HOME LOANS AND INSURANCE – WHERE IS THE CATCH !!!


The moment the home loan is sanctioned the borrower is elated as if he got a bumper prize but the truth is that he has entered into an agreement of longstanding labour.

Majority of the financial institutions or the managers at the banks or the banks itself will have an INSURANCE POLICY attached to the HOME LOANS.

Some banks/financial institutions add a single premium to the loan amount and the unsuspecting, ignorant and dumb buyers sign the home loan agreement, which includes the insurance premium not only on the life of the borrower but also for the property.

The insurance premium varies on the amount borrowed and the age of the borrower and in general, the premium on an average is around Rs.50,000/- for Rs.25 to 50 lakhs.

Even though the borrower has covered his life with insurance from some other company, the lending institution/bank will provide insurance for the borrower as well as the property, so as to ensure that the bank money is NOT LOST.

The insurance premium is added to the home loan and the borrower pays interest on this for many numbers of years.

This premium along with other charges, taxes, clubhouse, deposits and statutory duties forms around 20% to 25%.  The borrower pays interest on these additional amounts.  It is a lifetime punishment for the borrower.

 

FRAUD AND CHEATING UNDER THE NAME OF CLUBHOUSE MEMBERSHIP, BESCOM DEPOSIT, BWSSB DEPOSIT AND LEGAL CHARGES OR EXPENSES—-CHECK-THE ADDITIONAL EXPENSES AND CHARGES WHILE BUYING A SITE OR APARTMENT


Spicy Ads in newspapers and on the internet and melodious and spicy callers on phone trying to sell/market the properties is the order of the day.

Buyers are not aware of the charges, taxes, deposits and other additions to the prices quoted by the sellers/builders and marketing agencies.

The following may be the some of the additions which are generally and usually hidden/concealed or not made public.

1). Club House. ( In general, the membership is not at all required for the majority of the buyers, but the builders’ force/compel the buyers to PAY FOR IT)

The average cost or charge is around Rs.50,000 to Rs.3,00,000/-

The buyers without any awareness pay this amount.  This forms a part of his loan.  The buyers pay interest for this unnecessary addition.

2). GST.

This is a statutory tax payable.

3). Electricity Deposit.

The deposit is calculated on the KV allocated or sanctioned as a whole to the project and is divided into each apartment based on the allocation.

Fraud and Cheating under the name and style of Deposit.

In general, all the sellers charge ABNORMAL deposits amounting anywhere between Rs.50,000/- to Rs.2,00,000/-

4). Water Supply Deposit.

This is levied on the builder by the supplier on the Pro-Rata basis, this deposit is charged for the whole complex or project.

Fraud and Cheating under the name and style of Deposit.

In general, all the sellers charge ABNORMAL deposits amounting anywhere between Rs.50,000/- to Rs.2,00,000/-

5). Legal Charges.

Major Fraud and Cheating Head.

Whose legal charges?

NO ADVOCATE OR LAWYER or LAW FIRM has paid any service tax on this head, which is illegally collected by the sellers/builders.

For Example, One housing complex has 100 apartments and the seller/builder charges Rs.30,000/- on an average as legal charges or expenses and collects the same from the property buyers and this amount totals around Rs,30,00,000/-

NONE OF THE ADVOCATES OR LAWYERS OR LAW FIRMS have ever shown this amount in their SERVICE TAX RETURNS NOR IN THEIR INCOME TAX RETURNS.  It is pocketed by XXXXXXXXXXXXXXXXXXXXXXXX. Great Cheating and Fraud.

6). There are few interesting characters/sellers/builders which charge or demand payment for the POWER GENERATOR in the complex.

It is generally between Rs.25,000/- to Rs.75,000/-

In addition, there are statutory or mandatory duties like Stamp Duty, Cess and Registration Fee must be borne by the buyers at the prescribed structure.

All the aforesaid taxes, charges, deposits (legal and illegal) works out at around 20% above the price quoted in the newspapers and the offered or quoted price.

NOTHING IS FREE.

EVEN THE WORD FREE IS NOT FREE.

The buyers must pay for all the services including transportation for the inspection, home loan mela venue rent, coffee, tea, soft drinks, sweet talk, brochure and what not.

ANYTHING AND EVERYTHING is CHARGEABLE.  NOTHING IF FREE.

DOCUMENTS AND TAXES – GENERAL LIST FOR THE PURCHASE OF PROPERTIES


Transactions in immovable property are carried out by parties in properties containing the following elements:

GENERAL REQUIREMENTS

(All approvals, NOC, Licenses, Documents, Provisions, Rules, Regulations, Laws, Taxes, Charges, Fees, and Regulations are not applicable to all the properties.  Specific Requirements or eligibility or statutory documents for specific properties.)

Generic list

OWNERSHIP

Original owner.

Intermediary owners.

Promoter.

Developer.

Contractor.

Investor.

Marketing agency.

Prospective buyer.

Lending institutions.

Association of Owners.

Agreement Holder.

GPA Holder.

NATURE OF PROPERTIES

The following are the nature of properties:

Land.

Houses.

Flats/apartments.

Infrastructure.

Special amenities and facilities.

Sites.

Industrial Sheds and Lands.

Commercial Complexes.

RIGHTS

The following are the nature of rights:

Ownership.

Possession.

Leasehold rights.

Rights under a mortgage.

Easement.

License.

Lien.

SUCCESSION

There are two types of inheritance and succession:

Intestate succession i.e. by operation of personal laws.

Testamentary succession i.e. through wills.

TITLE

Three-tier legal scrutiny of titles is essential:

In the hands of the present owner.

In the hands of the prospective buyer for his benefits.

For the benefit of the lending institutions.

Issuing public notice in leading English and vernacular newspapers, inviting objections or claims, is recommended in all cases.

CHARGES AND OTHER LEVIES

1). Betterment Charges or Improvement Charges.

2). Lake Development Charges.

3). Solid Waste Charges (Municipal Area)

4). BWSSB charges or cell or penalty on buildings without OC.

TAXES

Properties attract the following taxation:

1) Gift Tax, Wealth Tax or any prevailing or applicable taxes.

2) GST (on the transfer of goods in contracts).

3) Income tax on income and capital gains.

4) Tax exemptions and deductions under special schemes for housing, economic zones etc.

5). Municipal Taxes or Property Taxes.

TAXES AND DUTIES AT THE TIME OF REGISTRATION

1). Stamp Duty.

2). Registration Fee.

MODES OF CONVEYANCE OR TRANSFER

The following are various modes by means of which any person can acquire any type of right, title, and interest in an immovable property:

  1. Direct purchase/transfer.
  2. Gift/settlement.
  3. Will/probate/succession certificate.
  4. Intestate succession and inheritance.
  5. Partition, release, family settlement, reunion.
  6. Family Arrangement.
  7. Partition among co-owners.
  8. Property as a capital contribution in a firm.
  9. Distribution of assets in a firm on reconstitution and on the dissolution of a firm.
  10. Private trust.
  11. Amalgamation, merger, de-merger and liquidation of companies.
  12. Rights and interests held through shares in companies, cooperative society etc.
  13. Adverse possession.
  14. Awards in arbitration proceedings.
  15. Orders and decrees of courts of law and other statutory authorities including Lok Adalats.
  16. By operation of various provisions of personal laws relating to Hindus, Mohammedans, Christians, Sikhs, Parsis, Jews etc.
  17. By operation of law under laws relating to other persons and legal entities including cooperative societies, other societies including mutual benefit societies and other Association of Persons.
  18. BDA sites.
  19. Land acquisition.

20.By grants were given or orders passed by Governments and statutory authorities.

  1. By a Conciliation, Order passed under section 19(v) (i) and (ii) read with Section 21 of the Legal Services Authority Act, 1977. Such an order can be passed by a High Court Judge and other competent authorities by which rights and interests between contending parties can be settled and established.

TRACING OF TITLES

The tracing of titles should begin with the tracing of the earliest documents available pertaining to the property which, probably, will pertain to the documents obtained by the first owner.

First owner: The earliest original documents, records, the order of a court or government or a statutory authority by which the rights to an immovable property is vested with the first owner.

Intermediary parties: The subsequent documents, records or orders of the type mentioned above, duly recording in a chronological unbroken sequence of legal acts, events, identifying and tracing the title in the hands of the various intermediate owners till the last owner i.e., the transferor.

Current owner: The documents of title with the current owner i.e., transferor, including the document by means of which he has acquired title and other documents like the Khatha, Encumbrance Certificate, and tax paid receipts up-to-date.

An investigation of these records must be made before a certification of these records by an advocate. The investigation is the verification of the actual existence of these records in the books/registers of the various departments mentioned above. Certification, on the other hand, is done only on the basis of records produced before an advocate on an apparent examination of the same by him.

CHARGES AND ENCUMBRANCE OF THE PROPERTY

Encumbrance Certificate

Various kinds of transactions and matters mentioned below will not be entered in Book-I maintained by Sub-Registrars and hence will not appear in an encumbrance certificate furnished either in Form 15 or in Form 16 by the Sub-Registrar exercising relevant jurisdiction. Hence, other modes of evidence and documentation are required to confirm the title. The following are the transactions and matters not included in the encumbrance certificate:

  1. Oral tenancy.
  2. Litigation in courts (Lis Pendens).
  3. Tax liabilities
  4. Unregistered mortgage by deposit of title deeds.
  5. Prior unregistered agreement
  6. 6.Oral Partition/Family Arrangement.
  1. Oral gift under Mohammedan Law.
  2. Unregistered will.
  3. Rights and interests held through partnership firms, Association of Persons, societies including cooperative societies, companies etc.
  4. Unregistered agreements, MOUs, the general power of attorney etc.
  5. Rights of third parties not directly recorded in documents.
  6. Orders and decrees of courts, statutory and tax authorities.
  7. Rights through possession, part performance, the equitable title under Section 53-A of the Transfer of Property Act, 1882.
  8. Physical Possession of the property and grounds or claims of possession.

SAFEGUARDS

Many safeguards must be taken to ensure the vesting of a clear, absolute and marketable title in the hands of the purchaser or any person acquiring any interest in the property in question in any manner whatsoever. Some of the safeguards are mentioned below:

  1. Obtain court permission for sale of minor’s share.
  2. Make all major co-parceners parties in case of Hindu Undivided Family.
  3. Ensure compliance with legal formalities by companies, other persons, and legal entities.
  4. Examine Government records, documents, and papers.
  5. Verify original documents of title and lodge the same with a common custodian in Escrow.
  6. Issue public notice through newspapers.
  7. Verify marketability of title.
  8. Make all other interested parties as parties in the transaction.
  9. Obtain confirmations and affirmations through affidavits.
  10. Obtain possession in part performance.
  11. Appropriate court action for injunctions, specific performance etc.,
  12. Resolve disputes through arbitration or through the family arrangement.
  13. Avail the benefit of other legal remedies and reliefs as provided under different transactions, different laws apply.
  14. Obtain the general power of attorney to derive powers and authority to carry out all acts in general and certain specified acts, deeds and things in relation to the immovable properties and the rights, interests, and title relating thereto.
  15. Register agreements and get attestation by Notary Public on documents.
  16. Obtain Encumbrance Certificates, tax paid receipts and certified copies of other papers and records held by statutory authorities.
  17. Verify if there are any restrictions relating to land granted including restrictions in respect of land of Scheduled Castes and Scheduled Tribes.
  18. Protect the rights or possession under section 145 of the Criminal Procedure Code from statutory authorities.
  19. Obtain Succession Certificate from the Jurisdictional Court, in case of intestate succession.
  20. Obtain Family Tree from the jurisdictional revenue authority appointed by the State Governments with powers delegated to issue the same.

* * *

Vital documents for acquiring BMP, BDA property

The following are the documents of title with respect to properties located within the jurisdiction of the Bangalore Mahanagara Palike which are to be obtained from the present owners and verified before purchase/acquisition by lease, mortgage:

Primary documents

1) Parent Deed by means of which the present owner/owners acquired title to the property.

2) Building sanction plan issued by the Chief Executive Engineer, BBMP, BDA, BMRDA or local planning authority, in case of a building constructed on the property.

Secondary documents

1) Khatha Certificate issued by the BBMP, BDA, GP in the name of the present owner/owners.

2) Khatha Extract issued by the BBMP, BDA, and GP.

3) Tax paid receipts issued by the BBMP/BDA/GP evidencing payment of taxes in respect of the property.

4) P.T. Sheet and Chalta issued by the City Survey Department containing the sketch of the property in question and its measurements.

5) Encumbrance Certificate (preferably in Form 15) issued by the Sub-Registrar exercising relevant jurisdiction over the property for a period of not less than 30 years.

6) Copy of the plan sanction issued by the BBMP/BDA/Local Planning Authority/BMRDA for the construction of a house or residential or commercial multi-storeyed building.

7) Copy of the Commencement Certificate of the BBMP/BDA/BMRDA issuing permission to commence construction of a multi-storeyed building.

8) Copy of the occupancy certificate issued by the Palike certifying that the building constructed on the schedule property is in accordance with the sanctioned plan.

9) Copy of the receipt evidencing payment of compounding fees to the BBMP or Revenue Authorities or Municipal Corporation or Town Municipal Council for regularising the deviation, if any, made from the building sanction plan.

10) Copy of the No Objection Certificate from the Fire and Emergency Services, HAL, AAI, KSPCB, BESCOM or other electricity suppliers, Water Supply (rural) or BWSSB, Coastal Area Authority(if applicable) Department.

11) Copy of the clearance to operate lifts in the building issued by the Chief Executive Engineer, BBMP, and Electrical Inspectorate.

12) Copy of the NOC/CFE/CFO/Clearance Certificate issued by the Pollution Control Board.

13) Copy of the Endorsement issued by the Director, Fire Services Department, by means of letter addressed by him to the BBMP/BMRDA/BDA or LPA stating that he has no objection to the  issuing an occupancy certificate in respect of building constructed on the property.

14) No Objection Certificate from the Airport Authority of India.

The documents mentioned in (6), (7), (8), (9), (10), (11), (12), (13) and (14) usually arise in the case of multi-storeyed buildings and large layouts.

BDA jurisdiction

The following are the documents of title with respect to properties allotted and/or sold by the Bangalore Development Authority to the present owner/owners which need to be obtained by every prospective purchaser:

PRIMARY DOCUMENTS

Allotment letter issued by the Bangalore Development Authority in favour of the present owner in respect of the property.

Possession letter issued by the Bangalore Development Authority in favour of the present owner in respect of the property, recording handing over of possession of the property to the present owner.

Absolute Sale Deed executed and registered in favour of the present owner by the Bangalore Development Authority in respect of the property after the expiry of 10 years from the date of allotment.

Building sanction plan issued by the Bangalore Development Authority where a building has been constructed on the property.

Secondary documents

Khatha Certificate issued by the Bangalore Development Authority in the name of the present owner/owners.

Tax paid receipts issued by the Bangalore Development Authority evidencing payment of taxes in respect of the property up-to-date.

Encumbrance Certificate (preferably in Form 15) issued by the Sub-Registrar exercising relevant jurisdiction from the date of allotment up-to-date.

APPROVALS/LICENSES/PERMISSION/CONSENTS/ORDERS/NOC

1). DC Conversion Order for the change of land use.

2). Change of Land Use from BDA, MUDA/BMRDA or Any other LPA.

3). Developmentpment Plan from BDA/BMRDA/LPA.

4). Sanctioned Building Plan from Municipal Corporations or TMC or GP as applicable.

5). NOC from BESCOM ( in case of Bangalore), BWSSB ( in case of Bangalore) AAI, HAL, GSI, Fire and Emergency Services, LDA, CFE and CFO from KSPCB.

6). In case of Coastal Areas, appropriate orders from Local Bodies.

7). NOC from KIADB, KHB, LAO, NH and BDA.

8). NOC Under Sec 79A and 79B, 7 and 7A and PTCL Acts. (specifically for agricultural lands)

9). RERA APPROVAL.

 

 

PROPERTY GUIDANCE VALUE REVISED OR INCREASED IN BANGALORE URBAN AND RURAL DISTRICT WITH 15 DAYS NOTICE TO FILE OBJECTIONS


The State Government has increased the Guidance Value or the Circle Rates or the Market Price of the property in Bangalore Urban, Bangalore Rural District and Ramnagar District with 15 days notice to submit the objections, if any, with supporting documents or evidence.

In some areas, the increase is very steep and on an average the increase is around 10% only.  The consequent effect will be strain the buyers.  With this increase, the Income Tax, VAT, Service TAx and Capital Gains tax will also goes up, indirectly.

The Income Tax department is also scrutinising many transactions, wherein the buyers in collusion with the sellers/agents/builders have underquoted the property consideration below the guidance value.  The department may initiate penal action on such buyers and sellers soon. The Guidance Value is treated as the Fair Market Value.  The property value or consideration must not be less than the guidance value as per the Finance Act.

BMRDA SITES/PROPERTY TAXES


THE TAXES ON PROPERTY ON BMRDA SITES ARE PAYABLE AT THE CONCERNED VILLAGE PANCHAYAT OFFICES SITUATED IN THE RESPECTIVE VILLAGES.

IF THE PROPERTY OR LAYOUT IS SITUATED IN THE  AMALGAMATED BBMP VILLAGE LIST,THEN THE TAX IS PAYABLE IN THE BBMP JURISDICTIONAL WARD OFFICES.

KATHA MUST BE ISSUED TO ALL BMRDA APPROVED LAYOUT SITES WHICH ARE NOW IN BBMP, IF THERE ARE NO LITIGATION OR ANY STAY ORDER OR ANY INQUIRY BY ANY DEPARTMENT.