property is a home loan. The process of acquiring a home
loan can be confusing and tedious. Below comprehensive guide that offers information on home loans
to take the right decision.
Home Loan: New borrowers
If you have been planning to buy a home from quite some time now, this is the most appropriate time
to buy one. Though the interest rates are rising, but rise may be quite steep in the near future. Thus,
all you new home aspirants don’t wait. In case you want to opt for a home loan to buy your dream
home, the best thing to do now is to take the teaser loan being offered by some of the banks. The
teaser loans offer you fixed EMI for the initial 13 to 36 months depending on bank to bank. Earlier
many banks were offering teaser loans, but most of these banks have discontinued them recently. .
Other than that, banks have normal home loan products ? Floating home loan interest rate and Fixed
home loan interest rate product. Floating home loan interest rates, as the name suggests, keep on
changing as the in accordance with the change in base rates or the BPLR(whatever the case maybe).
There are two types of fixed home loan interest rate products, fixed for the entire tenure or fixed for
a certain period of time. In case the interest rate is fixed for the entire tenure of the loan, then the
EMI of your housing loan will be fixed for the entire tenure of the loan. But in case the interest rate is
fixed only for a specific tenure say 5 years, this means, the bank can change its interest rate every 5
years.
Home Loan: Existing borrowers
If you are an existing home loan borrower with a good track record, you should think about shifting to
a teaser rate scheme. The time and effort you will devote on shifting your existing loan to the new
teaser home loan will be worth every effort. Along with that the first thing you should do is to shift
from the old BPLR system to the new base rate regime. This base rate system is not automatically
applicable to the existing users and for this you will have to apply to the concerned bank. The banks
will change the base rate and this system of setting up the base rate is more transparent than the
system of fixing up BPLR. Thus consider converting your existing home loan to a base rate system
which will be much more beneficial to you then to stay in the old BPLR system.
Home Loan Application Process
The process of taking a home loan can be daunting, especially if you have never applied for any loan
earlier. And ignorance on your part can not only make it an unpleasant experience, but also prove to
be costly. Here is a step by step guide to equip you with the right info, so you know what to expect.
From applying for a home loan to getting it involves various stages. These are:
Step 1:
Application form
Step 2:
Personal Discussion
Step 3:
Bank’s Field Investigation
Step 4:
Credit appraisal by the bank and loan sanction
Step 5:
Offer Letter
Step 6:
Submission of legal documents & legal check
Step 7:
Technical / Valuation check
Step 8:
Valuation
Step 9:
Registration of property documents
Step 10:
Signing of agreements and submitting post?dated cheques
Step 11:
Disbursement
1. Applying for a loan:
Filling up the application form is the first step. The look of an application form may differ from bank
to bank, but nearly 80 per cent of the information they need is similar. Most of this is basically your
personal and professional information, details of your financial assets and liabilities and the details of
the property (if finalized) including the estimated cost and the means of financing the same.
Documents to submit
While submitting the application form, every bank asks for several documents. And most banks these
days provide doorstep service, so that you don’t have to spend time visiting their office to submit the
documents. However, some banks still insist on the customer visiting their offices at least once.
Proof of income:
This will need to be backed up by proof such as copies of last three years’ Income Tax returns (along
with copies of Computation of Income/Annual accounts, if any), Form 16/Form 16A, last three months’
salary slips, copies of the last 6 months’ statements of all your active bank accounts in which your
salary/business income details are reflected, etc. Other documents that you need to provide with your
application form include age proof, address proof and identification proof. You may also be asked to
give your employment details.
Age proof:
Copy of your school leaving certificate/Driving licence/Passport/ration card/PAN card/Election
Commission’s card/etc.
Address proof:
Similar documents need to be provided to prove that you are actually staying at your current address.
Identification proof:
Same as above, but with photograph. Sometimes, the same document if it contains a photograph, the
current residential address and the correct age can be the proof for all 3 things.
Your employment details:
If your company is not well known, then a short summary about the nature of the company, its
business lines, its main customers, its competitors, number of offices, number of employees, turnover,
profit, etc may be needed. Usually, the company profile that is available on the standard website of
the company is enough.
Financial check
All the income related documents you submit serve a specific purpose. The lending institution uses
them to study your financial status. The bank statements you submit are scrutinized for:
Level of activity in the case of self-employed persons, this gives a very good clue about the extent of
business activities.
Average bank balance a cursory glance at the average bank balances maintained in a savings bank
account speaks volumes about the spending/saving habits of any individual.
Cheque returns a small charge debited by your bank in the statement indicates that a cheque issued
by you was returned by your bank. Many such cheque returns can have a negative impact on your
loan sanction.
Cheque bounces if cheques deposited by you are returned by the issuer’s bank, they will be visible in
your bank statement and again, banks have specific norms as to how many such returns are acceptable
in a period of one year.
Regular periodic payments the existence of periodic payments to other finance companies/banks etc.
indicate an existing liability and you will need to provide full details to the lender.
Your investments also come under the scanner. This helps the bank to estimate your ability to pay the
down payment as well as your savings habit.
Processing Fee
Along with the application form and the credit documents, banks ask for a processing fee. This fee
varies from bank to bank, but is usually around 0.25% to 0.50% of the total loan amount. For instance,
if you take a loan of Rs 10 lakh, you will have to pay around Rs 2,500 to Rs 5,000 as processing fee. The
agent dealing with you earns a commission from the bank, which to some extent is also affected by
the amount of fees paid by you. Most banks have flexible fee structures, and it is advisable that you
negotiate hard to find out the bank’s minimum possible fees though it is unlikely that a bank will agree
to provide a loan without any upfront fee at all. Some banks have zero upfront fee loans, but that
advantage may be negated as their other charges such as “legal charges” and “stamp duty” are
normally higher. This fee is collected to maintain your loan account, and includes work like sending
Income Tax certificates every year, maintaining post-dated cheques, etc.
Quick tips
When applying for a loan, it will help to keep copies of your income proof handy. For self-employed
persons, if the income has increased dramatically in the past year, have your explanation ready as to
why you think this is a permanent increase in your income rather than just a one-time aberration
which might be reversed in later years. If the bank is convinced with your explanation, then the loan
eligibility can be considered in relation to the latest income rather than considering the much lower
average income.
2. Personal discussion: Face to face
After you have formally and successfully completed the application process, all you have to do is wait
till the home finance institution evaluates your papers. The wait normally lasts only a day or two or
sometimes even less. However, some banks insist on meeting you after receiving the application form,
and before the loan sanction. This is to gather more details about you that may not be mentioned in
the application form and to reassure them of your repayment capacity. Again, this stage is insisted
upon only in very few cases these days.
Quick tips
While going for the personal discussion, carry all the original documents pertaining to the information
provided on the application form for the personal discussion. Avoid submitting any fake documents
and do not lie about the financial details requested; banks process home loans only after they are
convinced about your credentials.
3. Field Investigation: Checking you out
Thousands of people apply for loans every day. And however eager a bank is to complete its targets,
every loan is a risk. So, it is only natural that it confirms or validates the details you provide. The bank
checks all your information including your existing residential address, your place of employment,
employer credentials (if you work for a small organization), residence and work telephone numbers.
Representatives are sent to your workplace or residence to verify the details. Even the references you
have provided in the application form are checked out. While this may sound irritating and an invasion
of your privacy, banks are forced to undertake validation in the absence of any credit bureau. Once
your credentials are validated, it helps establish trust between you and the bank.
Quick tips
The address and telephone number verification work is usually outsourced to small firms and the
ability of the representatives is often uneven. Hence, interaction with them may not always be
smooth. When the validation process starts, expect to reschedule some of your other work for being
available to furnish details required.
4. Credit appraisal and loan sanction: Getting the node
This is the make or? break stage. If the bank is not convinced about your credentials, your application
may get rejected. If it is satisfied, it sanctions your loan. The bank or the home financier establishes
your repayment capacity based on your income, age, qualifications, experience, employer, nature of
business (if self-employed), etc, and based on these, works out your maximum loan eligibility, and the
final loan amount is communicated to you. The bank then issues a sanction letter. This letter may
either be an unconditional letter, or may have certain terms and conditions mentioned, which you
have to fulfill before the loan disbursal.
Quick tips
Final loan amount and your loan eligibility are two different things. Once you know what you are
eligible to get, you can decide on the loan amount. Just because you are eligible for a huge sum does
not mean you should borrow heavily. The sanction letter is an important piece of document and you
should keep it safely.
Offer letter: I do…
Once the loan is sanctioned, the bank sends you an offer letter mentioning the following details:
Loan amount
Rate of Interest
Whether fixed or variable rate of interest linked to a reference rate
Tenure of the loan
Mode of repayment
If the loan is under some special scheme, then the details of the scheme
General terms and conditions of the loan
Special conditions, if any
Acceptance copy
If you agree with what is mentioned in the offer letter from the bank, you will have to sign a duplicate
letter of the same for the bank’s records. Earlier, banks used to charge administrative fees along with
the offer letter. However, with rising competition, administrative fees have virtually disappeared from
the home loan market.
Quick tips
Check if the rate of interest mentioned and the loan amount on the letter is the same that was
discussed and agreed upon. Home loan rate of interests can be negotiated, use the fact to your
advantage.
6. The legal angle: Property and papers
Now, the focus of the bank’s activities shifts from you to the property you intend to buy. Once you
select your property, you need to hand over the entire set of original documents pertaining to your
property to the bank so that it can keep them as security for the loan amount given to you. These
normally include: The title documents of your seller, which prove the seller\’s title including the chain
of title documents if he is not the first owner. NOCs from the legal owners such as cooperative housing
societies, statutory development authorities, the lessor of the land in the case of leasehold land, etc.
NOCs are not required where the property is situated on freehold land and the entire land is being
transferred along with the structure. These documents remain in the bank’s custody until the loan is
fully repaid.
Legal check Every bank conducts a legal check on your documents to validate their authenticity. Even
the draft sale documents that you will be entering into with your seller will be scrutinized.
-he documents are sent to a lawyer in their panel (either in-house or outsourced) for a thorough
scrutiny. The lawyer’s report either gives a go-ahead if documents are clear, or it may ask for a further
set of documents. In the latter case, you are expected to hand over the additional documents to the
bank for a clear title. So, if a bank decides to disburse your housing loan, you have every right to smile,
since you can safely assume that your property documents are clear and the transaction is safe.
Quick tips
Sometimes the bank may ask you to pay for the legal verification. However, most banks cover the
costs in the upfront (processing) fee that you pay. Property documentation in India is non-standard
and non-transparent. Hence, it helps to buy property from a reputed developer since they know the
process inside out, and keep all the documents ready. Due to the heavy transfer charges on sale of
property and/or very heavy stamp duties, some people conduct sale of property by showing “lower
consideration” than agreed for, with the balance being paid either on an amenities agreement or in
cash. Also the concept of sale by executing “irrevocable power of attorney” has gained ground
especially in the National Capital Region. All this could restrict the choice of your lenders and may
therefore increase the cost of the loan, which you might want to keep in mind while finalising such
properties.
7. Technical / Valuation check: Making doubly sure
Banks are extremely careful about the property they plan to finance. They send an expert to visit the
premises you intend to purchase. This expert could either be a bank employee or he could belong to
a firm of architects or civil engineers.
Site visit
The site visits to your property are conducted to verify the following:
In case of under construction property
Stage of construction is the same as that mentioned in the payment notice given to you by the builder.
Quality of construction
Satisfactory progress of work.
Layout of flats and area of property is within permissions granted by the governing authority.
The builder has the requisite certificates to start construction at the site.
Valuation of the property in relation to other deals in the surrounding areas.
In case of ready/resale construction
External / internal maintenance of the property.
The age of the building.
Will the building last the loan tenure? This has a direct bearing on your loan eligibility, since the loan
tenure will be restricted to the maximum age of the property as decided by the bank’s engineer and
this will impact your loan eligibility.
Quality of construction.
Surrounding area (development).
Whether the builder has received the requisite certificates for handing over possession of the flat.
There is no existing lien or mortgage on the property.
Valuation of the property in relation to other deals in the surrounding areas.
These inspections are carried out to protect consumer interests in terms of construction quality,
adherence to local laws, approved building plans, etc. A technical inspection also lets the bank
understand the progress of construction so as to release the staggered disbursements.
Quick Tip
Do not circumvent or skip this stage and ensure that it is completed as early as possible. As a buyer, it
gives you confidence that your property has been inspected by experts and that you are buying an
asset that is legally clear and technically sound. The fee for this service, like the legal check, may either
be built into your upfront fee or be charged separately by the Bank
8. Valuation: Reality check
Since housing loans are cheaper than other loans, there have been cases where individuals have
shown purchase of properties from related entities at inflated prices to obtain cheap loans. Since the
risk associated with diversion of funds is higher than if the loan was used for genuine purposes, banks
carry out an independent valuation to find out whether the transaction is in line with the existing
market price of the area. Valuation has become a key parameter in determining the loan amount that
can be sanctioned by the bank. The valuation process is quite subjective and depends on the quality
and ability of the person sent by the bank for valuation. Valuation of real estate as a profession is still
in its infancy in India and is still non-standardized. In many cases, the valuer determines the value of
the property at an amount that is lower than the documented cost of the property and this would
result in the loan amount being lower, since the bank funds a certain percentage of the cost or
valuation of the property, whichever is lower. This practice has led to severe consumer issues in an
increasing number of cases, as the valuation is normally done only after the consumer takes a sanction
(by paying a fee) and after identifying and committing to buy the property. The valuation issue rarely
arises when a property is purchased through a reputed builder directly or if the property is preapproved. In both the cases, the banks would have already completed the valuation and therefore,
you can safely assume that there is no difference between the documented cost of the property and
the bank’s valuation amount.
Quick tip
Some banks will charge a special fee to cover these costs or may ask you to pay the valuer directly,
though for most banks, the upfront fee covers these fees as well. Approach banks which are willing to
do the valuation even before the sanction process and before you pay any fee to the bank.
9. Registration: Sealing the deal
After the legal and technical / valuation check, the draft documents as cleared by the lawyer need to
be finalized and signed and the stamping and registration of the documents need to be done. Also, if
any NOCs are pending, these need to be obtained in the format approved by the bank’s lawyer.
10. Signing the home loan agreement: In black & white
All borrowers need to sign the home loan agreement. You also need to submit post-dated cheques
for the first 36 months (if that is the agreed mode of repayment). The original property documents
have to be handed over to the bank at this stage. Some banks also create a document recording the
handing over of the property documents to them as security for the due repayment of the home loan.
This document is also called a memorandum of entry and attracts significant stamp duty depending
on the amount of the loan in some states. The stamp duty payable on such a memorandum is naturally
recovered from you. Not all banks create this memorandum and hence the stamp duty may or may
not be payable, depending on the practice of the specific bank. However, even where no such
memorandum of entry is created, the state government concerned may, in the future, demand a
stamp duty on the loan transaction, which naturally is recoverable from you as per the home loan
agreement signed by you.
11. Disbursement: The big payout
After the bank has ensured that the property is legally and technically clear, all the original documents
pertaining to transfer of ownership of property in your favour have been submitted and all the
necessary loan agreements have been executed, finally, it is payment time! You will now actually
receive the cheque in your hand. Time to celebrate! But hold on a second. Before the big moment
arrives, you need to submit documents to prove that you have paid your personal contribution
towards the property, since banks normally finance only up to 85-90 per cent of the total cost of the
house. In case you are expecting money from other sources to fund your own contribution, you need
to provide sufficient evidence for the same. It is only after submitting this proof that the bank will
release part-disbursement of the loan. The cheque will be in the name of the reseller (for resale flats),
builder, society or the development authority. It is only in exceptional circumstances, that is, if you
provide documents to support that you have made an excess payment from your own account that
the cheque will be handed over to you directly by the bank.
Quick tips
All banks charge interest on the loan amount from the day on which the cheque has been made and
not from the day on which the cheque is handed over to you/seller. So, take delivery of the cheque
the same day or the very next day to avoid paying extra interest on money.
Disbursement in stages
Usually, loans are disbursed on the basis of the stage of construction of the property. So, in case of
resale or ready possession properties, the disbursement is full and final. However, in case of under
construction properties, the payment is made in parts, also known as part disbursement. Each option
would have different disbursement processes.
Part disbursement:
When a loan is partly disbursed, the bank does not start EMIs immediately, since it is calculated on
the total loan amount at a particular rate of interest and for a given tenure. Moreover, it normally
does not start breaking up the installments into its principal and interest components until the entire
loan amount is disbursed. To overcome this difficulty, banks charge simple interest on the partly
disbursed loan amount. For instance, if you have a sanctioned loan of Rs10 lakh, but the property is
under construction and the bank has disbursed only Rs4 lakh, you will be charged a simple interest
only on the disbursed amount. This process continues until the final disbursement takes place. The
simple interest paid is called Pre EMI interest or Pre EMI. At this stage, banks may take only around
three to six postdated cheques on account of Pre EMI.
Quick tips
Always ensure that the amount of simple interest is available in your bank account to avoid dishonour
of the cheque.
The systems of most banks do not track Pre EMI payments as effectively as EMI payments. However,
as per the loan agreement, your liability to pay Pre EMI is absolute and without receiving any reminder
from the bank. You may have to pay a delayed payment charge if your Pre EMI is delayed. So, it is in
your own interest to keep track of the number of PDCs given to the bank for Pre EMI and replenish
them, should the need arise.
Submit the demand letter from the builder as and when raised, to ensure that the balance
disbursement can take place.
Collect the receipt from the builder for the part disbursement and hand it over to the bank.
Ensure all the above are complied with till the final disbursement of the loan.
Full and final disbursement: If it is a ready possession property, the bank disburses the entire loan
amount in favour of either the reseller or the builder.
Quick tips
Take time to fill in the loan documents before you sign them. Some columns may have to be kept
blank as the exact amounts may not be known, but this should be limited. The bank is supposed to
return a copy of the loan documents signed by its authorised signatory but that rarely happens in
practice without sustained follow-up. Keep photocopies of all documents/agreements/letters
submitted to the bank to avoid any misunderstandings later.
The relationship continues…
The final disbursement does not end your relationship with the bank. In fact, it is just the beginning.
And there are various issues / situations that arise in between the beginning of the relationship and
its end. These include:
Post disbursement documents
Repayment
Income tax certificate
Prepayment
Loan pre-closure/satisfaction
Post disbursement documents
Payment receipt:
Once the bank hands over the pay order to you, you in turn are expected to hand it over to the reseller
or the builder. You should get a receipt from them for the payment and hand it back to the bank, as it
will become part of your mortgage documentation. Share certificates: In case your property is part of
a society, you will need to get the flat transferred to your name by asking the society to issue the share
certificate in your name and recording the transfer of ownership in their books. This normally happens
at the first AGM/EGM after the sale transaction. This transferred share certificate also happens to be
a part of the mortgage documentation and has, therefore, to be handed over to the bank after the
transfer takes place.
Repayment The loan is generally repaid by equated monthly installments, using postdated cheques.
Banks usually ask for 12, 24 or 36 PDCs, after which you need to repeat the process until you have
repaid the loan. Some banks may also insist on a cheque for an amount equivalent to the loan
outstanding at the end of PDC period to ensure timely replenishment of PDCs for the next 12, 24 or
36 months as the case may be. In case your installments are to be deducted against your salary, you
need a letter from your employer accepting this arrangement and directly remitting the amount to
the bank every month. This is possible only if your organization has an arrangement with the bank for
all employees. Some banks allow you to give standing instructions to the bank where you have your
savings/current account to deduct money each month crediting your home loan account. Some banks
allow the monthly installments to be paid by convenient ECS facility. Another possible mode of
payment is by cash or demand draft (not all banks offer this). You can deposit the EMI every month at
the bank’s office.
Income Tax certificate
Every bank issues an income tax certificate that serves as requisite proof to let you avail of tax benefits
that accrue on repayment of a home loan. This will typically contain the total amount of interest and
capital repaid during the year. This is mandatory to claim the tax benefit in respect of self-occupied
property. You will have to file this with your tax returns and submit this to your employer or chartered
accountant to calculate your tax liability.
Prepayment
You can prepay a loan either in part or in full at any given point of time. You can also prepay it even
when it is only partly disbursed. However, most banks have an upper limit on the number of times a
person can prepay his loan in a year as well as on the minimum amount you can prepay each time.
Until recently, banks charged a penalty for part or full prepayment. But increased competition has
forced most banks to allow partial prepayment at nil charge. Most banks levy a prepayment charge if
you make full repayment and ask for release of your property documents.
Loan pre-closure/satisfaction
You also have the option of completely repaying the loan at any time. Of course, each bank has its
conditions for pre-closure. Also, the loan will get completely paid off on the expiry of the tenure of
the loan if you have paid all your installments on time. Once you have completely repaid your loan,
ensure that the entire set of original property documents is handed back to you. You should also ask
the bank for a No Objection Certificate saying the account has been cleared. As an option, the bank
may issue a consent letter stating that the property is now free from mortgage. If you have guarantors,
the bank will issue a separate letter for each of the guarantors stating that their liability has come to
an end. Only after you receive these documents can you say that the property is now completely free
of mortgage. At this stage, in some cases, you may discover that the original documents have yet not
been received by the bank from the registrar. In such cases, you will need to follow up with the
registrar and get the documents from them directly by showing them a copy of the bank’s clearance
certificate. Sometimes, (and we must stress only sometimes) the bank may misplace your original
property documents leading to avoidable stress. In fact, the bank may claim that these documents
were never given to them at all. Hence the importance of insisting on a proper receipt of title
documents while handing them over to the bank. Remember that receipt will come in very useful
when the loan is fully paid off. Also, it is extremely useful when you want to shift your loan to a new
lender.
We can add PROPERTY KNOWLEDGE – RENT
1. Find the Location
The rental market in a lot of locations is still undervalued, for example, any location, which is far away
from any train station or highway or basic infrastructure, can get you a great deal, provided you are
tuned to travel that extra mile.
Most of the time, if you have kids going to school or college, the relocation to another micro location
becomes very difficult as it uproots life to an extent and one has to worry about distances and extra
time of travel and find alternate means of travel. The relocation rules completely favour the family
and reviewing distances between Home and School are very crucial. If the distance to office grows, its
fine, but school and home should be in the reasonable travel distance.
2. Be open to see other locations and not just look at one
As a property renter in relocation, one has to be vigilant of the infrastructure impact and also out of
box thinking to see what options one can have for the value of rent provided by the developer and if
one can save some money you can pay for comfortable travel with the saving.
3. Start your search at least a month before your move.
When housing societies, go in for redevelopment, obviously the majority of the people, who will be
looking to get an apartment will be wanting in the same location and don’t be surprised to see your
neighbor in the same apartment while you gone to visit it. It’s highly advised, that you start earmarking
the location where you want to be well in advance.
4. Understand the Neighborhood, Building & Apartment
Once you have shortlisted a building or an apartment, do visit it again at a different time be it in the
day or night. Right from understanding the location, shopping areas around, amenities in the building
and what does the apartment offer inside is important. Depending on what you are bringing back from
your old flat, and what is available inside the new flat is you have to match. Make sure you also spend
enough time in an apartment to check water pressure, storage spaces, kitchen cabinets, wardrobes,
geysers, piped gas and cell phone receptions.
5. Let go off the Old Things
Understandably, we do get hooked on to an old piece of furniture or the old bed etc. this is a springcleaning time. Take only what you need in the rented flat and take back only things which are required
in the new home and match them perfectly to give you that house proud feeling. There are so many
websites, which you can sell or buy furniture on line.
6. Lease Extension Agreement – in Principle.
It is imperative to have excellent relations with the owners, give them the escalations, pay rent on
time and then the owner should have no reason to say no to you, unless he has other reasons of
moving or loosing another tenant.
7. Put All on Record
These days, with emails, etc. you can keep all the things on record so that there is no grey area of what
is agreed upon and not. Draw up a term sheet encapsulating all the terms and conditions of the
agreement, the term, the lock in period, the notice period, rent, escalations, etc. This would help
tremendously in the long run.
8. List of Amenities/Furniture in the House
Prior to getting the possession of the property, do a joint inspection of the flat with the owners, and
sign jointly on the List of Amenities, which should be attached to the Leave and License agreement
and duly registered.
In case of anything, which is not working properly, it should be brought to the owners notice in writing
before hand. Remember, once the possession is given to you, then there is a huge grey area as to was
it working or not etc. If there is anything that the landlord did not agree to fix or you agreed to accept
from your initial visit inspection such as Taps, windows, missing tiles in the shower, make sure this
damage is documented in your lease as pre-existing.
9. What’s included in the rent?
In Rajkot, typically, the Rent is for the premises and/or the car parking if charged extra for an extra car
etc. Please ensure that the last payment of Water, Electricity, Cable, Internet, Piped Gas is done before
hand and you must pay all the bills on time during the term of the agreement. The best way these
days is to place all your utilities bills on your credit card to ensure they are paid automatically. Please
ensure that you leave sufficient money in advance to the owners at the time of termination or expiry
of the agreement to cover the utilities.
10. Know your Notice Period and Circumstances
It’s important that you read the agreement termination clauses, so you understand the implications
of breaking your Agreement early and your obligation of notice when you choose to move out at the
end of a lease term. Be sure to read the agreement well before you execute.
11. Society Rules and Regulations
Please follow the society rules and regulations while you are in the apartment. Prior to move in most
of the societies, will have a meeting with the new tenant, complete your bio-data there with your
important telephone numbers etc. Complete your police verification as per the local laws.
12. Stamp Duty and Registration
Ensure, that you get your agreement registered and get a few copies notarized as the original remains
with the property owners in your location
13. Paper Work
Do hire an experienced real estate consultant, who can help you with all these aspects, most of the
issues, you face during your lease is because you have tried to do all by yourself.
14. What is the difference between the lease agreement and the Leave and License agreement?
A Lease, defined under Section 105 of The Transfer of Property Act, 1882, is a transfer of the right to
enjoy the concerned property for a pre-defined time period or in perpetuity. The lessor (owner of the
property) gives the lessee (the one leasing the property) such consideration periodically, usually at the
beginning or end of a lease agreement.
License is defined in Section 52 of the Indian Easements Act, 1882. License does not allow any interest
in the premises on the licensee’s part. It merely gives the licensee the right to use and occupy the
premises for a limited duration.
A lease deed needs to be stamped and registered. The amount payable towards the lease deed’s
stamp duty is more than that payable towards the Leave and License’s. For a period exceeding three
years, the stamp duty is same for both agreements.
15. What are the implications of entering into a lease agreement?
There are various implications of entering into a lease agreement such as you have to pay the stamp
duty, the lease agreement has to be registered etc