BUYER'S GUIDE
With almost two decades of glorious experience in creating real estate masterpieces in Vadodara and Ahmedabad. Pratham Enterprises was founded in 1997 with a clear vision to transform the way people perceive quality.
We believe a home is a reflection of your own self. That is why we construct every home with utmost precision, elegance and balance. We create spaces that blend in with the surroundings, exude vitality and aesthetic appeal by putting in our best efforts to achieve the desired standards.
At every stage of the construction process, you will see how we utilize quality craftsmanship and superior materials to create a residence that reflects your family’s lifestyle.
What are the benefits of investing in Vadodara, Ahmedabad?
Ahmedabad and Vadodara are considered as the lifelines of Gujarat and hearts of real estate investment. The main factors that attract the investors to invest in these two cities are – affordable realty prices, excellent connectivity, well-developed expressways connecting various parts of the state, the presence of superior infrastructural facilities, investment friendly climate, increased NRI investments, high return on investments and much more.
Apart from high development rate, booming industrial sector; Ahmedabad and Vadodara have also established themselves as a major retail and IT/ITeS destination. Moreover, these cities have an impressive infrastructure with a consistent supply of water and electricity. Owing to these factors, investors are choosing Ahmedabad and Vadodara as their base over other cities in the north as well as Western India.
FAQ
1. Documents need to be verified before investing in Immovable Property
The lawyer can be allowed to take inspection of all original documents pertaining to the property.
1.1. Which documents must be compulsorily registered?
The following documents are required to be registered compulsorily under the Indian Registration Act, 1908:
- (a) Every time the immovable property is sold/purchased, the agreement needs to be registered.
- (b) Instrument of gift of immovable property;
- (c) Other non-testamentary instruments which maintain or operate to create, declare, assign, limit or extinguish, whether in future or in present, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable property.
- (d) Non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of creation, declaration, assignment, limitation or extinction of any such right, title or interest;
- (e) Lease of immovable property from year to year or for any term exceeding one year or reserving a yearly rent. But the State Government may publish an order in official gazette exempting any district or a part of a district or a lease that does not exceed the term of five years and the annual rent of which does not exceed Rs. 50/-.
- (f) Non-testamentary instruments transferring or assigning any judgment or order of a court or any award when such judgment or order or award declaration or operates to create, declare assign, limit or extinguish, whether in future or in present, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards to or in immovable property.
- (g) Authorities to adopt a son that is not conferred by a will.
Regarding the authenticity of documents, you can take the help of an advocate for verification.
2. Knowing the sections of the building
2.1. How is floor space measured?
For both commercial and residential properties the calculation of the floor space measurement is the same. They are measured on the basis of the following three areas:
Carpet Area
This is a total internal area of premises measured from the internal walls.It does not include the space which is covered by the common areas such as lobby, lift, stairs, play area, etc. You can say it is the actual area that you get to use.
Built Up Area
This is the total area of premises measured from external perimeter wall surfaces and incorporates an allocation of common areas on the same floor excluding lift, core and fire stairs.
Super Built Up Area
This incorporates built up area but also includes a proportional allocation of all common areas including stairs, lift cores, ground floor lobby, and caretakers office/flat etc. throughout the entire building
2.2 What exactly do we mean by a Free Hold flat? What are the advantages and disadvantages, if any?
A freehold property (plot or a flat) is one where there is a whole and sole owner(s), ownership is full and unconditional (within the provisions of the laws of the land) and there is no lesser / lessee involved.
3. Queries related to Valuation of Property
3.1 What is meant by the valuation of property?
The valuation process evaluates the market value of the property. Demand and supply forces operating in the market, as well as other factors like type of property, quality of construction, its location, the local infrastructure available, maintenance, are all taken into consideration before the market value is decided.
3.2 Who is the appropriate authority for knowing the market value of the property?
The Sub-Registrar of the area, in whose jurisdiction the property is located, is the appropriate authority for knowing the market value of the property.
3.3 How often does the State Government issue a ready reckoner indicating the market value of properties?
A ready reckoner is usually published on the 1st day of January every year or at the end of a financial/budget year.
3.4 What is meant by the market value of the property and is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement?
The market value of the property as ascertained by the stamp duty authorities on the basis of a ”Ready Reckoner” which gives the per sq. meter value of each village, zone and sub-zone. The ready reckoner is normally published on 1st January of every year. The Stamp Duty is payable on the agreement value of the property or the market value whichever is higher. Usually, different rates for stamp duty are applicable for the residential and non-residential property. In Gujarat, the rate of stamp duty is 4.9% and 1% registration charges for both residential and commercial property.
4. Queries related to Registration Process
4.1 How much is the Registration Fees on sale of immovable property?
The registration fee in case of sale of immovable property is 1% in Gujarat of the market value.
4.2 Do I have to go personally for the registration?
It is advisable to go personally but in case it is not possible, a power of attorney can be issued to some other person. This Power of Attorney should mention all the relevant clauses and must be registered before the Sub Registrar.
4.3 Will someone escort us for the registration?
Yes, the POA holder of the developer is present at the member escorts our customers for registration.
4.4 When and where should a document be registered?
Every document which is required to be registered under the Registration Act, except a Will, should be presented at the office of Sub Registrar of Assurances for registration within the prescribed time of four months from the date of its execution. A document is registered with a sub-registrar appointed by the State Government, under the Indian Registration Act, 1908. It is advisable to register documents after the booking amount.
4.5 What are consequences of non-registration of a document?
An instrument, which is not registered, is inadmissible as evidence.
5. Queries related to Stamp Duty
5.1 What is Stamp Duty and who is liable to pay the Stamp Duty, the purchaser or the Developer?
Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. The document can be stamped online as well.
5.2 Which are the instruments that attract the payment of Stamp Duty?
The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.
5.3 Is Stamp Duty payable when a flat is from a relative to another relative by way of a gift?
Yes. Stamp duty has to be paid on the gift but the rate of duty is lower. In Gujarat, the sale of a flat attract levy of duty of 5% and a gift attracts levy of 2%.
5.4 What are the consequences of delay or non-payment of Stamp Duty on an instrument?
Delay in payment of stamp duty attracts penalty at the rate of 2% per month on the amount of the stamp duty that has to be paid, up to a maximum of twice the amount of the stamp duty payable. An instrument, which is not properly stamped, is inadmissible as evidence.
5.5 What is adjudication?
In case you wish to ascertain the correct stamp duty payable on an instrument, an application can be made to the Collector of Stamps.
The stamps are required to be purchased in the name of any one of the executors to the Instrument.
6. Queries related to power of attorney
6.1 Is a Power of Attorney (POA) revocable?
Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.
6.2 Can a Power of Attorney be issued to someone else to register the document?
Yes, the same is required to be registered in the office of the Sub Registrar in the city you are staying in.
6.3 Can a Power of attorney be issued to someone else to register the document in case of being out of the country?
Yes, the Power of Attorney Draft can be signed and attested by the Indian Consulate/ Indian Embassy/or local notary. Once the Power of Attorney is received in India, the same has to be submitted to the Collector of Stamps for adjudication. After the same is adjudicated the POA holder can submit the same at the time of registration of the document.
6.4 Types of Power of Attorneys?
- Special Power of Attorney &
- General Power of Attorney. Both can be revocable or irrevocable and should confer the authority as desired by the person issuing the POA.
What is the difference between a general and special power of attorney A general power of attorney gives broad authorizations to the agent. The agent may be able to make medical decisions, legal choices, or financial or business decisions. A special power of attorney narrows what choices the agent can make. You can even make several different POAs, with different agents for each. For example, you could create a special power of attorney which only allows your spouse to make medical decisions on your behalf. You could create another POA which would grant a business partner the ability to use certain assets to care for your business in the event you become incapacitated.
In other words, special powers of attorney allow you to be more specific.
7. Queries related to License Agreement
7.1 Is registration of a Leave and License mandatory and what are the consequences if the same is not registered?
As per Section 55 of the Gujarat Rent Control Act, 1999 registration of Leave and License Agreement is compulsory and it is the responsibility of the landlord to ensure registration. If the same is not registered, the landlord would be prosecuted and on conviction, he’s subject to up to three months imprisonment or be subject to fine not exceeding Rs.5000/- or with both. Further in the absence of a Registered Agreement, the contention of the tenant, about the terms and conditions on which the premises have been given to him by the landlord shall prevail unless otherwise proved.
7.2 Is the leave and license agreement generally signed in multiples of 11 months or 12 months? Is there any stipulation of time?
Formerly leave and license agreements used to be signed in multiples of 11 months or 12 months. After the Gujarat Rent Control Act, 1999 came into force from 1.3.2000 there is no stipulation as to whether leave and license agreement should be in multiples of 11 or 12 months, and there is no stipulation as to total time period. However, leave and license agreement generally does not exceed 3-5 years. If it does, it’s then called a lease deed.
7.3 Is registration of a Leave and License mandatory and what are the consequences if the same is not registered?
As per Section 55 of the Gujarat Rent Control Act, 1999 registration of Leave and License Agreement is compulsory and it is the responsibility of the landlord to ensure registration. If the same is not registered, the landlord would be prosecuted and on conviction, he’s subject to up to three months imprisonment or be subject to fine not exceeding Rs.5000/- or with both. Further in the absence of a Registered Agreement, the contention of the tenant, about the terms and conditions on which the premises have been given to him by the landlord shall prevail unless otherwise proved.
7.4 What is the difference between lease and leave and license agreement?
Lease is defined under Section 105 of The Transfer of Property Act, 1882 and a lease of immovable property is a transfer of a right to enjoy such property for a certain time or in time without end on consideration to be rendered periodically or on specified occasions, while a license is defined in Section 52 of the Indian Easement Act, 1882, and it does not create any interest in the premises in favor of licensee excepting a mere right to use and occupy the premises for a limited duration. Both documents have now to be registered. A lease deed is required to be stamped and registered. However, the stamp duty payable on thelease is more than on Leave and License for a period up to three years. For a period exceeding three years, the stamp duty is same for both agreements. The implications of entering into a lease agreement would be:
i) That stamp duty would have to be paid
ii) That the document would have to be registered
iii) That Municipal taxes may go up
iv) Of course, Income-tax would have to be paid on your income; and
v) The question of Wealth-tax would have to be considered. One property is exempt from Wealth-tax. However, if you have any other property, this implication would have to be considered.
8. For Non Resident Indians
8.1 Can NRIs and Overseas Corporate Bodies (OCB) Invest in India?
NRIs and OCBs can make investments in India in consonance with Indian law, RBI rules and regulations as well as other regulations set forth by the Foreign Investment Promotion Board (FIPB). NRIs and OCBs can make up to 100% equity investment in real estate sector and the nation’s civil aviation sector. Further, all investments, except for the real estate investments, are fully repatriable. For real estate investments, the lock-in period on original investment is 3 years.
8.2 Can NRIs obtain loans for buying a house/flat for residential purpose from financial institutions providing housing finance?
Reserve Bank has granted general permission to certain financial institutions deals in housing finance to grant housing loans to non-resident Indians for the acquisition of houses/flats for self-occupation subject to certain conditions.
8.3 What are the formalities required to be completed by a foreign citizen of Indian Origin for purchasing residential immovable property in India under the general permission?
They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transactions and bank certificate regarding the consideration paid.
8.4 Can such property be sold without the permission of Reserve Bank?
Yes, Reserve Bank has granted general permission for sale of such property. However whether the property is purchased by another foreign citizen of Indian Origin, funds towards the purchase consideration should either be remitted to India or paid out of balance in NRE/FCNR accounts
8.5 Can a foreign citizen of Indian Origin acquire or dispose of residential property by way of gift?
Yes. Reserve Bank has granted general permission to a foreign citizen of Indian Origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian Citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.
8.6 Can foreign citizen of Indian Origin acquire commercial properties in India?
Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizen of Indian Origin provided the purchase consideration is met either out of inward remittance in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in Form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
8.7 While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?
One can choose not to grant the Power of Attorney (POA) to the developers. However, this will mandate the mailing of all documents to your foreign residence and associated time delays.
8.8 What are the criteria regarding avail of home loans for NRIs in India?
According to Reserve Bank guidelines for NRIs, the loan amount shall not exceed 80% of the cost of the dwelling unit, also depending upon the bank norms. Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
8.9 Repayment of the loan
Repayment of the loan, comprising the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
8.10 Can an NRI give a Power of Attorney to a person in India for completion of loan formalities on their behalf?
Yes. We very well understand that as an NRI you have a different set of needs with respect to your real estate management and investment requirements and we also understand that it needs special set of services to cater to your requirements. The good news from India is that government has allowed 100% revivalfor NRIs. Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd. etc. to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions.
Home Loans
Tax Benefits
I – For Indian Residents
Availing a home loan comes with multiple benefits. Home loans let you achieve your goal of buying a new home and make you eligible for tax benefits. These tax benefits can contribute towards your EMI flow and savings. Take a look at the following points and calculate your tax benefits based on your loan amount.
The home loan borrower enjoys Tax Benefits on both Interest paid & the Principal re-paid. Under Section 24(d) of Income Tax, the deduction of interest payable on the home loan is up to a maximum of Rs. 1, 50,000.
Under Section 80(c) of Income Tax, thePrincipal amount for the repayment ofloan along with other savings & investments is eligible for tax deduction up to a maximum limit of Rs. 1, 00,000.
II – For Non Resident Indians
Below we have listed key tax benefits of taking NRI home loans for buying properties in India
1) You are only eligible for tax benefits if you pay income tax in India i.e. you have additional income in India e.g. rental, dividend or others. Since, it’s not mandatory for NRIs to file income tax in India and you may not be paying, but think about it for future income e.g. rental income from your house in future.
2) If you don’t have any income in India then you don’t need to pay any income tax.
3) Deduction of up to 2 lakh INR is allowed from your taxable income towards the interest payment of your NRI home loan for a self-occupied property.
4) If it’s not a self-occupied property, there is no limit on deduction i.e if you paid 3 lakh INR as interest on your home loan you can deduct all of them from your taxable income.
5) The deduction on interest payment reduced to 30,000 from 2 lakh if the house is not acquired or constructed within 3 years of taking a home loan. This is now increased to 5 years from FYI 2016-17 and only applicable for self-occupied property.
6) If you are not living in the house because you are living somewhere else due to your employment e.g. NRI, the maximum limit is still 2 lakh INR and not unlimited as in the case of rented house.
7) The deduction on interest paid for a home loan is available under section 24.
8) You must file income tax returns in India to claim any tax benefits of NRI home loans.
9) You can claim up to 1.5 lakh INR on the principle component of EMI under section 80C.
10) You can claim additional 50K on interest paid on EMI if you are a first-time buyer and took the loan in FY 2016-17.
11) You can also claim stamp duty and registration charges paid under section 80C.
All the information provided for the ‘Buyer’s Guide’ is published in good faith and for the general information purpose only. Pratham Enterprises does not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information you find on this website is strictly at your own risk. Pratham Enterprises will not be liable for any losses and/or damages in connection with the use of our ‘Buyer’s guide’.