I recently graduated from a university in US and will be starting work soon. Can I become a co-applicant or co-signer for a home loan with my father here in India? I want this because he is nearing retirement and will be getting a lesser amount as home loan. I want to co-apply with him so that he gets a sufficient loan amount.Is this possible or can you suggest a better alternative?
—Sudesh Rao Of course you can become a co-applicant (that’s the term we use in India rather then the term co-signer which is more commonly used in the US) with your father. It may not add much weight to your father’s sanction process though as most lenders would want to look at a track record of earning of at least two years before they consider your earnings for approving a much higher joint loan. Having said that, lenders definitely will make exceptions to the rule if you have graduated from well-known institutions and have a job with wellknown companies. It definitely is worth a try.
I have a plot in a colony. I need a loan of approximately ` 10 lakh for construction. I already have a personal loan. Please suggest the best way to get a loan for construction.
—Shivam Sood You will have to submit an
estimate of the total cost of construction, duly certified by an architect/civil engineer.
The loan will be released in parts, based on the progress of the construction. The lender may also insist on sending his own technical personnel to assess the progress of construction or may decide to rely on certificates/photographs submitted by you.
Some lenders are not comfortable funding self-constructed properties and hence, your choices will be limited. You can talk to all the standard lenders for availing a construction loan.
Your existing personal loan will also have an impact on your construction loan eligibility and the lender will calculate your eligibility based on the EMI being paid now and the room left to pay an additional EMI for another loan on the basis of your earnings. What are the tax implications if a person buys a house with a loan and sells it (a) within three years, (b) after three years? Further, what is the impact on benefits related to interest and capital repayment?
—Subodh Sharma If you sell a house within a period of three years from the date of taking possession, the difference between the cost price and the net price shall be treated as short-term capital gains and will be included in your other incomes and taxed accordingly. But, if the sale takes place after three years, then the profit shall be treated as long-term capital gains and will be taxed at 20% after indexation. You can save on long-term capital gains by investing the capital gains in another house property or bonds. In case you sell the house purchased with a loan
within a period of five years from the end of the financial year in which possession of the property was taken and claim tax benefits under Section 80 C in respect of the principal portion of the loan, all the deductions allowed in respect of the principal portion of such a loan will be treated as income of the year in which the house was sold.
A bank in its documentary requirements has asked for proof of the origin of own contribution. Is this
an accepted norm in the industry?
—Shikha Shah The bank definitely is interested in knowing how you are funding your down payment contribution. If you have borrowed for the purpose of making the down payment, it is likely to put pressure on you in the future and thus affect the servicing of the home loan.
Harsh Roongta is CEO, Apna Paisa. He can be reached at email@example.com