I am planning to buy a bank auction property from an agent. What precautions must I take?
—DL Mehta Please involve a good lawyer before you bid for any such property. Before you bid, please make sure that the bank has actually taken possession of the property. It is also advisable to find out the credentials of the person whose property the bank is selling so as to ensure that you do not have any problems after purchasing the property, as he can create problems when you get possession. In case the property is unusually cheap, there is very high probability of there being more legal issues.
If the property (for which I have taken a home loan) goes under some kind of legal dispute or the builder stops construction, what will happen to the loan? Will I need to keep paying the EMI? How will the property insurance help in such cases?
—Praveen Sinha While the bank’s approval is prima facie a good indicator of the legal title of the property, it is in your own interest to do your own due diligence before buying it, preferably through a lawyer who is an expert in these matters. Basically it is the buyer (that is, you) who has to bear the risk/loss arising out of defect in the title or delay in construction of the property. Title insurance is still not available in India.
Remember, you will need to pay back the loan if things go wrong irrespective of the bank’s approval of the property. The bank’s prime facie approval does not amount to any sort of guarantee, which will be far more expensive.
Your liability to service your home loan is independent of your inability to get possession of the property either due to legal dispute or fault on the part of the builder.
The bank does not take the responsibility of any delay made by the builder in construction due to any reason. You will have to continue paying the pre-EMI to avoid becoming a defaulter. The builder generally will not compensate you for the losses due to delay in construction unless specified by him in the agreement.
Property insurance does not cover the risks on matters pertaining to delay due to the builder’s fault or a legal dispute. The property insurance covers damage or destruction of the property because of some mishap. Paying the EMI or pre-EMI interest ensures your credit history is not spoiled. I stay on rent and would like to take a loan to buy a house in the name of my wife. Am I eligible for a loan or tax benefits?
—Hasan Ali You can get a loan if your income can justify the same. Since the property will be registered in your wife’s name, she will have to be a co-borrower.