CHEQUE BOOK

HT Estates - - HTESTATES - Harsh Roongta

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 ceo@ap­na­paisa.com

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