Top 10 Home Buying tips

Top 10 Home Buying tips


1. Don’t buy home for short duration stay

If you are planning to buy a home for short duration stay for 2-3 years and if you can't commit to remaining in one place for at least few years, then owning a home is probably not for you. With the registration fees and other transaction costs of buying and selling a home, you may end up losing money if you sell within a short period even a rising real estate market. Suppose, if prices of properties are falling you may end up with huge loss. So before going to buy a house/apartment first decide how long you are going to reside there, if your answer is long term say above 5 years, go ahead and buy the house otherwise drop your idea.

2. Explore the possibility of availing a loan at a competitive rate

Since you most likely will need to get a loan to buy a house, you must make sure that you will be able get the loan as much as required for the full/part payment of the property value. Please note that, the interest rate varies from Bank to Banks and now after NBFCs started competitive rates, you have more choices. In this context, you should also check other fees such as processing fee, documentation fee, and any prepayment penalty associated with the home loan. At the same time do research on the best option that banks offer. Home loan is a huge amount and hence even a difference of 0.5% can make big difference in pay-outs. You should also get the maximum tax benefit from your home loan. See if you can make your spouse as co-applicant and avail the tax benefits. You will simply double the tax benefits if there are two co-applicants.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about 30-40% of your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford. This is one of the most crucial decisions. Know the amount of loan you can afford. The banks may sanction loan based on your income but you should look at your monthly expenditure and see if you can afford the maximum that banks offers.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest loans that require a down payment of 10-20% of the value of the property you are planning to buy. In case you are unable to find source to this basic 10-20%, you may have to pay interest at higher rates.

5. Buy in a good location with all basic facilities

The most important part of a real estate piece is location. Even if you have to pay little extra, you should do it. The most important aspect of the right location is future prospect of big construction such as mall, IT Park, company, SEZ, airport, railway lines, or any other commercial space. Apart from this, the points to consider in any location are the following: Availability of civic amenities such as power, water, roads, calm environment, and closeness to main road, markets, shopping malls, schools, and hospitals etc, possibility of renting out your home if required. Good schools located nearby are an added advantage. In most areas, this advice applies even if you don't have school-age children; the reason is that, when it comes time to sell, you will realize that good schools and other basic facilities around are a top priority for many home buyers, thus helping to boost property values.

6. Do your homework before taking the decision

Do your home work before decided to buy a home and to ensure that the home you are planning to buy is suitable for your living at least for the coming 10-15 years and also have enough space to accommodate the expected increases in the number of family members. Also, ensue that the prices you are paying is worth to the facility provided.

7. Avail the service of a professional

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the entire process.

8. Select a builder with good track records

Before buying an apartment, please check the credibility of the builder and also make sure that, the builder has delivered all his past projects within the time limit with specified quality. In case you observed any delay or failure form the part of the builder to deliver the project don’t buy apartment from that builder. You have to have long term view of your investment. The property should be stable enough to last 40-50 years so that if you want to sell it and buy another home, you should be able to do it without much hassle. This is where buying from a reputed builder becomes more important. At the same time, explore the possibilities of linking your loan disbursal based on the progress of the construction work instead of pre-determined specified timings.

9. Verification of Legal Documents

Always look for apartments which are pre-approved by the financial institutions. This will one way ensure that, the property title and other documents are verified and approved by the financial institutions and they are supposed to be in order in all respects. Also insist the builder to show you the original title document of the land. For your safety and to ensure that, all documents are in order, you need to engage a lawyer who can search and verify the title and associated documents before you buy the home. You should get everything in writing from the builder. The sale deed should be duly signed by both the buyer and the seller. You should also ensure that lay out plan, building plan, number of floors, and ownership documents are in order and builder has got necessary approval from the concerned Government authorities. You should take legal help from a lawyer if you do not understand any document. Apart from these documents, make sure to get the encumbrance certificates from the sub-registrar. The encumbrance certificate tells you the details of property dealings and other ownership transfer of the property for the last 30 years. All taxes (including land tax and panchayat/municipal/corporation tax) should have been paid on the property. You should get the proof of paying this tax from the builder; also verify the, the NOC certificate from water and electricity authorities.

10. Hire the service of an expert civil engineer

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house/apartment is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road

What is DTAA (Double Taxation Avoidance Agreements)?

Double Taxation Relief

The incidence of Double taxation occurs when an individual is required to pay tax more than one time for the same income he generated from a country different from his home country. Double taxation occurs mainly due to overlapping tax laws and regulations of the countries where an individual operates his business or employs. . Consistent with the practice adopted in most of the countries in the world that have taken to levy tax on income / capital, India has adopted the system under which Income Tax on residents is imposed on the "total world income" i.e. income earned anywhere in the world. Whereas a tax payer’s own country (referred to as home country) has a sovereign right to tax him, the source of income may be in some other country (referred to as host country) which country also claims a right to tax the income arising in that country. The result is that income arising to a resident out of India is subjected to tax in India as it is part of total world income and, also in host country which provides the source for that income.

India has entered into Avoidance of Double Taxation Agreement (DTAA) with 65 countries including countries like U.S.A., U.K., Japan, France, Germany, etc. The agreement provides relief from the double taxation in respect of incomes by providing exemption and also by providing credits for taxes paid in one of the countries. These treaties are based on the general principles laid down in the model draft of the Organization for Economic Cooperation and Development (OECD) with suitable modifications as agreed to by the other contracting countries. In case of countries with which India has double taxation avoidance agreements, the tax rates are determined by such agreements and vary between countries. Apart from providing ways and means to avoid double taxation of same income, the agreements generally provide for other matters of common interest of the two countries such as exchange of information, mutual assistance procedure for resolution of disputes and for mutual assistance in effecting recovery of taxes

Unilateral Relief

The Indian government provides relief from double taxation irrespective of whether there is a DTAA between India and the other country concerned, if
1.The person or company has been a resident of India in the previous year.
2.The same income must be accrued to and received by the tax payer outside India in the previous year.
3.The income should have been taxed in India and in another country with which there is no tax treaty.
4.The person or company has paid tax under the laws of the foreign country concerned.