I am buying my sister’s apartment. A PSU bank has rejected the loan saying that they will not approve this sale transaction. Please let me know if a sister can sell the property to her brother.
— Piyush Malhotra The value of the sale transaction between the two of you will be subject to special scrutiny as your lender may not be very comfortable giving you the loan. Since the transaction in question will be between close relatives, the lender will want to rule out a sham transaction to raise money at low interest rates.
Yes, you c an c er t ai nly approach another bank, but you will have to take your lender into confidence about buying the property from a close relative. If the transaction is genuine and as per the prevailing market rate, then getting a loan will not be a problem.
I purchased a new flat two years ago. But now I want to sell it and purchase a new flat in another location (I have taken a home loan of ` 15 lakh). Is it possible to buy a new property by selling an existing one? What are the procedures and tax implications?
— Varun Sridhar Yes, you can sell your existing flat, but you will need the bank’s consent. This consent letter will typically provide the amount, on payment of which the outstanding loan will be fully paid off, and the bank will release the property documents. This amount includes the prepayment charge (presently payable only on fixed rate loans and on dual rate loans when they are in the fixed rate stage of the loan), if any, chargeable by your bank, and should list the documents held by them that will be released on payment of the stated amount. This amount mentioned in the certificate is typically calculated as on a future date, to give time to the buyer to arrange the payment.
If you sell a house within a period of three years from the
date of taking possession of it, the difference between the cost price and the net price shall be treated as short-term capital gains. This will be taxed at the rates applicable.
In case you sell the house purchased within a period of five years from the date on which it was purchased, with a loan, and you had availed the tax benefits under section 80 C in respect of capital portion of loan repayment, the deductions allowed in respect of such property will be treated as income of the year in which this house is sold. Please note that there is no such provision of treating the interest benefits claimed earlier as income in the year such a property is sold.
I need to purchase land worth ` 15 lakh and build a house on the plot immediately. The construction cost will be roughly around ` 10 lakh. Can I get a loan for both plot and construction? Will I also get a tax exemption?
— Abhishek Kothari You can avail a composite loan which is a loan taken for selfconstruction of a house. The loan is given to finance cost of land as well as cost of construction of property on such plots of land. You will have to submit an estimate of the total cost of construction, certified by an architect/civil engineer.
The cost of the plot to you or the current market value, whichever is lower, will be taken into account to work out the total cost of the project, provided you commence the construction within a reasonable time after purchase of the plot.
The bank will determine the home loan amount based on the total cost comprising construction cost and cost of the plot. The loan will be released in parts, based on the progress of the construction, and after you have brought in your full contribution. The bank may insist on sending its own technical personnel to assess the progress of construction or may rely on certificates/photographs submitted by you.
Some banks are not comfortable funding self-constructed properties, so choose your lender wisely. The tax benefits will be available only from the year in which the construction is completed.
Harsh Roongta is CEO, Apna Paisa. He can be reached at email@example.com