The real estate sector in India has always been looked upon as an unorganized sector governed by diverse state laws and particularly lacking the transparency and accountability of the promoters/developers to the buyers vis- a- vis the completion of the projects resulting in delays on committed schedules. To protect the interest of the buyers and infuse some uniformity in these diverse state enactments, the Government of India has recently passed the Real Estate Regulatory Act, 2016 (“Act“) which seeks to protect the interest of the buyers of residential and commercial real estate units by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by developers/promoters. The major portions of the Act have been made effective from May 01, 2017 kick-starting the process of making rules as well as putting in place institutional infrastructure to protect the interests of the consumers.
One of the major requirements under the Act is the compulsory registration of every project by developers/promoters with Real Estate Regulatory Authority (RERA) including those that have not got completion or occupancy certificates. The Act contains several provisions to address the lacunae in the real estate sector, largely by way of establishing a disclosure framework and setting strict liabilities for promoter irregularities.
Set out below are the major changes or introductions envisaged by the Act:
Registration with Real Estate Regulatory Authority: Registration has been made mandatory for all the real estate projects with the RERA, if the total area of land proposed to be developed exceeds 500 square meters or if more than eight apartments are proposed to be developed inclusive of all phases. Projects cannot be advertised, booked or sold in any form prior to registration and obtaining the necessary construction approvals. Real estate agents are also compulsorily required to obtain registration from RERA. RERAs shall be established within a period of one year and till the time being the Government will be specifying the relevant authorities for the purpose of registration under the Act.
Legal & Commercial Restrictions on the Promoters/ Developers:
Any transfer or assignment of majority rights and liabilities by the promoter to a third party is subject to prior written consent from two-thirds of the allotees and RERA.
The promoter is prohibited from creating any charge or encumbrance on any apartment after executing an agreement for the same.
The promoter is responsible for structural defects or other deficiencies for a period of 5 years from the date of delivery of possession.
The promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottee and 2/3 rd of the allotees in case of common areas/amenities.
Prior to execution and registration of a sale agreement, a cap of 10% of the cost of the apartment, plot, or building has been imposed as an advance payment or an application fee .
Delay in Handover: Delay in handing over the developed property and failure to achieve the committed schedules by the promoters was seen as the major problem faced by the buyers. The Act now prescribes that in case the promoter is unable to hand over possession of the apartment, plot or building to the allottee in accordance with the terms of the agreement of sale or for any other reason, then (i) the promoter will be liable, on demand, to return the amount received by him from the allottee with interest and compensation; or (ii) in case the allottee does not want to withdraw, then he will be entitled for the interest amount for the delayed period.
Change in Pricing Norms: In order to protect the buyers from the abuse of any ambiguous sale tactics, the requirement of sale of units on the basis of carpet area criterion has been imposed. Carpet area essentially means the net usable floor area of an apartment and excludes the area covered by the external walls, areas under services shafts, exclusive balcony or veranda area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
Warranties on the legal title: In an attempt to protect the buyers from any dispute or adverse claims on the authenticity of the title over the land or the project, the promoter is now required to declare and authenticate the legal title to the project land.
Legal Recourse: No civil court has a jurisdiction to entertain any suit or proceeding (including injunction proceeding) in respect of any matter which RERA or the adjudicating officer or the appellate tribunal is empowered by or under the Act. The Act provides for time bound resolution of complaints and disputes by the RERAs and the real estate appellate tribunals.
Stringent Penalties: Till now only buyers were the sufferers in case of any delay in the completion of project. But now as a deterrent measure to ensure the compliance of the Act and timely completion of all the obligations of the promoters, stringent penal provisions including penalty may be up to 10% of the estimated cost of the project in case of defaults by the promoters; up to 5% of the estimated cost of the project in case of any default in disclosures and/ imprisonment of up to three years with or without fine have been prescribed under the Act. Additionally, the penal provisions have also been prescribed for any contravention or violation committed by the real estate agent or the buyer in certain cases.
Shortcomings: Few missing aspects still need to be looked into and supplemented to the Act like (i) the adequate measures to curb the black money usage in real estate transactions and (ii) the accountability of Governmental officers in relation to delay in providing approvals and permissions.
It is required that once implemented, the upshot of the requirement of maintaining a separate account for depositing 70% of the receivables should be closely monitored so that the same does not result in promoters opting for bank or other mode of finances and thereby ultimately raising the price!
After a lot of opposition, deliberation and several amendments, the Rajya Sabha has, on 10 March 2016, approved the Real Estate (Regulation and Development) Bill, 2016 (Bill/Act) which substantially amends the original Real Estate (Regulation and Development) Bill, 2013.
The Bill largely seeks to protect the interest of the allottees/purchasers by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by promoters. It also holds the promoters accountable for not registering their projects with the Real Estate Regulatory Authority (Regulatory Authority) or for providing insufficient information regarding their project. In addition to the promoter and allottees, the Bill also brings real estate brokers who facilitate the sale and purchase of units in a project within its ambit.
The salient features of the Bill are the following:
Real Estate Regulatory Authority
Under the Bill, instead of a regular forum of consumers, the purchasers of real estate units from a developer would have a specialised forum called the “Real Estate Regulatory Authority” which will be set up within one year from the date of coming into force of the Act. In the interim, the appropriate Government (i.e., the Central or State Government) shall designate any other regulatory authority or any officer preferably the Secretary of the department dealing with Housing, as the Regulatory Authority.
Registration with the Regulatory Authority
The promoter has to register their project (residential as well as commercial) with the Regulatory Authority before booking, selling or offering apartments for sale in such projects. In case a project is to be promoted in phases, then each phase shall be considered as a standalone project, and the promoter shall obtain registration for each phase.
Further, in case of ongoing projects on the date of commencement of the Act which have not received a completion certificate, the promoter of such project shall make an application to the Regulatory Authority for registration of their project within a period of three months of the commencement of the Act.
The following types of projects shall not be required to be registered before the Regulatory Authority:
Where the area of land proposed to be promoter does not exceed 500 square meters or the number of apartments to be constructed in the project does not exceed eight apartments. However, the appropriate Government (Central and State Government) may, if it considers appropriate, reduce the threshold limit below 500 square meters or eight apartments;
Projects where the completion certificate has been received prior to the commencement of the Act;
Projects for the purpose of renovation or repair or re-development which does not involve marketing, advertising, selling and new allotment of any apartment plot or building.
The application for registration must disclose the following information:
Details of the promoter (such as its registered address, type of enterprise such proprietorship, societies, partnership, companies, competent authority);
A brief detail of the projects launched by the promoter, in the past five years, whether already completed or being developed, as the case may be, including the current status of the projects, any delay in its completion, details of cases pending, details of type of land and payments pending;
An authenticated copy of the approval and commencement certificate received from the competent authority and where the project is proposed to be developed in phases, an authenticated copy of the approval and commencement certificate of each of such phases;
The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project and the proposed facilities to be provided thereof and the locational details of the project;
Proforma of the allotment letter, agreement for sale and conveyance deed proposed to be signed with the allottees;
Number, type and carpet area of the apartments and the number and areas of garages for sale in the project;
The names and addresses of the promoter’s real estate agents, if any, and contractors, architects, structural engineers affiliated with the project; and
A declaration by the promoter supported by an affidavit stating that: a) he has a legal title to the land, free from all encumbrances, and in case there is an encumbrance, then details of such encumbrances on the land including any right, title, interest or name of any party in or over such land along with the details; b) the time period within which he undertakes to complete the project or the phase; and c) 70% of the amounts realised for the real estate project from the allottees, from time to time, shall be deposited in a separate account to be maintained in a scheduled bank to cover the cost of construction and the land cost and shall be used only for that purpose.
Under the Bill, developers can sell units only on carpet area, which means the net usable floor area of an apartment. This excludes the area covered by the external walls, areas under services shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment.
70% of realisation from allottees in a separate bank account
The Act mandates that a promoter shall deposit 70% of the amount realised from the allottees, from time to time, in a separate account to be maintained in a scheduled bank. This is intended to cover the cost of construction and the land cost and the amount deposited shall be used only for the concerned project.
The promoter shall be entitled to withdraw the amounts from the separate account, to cover the cost of the project, in proportion to the percentage of completion of the project. However, such withdrawal can only be made after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.
The promoter is also required to get his accounts audited within six months after the end of every financial year by a practicing chartered accountant. , Further, he is required to produce a statement of accounts duly certified and signed by such chartered accountant, and it shall be verified during the audit that (i) the amounts collected for a particular project have been utilised for the project; and (ii) the withdrawal has been in compliance with the proportion to the percentage of completion of the project.
Acceptance or refusal of registration
Upon receipt of an application by the promoter, the Regulator Authority shall within a period of 30 days, grant or reject the registration.
Upon granting a registration, the promoter will be provided with a registration number, including a login Id and password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the proposed project.
If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered.
The registration, if granted, will be valid until the period of completion of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the Regulatory Authority for a period not exceeding one year in aggregate, only due to force majeure and on payment of such fee as may be specified by regulations made by the Regulatory Authority.
Revocation or lapse of registration
The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo moto or on the recommendation of the competent authority in case (i) the promoter makes a default in doing anything required under the Act or the rules or regulations made thereunder; (ii) the promoter violates any terms of the approvals granted for the project; and (iii) the promoter is involved in any kind of unfair practice of irregularities.
In the event the registration is revoked by the Regulatory Authority or it lapses, the Regulatory Authority shall:
debar the promoter from accessing the website in relation to the project, specify his name in the list of defaulters on its website and also inform other Regulatory Authorities in other States and Union territories about such cancellation;
facilitate the remaining development works to be carried out by competent authority or the association of allottees or in any other manner as may be determined by the Regulatory Authority. However, the association of allottees shall have a first right of refusal for carrying out the remaining development works; or
direct the scheduled bank holding the project bank account, to freeze the account and thereafter take such further necessary actions, including consequent de-freezing of the account, for facilitating the remaining development works in the manner mentioned above.
Website of the Regulatory Authority
The promoter shall, upon receiving his login Id and password, create his web page on the website of the Regulatory Authority and enter all details of the proposed project including:
details of the registration granted by the Regulatory Authority;
quarterly up-to-date list of the number and types of apartments or plots or garages, as the case may be, booked;
quarterly up-to-date status of the project along with the list of approvals obtained and approvals pending subsequent to commencement certificate; and
such other information and documents as may be specified by the regulations made by the Regulatory Authority.
Advertisement or prospectus issued by the promoter
The advertisement or prospectus issued or published by the promoter should prominently mention the website address of the Regulatory Authority, where all details of the registered project have been entered and include the registration number obtained from the Regulatory Authority and other similar details.
Where any person makes an advance or a deposit on the basis of the information contained in the notice, advertisement or prospectus and sustains any loss or damage because of any incorrect, false statement included in these, he shall be compensated by the promoter in the manner as provided under the Act. Also, if the person affected by such incorrect, false statement contained in the notice, advertisement or prospectus, intends to withdraw from the proposed project, his entire investment (along with interest at such rate as may be prescribed and compensation in the manner provided under the Act), will be returned to him.
Limit on receipt of advance payment
A promoter shall not accept a sum more than 10% percent of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement of sale with such person and register the said agreement of sale, under any law for the time being in force.
Restriction on addition and alteration in the plans
The promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottee.
The promoter also cannot make any other addition or alteration in the approved and sanctioned plans, structural designs and specifications of the building and common areas within the project without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such a building.
In case any structural defect or any other defect in the workmanship, quality or provision of services or any other obligations of the promoters is brought to the notice of the promoter within a period of five years by the allottee from the date of handing over possession, the promoter shall rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation in the manner as provided in the Act.
Restriction on transfer and assignment
The promoter shall not transfer or assign his majority rights and liabilities in respect of a project to a third party without obtaining prior written consent from two-thirds of the allottees, except the promoter, and without the prior written approval of the Regulatory Authority.
Please note that the allottee, irrespective of (i) the number of apartments or plots booked by him or booked in the name of his family; or (ii) in the case of other persons such as companies/firms/any association of individuals, by whatever name called, booked in its name or booked in the name of its associated entities/related enterprises, shall be considered as one allottee only.
Refund of amount in case of delay in handing over possession
In case the promoter is unable to hand over possession of the apartment, plot or building to the allottee (i) in accordance with the terms of the agreement of sale; or (ii) due to discontinuance of his business as a promoter on account of suspension; or (iii) revocation of his registration or for any other reason, then the promoter shall be liable, on demand being made by the allottee, to return the amount received by him from the allottee with interest and compensation at the rate and manner as provided under the Act. This relief will be available without prejudice to any other remedy available to the allottee.
However, where an allottee does not intend to withdraw from the project, he shall be paid interest by the promoter for every month of delay, till the handing over of the possession, at a prescribed rate.
Other Relevant Provisions
The same rate of interest will be payable by the allottee and the promoter in the event of their respective defaults.
In the absence of any local laws, an association or society or cooperative society, as the case may be, of the allottees, shall be formed within a period of three months of the majority of allottees who have booked their plot or apartment or building, as the case may be, in the project.
After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or building. If any such mortgage or charge is created, then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment, plot or building.
The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, is unilateral and without any sufficient cause.
The promoter shall obtain insurance as may be notified by the appropriate Government, including but not limited to the title of the land and building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance.
The promoter shall execute a registered conveyance deed in favour of the (i) allottee in respect of the apartment, plot or building; and (ii) association of allottees of competent authority in respect of the undivided proportionate title in the common areas, and hand over possession of the same within the period as specified under the local laws. In the absence of any local law, such conveyance deed shall be carried out by the promoter within three months from date of issue of the occupancy certificate.
The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land in the manner as provided under the Act, and such claim for compensation shall not be barred by limitation provided under any law for the time being in force.
Every allottee shall take physical possession of the apartment, plot or building as the case may be, within a period of two months of the occupancy certificate issued for the said apartment, plot or buildings.
The Regulatory Authority shall make a recommendation to the appropriate Government on (i) creation of a single window system for ensuring time-bound project approvals and clearances for timely completion of the project; and (ii) creation of a transparent and robust grievance redressal mechanism against acts of omission and commission of competent authorities and their officials.
Real Estate Appellate Tribunal
In addition to the establishment of the Regulatory Authority, the Bill also proposes to establish a Real Estate Appellate Tribunal (Appellate Tribunal) within one year from the date of commencement of the Act.
Any person aggrieved by any direction or decision made by the Regulatory Authority or by an adjudicating officer, may make an appeal before the Appellate Tribunal within a period of 60 days from the date of receipt of a copy of the order or direction.
The Appellate Tribunal shall deal with the appeal as expeditiously as possible and endeavour shall me made to dispose of the appeal within a period of sixty days from the date of receipt of appeal.
The Appellate Tribunal shall have same powers as a civil court and shall be deemed to be a civil court. An appeal against the order of the Appellate Tribunal may be filed before the jurisdictional High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal.
For adjudging the compensation to be paid by the promoter in accordance with the provisions of the Act, the Regulatory Authority shall appoint (in consultation with the appropriate Government) one or more judicial officers as deemed necessary, who is or has been a District Judge, to be an adjudicating officer for holding an inquiry in this regard. However, such an appointment will be made after giving any person concerned a reasonable opportunity of being heard.
Offences and Penalty
Stringent penal provisions have been prescribed under the Act against the promoter in case of any contravention or non-compliance of the provisions of the Act or the orders, decisions or directions of the Regulatory Authority or the Appellate Tribunal which are the following:
If promoter does not register its project with the Regulatory Authority – the penalty may be up to 10% of the estimated cost of the project as determined by the Regulatory Authority;
If promoter does not comply with the aforesaid order of the Regulatory Authority – imprisonment of up to three years and a further penalty of up to 10% of the estimated cost, or both; and
In case the promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act – the penalty may be up to 5% of the estimated cost of the project or construction.
These penal provisions have also been prescribed for any contravention or violation committed by the real estate agent or the allottee.
If any allottee fails to comply with, or contravenes any of the orders, decisions or directions of the Regularity Authority, there may be a penalty for the period during which such default continues, which may cumulatively extend up to 5% of the cost of the plot, apartment or building, as the case may be, as determined by the Regulatory Authority. Further, if any allottee fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal, this may entail imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the cost of the plot, apartment or building, as the case may be, or with both.
The provisions of this Act shall have an overriding effect in case there is any inconsistency between the provisions contained in this Act and in any other law (including a state law) for the time being in force.
The Maharashtra Housing (Regulation and Development) Act 2012 has been repealed by the Central Government.
In essence, the Real estate Bill intends to increase transparency and accountability in the real estate sector, by providing mechanisms to facilitate and regulate the sale and purchase of commercial and residential units/projects and timely completion of projects by the promoters.
Real estate bill to be implemented from May 1st 2017.
Now, the challenge before the Government is to keep a check how efficiently it is functioning.
A very interesting concept – You get assured rent for fixed years once you invest in such property. Let’s dive in to the topic.
Puravankara’s Provident Housing came up with an innovative method to grow their business and give value to our investment.
Managed Residences Investment Plan (MRIP)
Puravankara, one of the top most real estate developers in India, believes in “We cannot really depend on our job alone if we want to achieve financial freedom. Creating and having multiple source of income is one of the best ways to step up the ladder and achieve our financial goals”.
Hence, came up with the solution, buy the ready-to-move in apartment with assured rent for seven years along with appreciation in rent.
Here are some quick points for more information.
An innovative, low risk real estate investment to help you build a long term rental income.
Investment structure – Buy & Sale back with a contracted lease term of 7 years.
Puravankara’s MRIP offer provides long term lease management services from JLL, the leading international property consultant.
Multi-city residential assets across Chennai, Bangalore, Coimbatore & Kochi.
Investments across 3 Price buckets – approx. 35 to 55 lakhs ; 75 to 125 lakhs & 2.5 to 4 cr.
Benefit from committed monthly rentals with annual rent escalations, long term capital appreciation, zero maintenance & hassle free process.
All apartments offered under Puravankara’s MRIP offer are ready to move in apartments and are completed apartments/ completed projects.
Pros and Cons of Puravankara’s MRIP Offer :
As the company believes, it is always better to have multiple investments and multiple sources of income. And hence, this is a best source of second income.
Buying a home for rental purpose is a very common practice in India. Finding a tenant and getting assured income is most challenging. This offer encourages a hassle-free maintenance process for seven years by not only paying the rent but also maintenance charges.
You just have to pay the property tax every year.
Be careful while buying as the price under Puravankara’s MRIP offer is slightly higher than the price for the units with no offer.
But if you are an NRI or retired employee or low risk taker, it is always best to invest.
Go for Purvankara’s MRIP Offer, only if you can self-invest. Since, under this offer, the pricing of the unit is relatively higher, it doesn’t make the best option if you have to pay more interest to banks under home loan.
How Loanyantra Works :
Investing in a property is no small issue. And we understand it. So your search for home ends here. Think home loan and think loanyantra.
As we discussed above about managing homes, we, in loanyantra, manage your home loan. Call us for further queries about free services on home loan management.
Goods and Service Tax (GST) is the tax which amalgamates various central and state taxes into one which aims to build a common market in India, and also avoids paying tax in multiple stages.
In-detail, GST, under one roof, includes many taxes, viz., excise duty, additional excise duty, service tax, additional customs duty, surcharges and cess, value added tax, sales tax, entertainment tax, central sales tax (levied by center and collected by state), octroi, entry tax, purchase tax, luxury tax and tax on lottery, betting and gambling.
Though the expected GST was in between 20% and 23%. The final rate is decided by the finance council and its members and is fixed to 18%.
GST on Real Estate Sector.
At present the consumers in the real estate sector who opt to take an under construction property pay sales tax, value-added tax, stamp duty and registration charges to the builders. With the introduction of the GST, it is made clear that the indirect taxes, viz., sales tax and value-added tax will be replaced by GST. Whereas the developer or builder pays various elements of non-creditable tax costs like excise duty, customs duty, CST, entry tax, etc which are inbuilt in the pricing of the units. All these tax costs add upto anywhere between 22%-25% of the price of the units. Also, for the builder while procurement of goods and services, GST would be applicable. This GST would not be creditable and the developers would have to load this in the price of the property. Hence, there are chances for the increase in the pricing of the under-construction properties.
But post demonitisation, the things turned out different with respect to real estate prices. The unorganized sector now offers at 30% lower prices whereas the organized sector remained neutral.
Also, for the projects which are under construction in different stages, the builder might have already purchased the raw material needed for the whole project. Which means the builder might have paid all the taxes which were supposed to be during the purchase. If the GST is implemented and if the builder is to claim the input credits, the cost of the unit might reduce to 20% of the value of the property. But, under GST, he can not get the credit of what he paid as consumer pays tax on taxes paid by the builder. Hence, the builder surely fits the price in the units. For example, if a builder wants to sell an under-construction property of Rs. 1000, the price of it is Rs. 1000 + service tax + VAT + stamp duty. With the implementation of GST, the price of it will be Rs. 1000 + GST + stamp duty. GST is beneficial in real estate sector, if the builder is benefited and if he passes on the same benefit to the customer.
If the consumer is looking out for a ready to move in apartment, the consumer need not pay the service tax or VAT, but has to pay the stamp duty which varies from state to state. So not much of price change is expected even with the implementation of GST.
So, what needs to be analysed and understood is, with the 18% replaced GST rate, how will the impact of the pricing of the under construction property will be? And how will the builder charge you at the end of the day.
The budget session clearly mentioned that the goal is affordable housing. So, even with the implementation of GST, the under construction projects’, the unorganized and organized sector real estate prices remain neutral. This gives another hope for the investors, and a big move for the real estate market after demonetisation.
You’ve finally decided to buy a home but it is plagued with uncertainties, speculation, opinions and uncalled for advice. Relatable, isn’t it? That’s because a home is possibly the biggest purchase in one’s life.
Needless to say, there’s a plethora of doubts and fears in your mind before you finalize on anything. You might take into account about the location, the market reputation of the builder, the size, and the amenities but it all boils down to 1 simple question: is your investment safe? More so in today’s financial scenario where the markets are weighed down by demonetization, slow down and the anticipation for real estate prices to fall further.
The Price Protection Policy comes in as a savior in such times; especially for those who are sitting on the fence still wondering whether to buy or not. Price Protection Policy is a solution to all your worries and has the power to instill confidence in both the buyers’ as well as the builders’ minds.
“You had my curiosity, but now have my attention”.
So what exactly is Price Protection Policy?
From the clothing industry to the automobile industry, brands use ‘cashback’ to retain their customers’ interest.
In the realty market, Price Protection Policy is that ‘cashback’ which helps us retain your confidence. It protects your investment from fluctuating prices such that, if the price of the property you’ve bought falls, the builders, refund you the difference.
For instance, if you buy a home for say, 80 lakhs, and due to market movements it drops to 75 lakhs, the builder will refund you the difference, i.e. 5 lakhs, under the Price Protection Policy, NO QUESTIONS ASKED!
Isn’t that so assuring and relieving?
But it’s important to note that the price protection window might differ from builder-to-builder. That means each builder might offer a different time frame to cover your properties under Price Protection. Usually the builder offers it till the buyer takes the possession.
How does the Price protection policy benefit the home buyer?
Price protection policy is first implemented in 2008 by a renowned builder Rohan Builders for their projects in Pune. This was done in the wake of global economic recession and real-estate crisis that crippled nations and organizations worldwide. As was mentioned in the property agreements, the difference was actually refunded to the customers.
It is a safety net for one’s life savings. In a market so volatile that even vegetable prices keep changing week-on-week, one is wary about parking lakhs or even crores of rupees in an asset like home if it’s their necessity. The Price Protection Policy alleviates that fear and instills confidence.
The realty market is betting big on this new policy. Make sure that you not only have a verbal commitment but also make the builder mention in the document.
Be optimistic to get something tangible and legal to hold on to when you buy your dream home from your builder. There are many known builders who follow this policy. Find out from your builder if he follows the policy. We only hope that every realtor follows for the betterment of the overall realty market.
Price protection policy followers
Pethkar Projects’ Seyona at Punawale is offering Property Rate Protection Policy from the day project was launched in 2014. Some of the followers of the price protection policy are Concord Builders, Tata Homes, Mahaveer Group, Runnal Group, Lodha Group, Oyster Living, Citrus Ventures. These developers had started implementing the policy post demonitization to bring back the boom in the realty market.
The purpose of the policy is in the interest of the home buyers not loosing their hard-earned money during the post demonetization when the realty market was going low. But with the decrease of home loan interest rates, the real estate market had become a hit again.
Debt is not bad when it comes at Home Loan Rate. Home loan is given considering you continue to earn and you are capable of paying it back. So Debt allows you to save and pay the debt.
Real Estate is little tricky. Consider you want to buy a 35 lac home now. But you have only 10 lac now. So for you to buy only option would be going for 25 lac loan or you want to save another 25 lac and delay the purchase. To save 25 lac you would take at least another 5 years. Lets say the price of the apartment appreciates very little to only 50 lac. Now you have to save another 15 lac more. Lets say you take another 2 years to save another 20 lac. Now you go and buy same apartment for 55 lac. When you saw it for the first time it was costing you only 35 lac but now its 55 lac. Also for 7 years you would have stayed in rented house and continued to pay say Rs 10,000 on average. So you would have paid Rs 8.40 lac as rent. And lets not forget the tax benefit the home loan gets you. For last 7 years lets consider you can save a tax of 2 lac.
So in total for delaying the purchase your total cost is
If you have excessive cash then lots banks have a Over Draft Loan products. Where in you can park the excessive cash in the OD Loan account, for the amount of cash you have parked they will not be charging you interest on it. This helps in closing the loan much faster.
Let me give an example. Consider you have taken 50 lac loan. For simplicity lets consider you are paying Rs 55 ,000/- as EMI. Out of which Rs 50,000/- is going toward interest and Rs 5,000/- is going toward principle.
Say you have Rs 10 lac cash which you deposited in the OD Loan account.
Then next month your EMI will still be Rs 55,000/- the way it is distributed is
Last but not the least the Property you are buying & Own contribution to pay 20% of the property
Location , approvals of the property.
Your Salary : You should be earning enough to pay the 80 lac EMI.
Your Age : Based on your age, maximum Loan tenure will be decided. Before you retire i.e 58 years you should be clearing the loan.
Existing Loans : If you have any exiting Loans, you will be paying EMI so you overall eligibility would come down for the next loan.
Credit Score : Banks/NBFC would look at your credit report and based on how you have paid will decide to go if they want to give you loan
Property : When you are asking for Rs 80 lac loan, it would mean at least the property should be Rs 1 crore. Technically the price of the property should support it and you have to pay 20% from your self funding and 80% you can take loan. It should not be like for Rs 10 Lac property you are paying Rs 1 Crore.
Approvals of the property : Based on the Location and type of approvals and amount of deviation while constructing banks would take a call if they will be giving loan or not.
So based on the property you have selected and based on your financial profile you need to select the bank and the loan product. Some not so famous banks will have better products for certain properties.
Plan your loan well, so that you will close faster and home will be fully yours.
Most of the bank will give you instant sanction of Home Loan based on your Eligibility. This doesn’t mean you will compulsory that you will get a home loan for that property.
Home Loan Sanction means you are eligible for certain amount of Loan. During the sanction whey would check following things
Your Existing EMI
Your Credit score
If all are in place, then banks you issue a Sanction letter. Then you can go with legality Check and technicality check of the property you have selected. If everything is clear then you would get a loan. In case any of it fails then you have sanction letter and you have 3–12 months validity based on bank. You can search for one more property and continue with the loan.
Banks also have a Pre-approved loan concept. Where in banks would issue a sanction letter and later you have certain time to finalize the property.
Advantage of Pre-Approval Loans is
You get to know your Loan eligibility
You reduce one step of loan before you finalize the property
Disadvantages of Pre-approval loans is :
You have to pay the processing fee.
It has 3–12 months validity so you have to finalize the property with in that span or else you need to submit all the documents again. Trust me selecting the first home is not so easy and not so fast unless you are lucky.
Most of the case you might have to submit the KYC documents again.
I would recommend you check your eligibility on home loan comparison portals like LoanYantra | Get Home Loan Online and then you select the property. Instead of going for pre-approvals.
If you plan your loan well, you will be able to close it faster and home will be fully yours.