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Sunday, 11 November 2012

Ways to buy a home and SARFAESI Act,2002

3.Buying a property auctioned by the banks:


When people default on their monthly EMI's for the property bought with home loans, banks repossess these properties and auction them off to recoup their losses and bad loans using the SARFAESI ACT 2002.

What is SARFAEST ACT 2002?

Prior to 1993, the banks had to approach civil courts for recovery of dues. This process was the time consuming and the fund was blocked in the litigation. Civil courts failed to deliver both in ascertainment of dues and execution of decree.

Recovery of debts due to banks and financial institutions(RDDBFI) Act 1993 brought the time span for adjudication of dues. The problem of ascertainment of dues was solved but failed to deliver in execution if decree.
In late 2002, The parliament passed the Act Sarfaest , which extends to the whole of India, giving banks the power to aggressively recover loans from defaulters by seizing their assets. 

 SARFAEST Act 2002 provides a procedure by which banks can serve notice to a borrower for payment of a defaulted loan. In the event of non- compliance, the bank may proceed with actions to take possession and dispose of the aspects.

The Act deal with three aspects.

1. Enforcement of security interest by secured creditor(Banks/Financial Institutions).

2.Transfer of non-performing assets to assets reconstruction company, which will then dispose of those assets and realize the proceeds.

3. To provide a legal frame work for securitization of assets.

This act successfully solved the problem of ascertainment of dues and execution of decree.

1.This Act lays the emphasis on recovery of the money, even without the intervention of court.

2.The banks were empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured assets.

3.The role of the court was limited to challenge the measures by way of appeal, that too on deposit of 75% of amount claimed on the notice.

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Ways to buy a home and SARFAESI Act,2002

Buying a resale property:

Both buying or building a home and marrying off one's daughter, are the daunting tasks on earth.

Unlike new property, buying old properties involve more risks. It involves many legal and other procedural requirements.

First of all you need to select a best place and property then follow the steps given below.

1. Consult Experts:-

It is ideal to engage a good real estate agent to locate a resale property. Most real estate agents charge fee and also help with registration, payment of stamp duty and other paper work involved in the purchase of resale property.
Taking the help of a good lawyer would also help to make sure that things are clear legally.

2.Title of the property:-

Establish the title of the property seller, whether she/he is the real owner of the property or has been given the power of attorney to transact the deal. All the documents with regard to the property need to be clear.
 You need to make sure that all the original documents with regard to the property that were given by the builder or original developer are in order. If the subsequent transfer of title are not properly stamped then it could become a big problem.

3. Existing loan:-

It is also necessary to make sure that the property documents are not mortgaged in the banks custody against a loan taken by the seller.  

4.Loan eligibility:-

Some banks may not lend money on building older than 10 years. Banks also ensure that the banks outstanding loan should always be lower than the value of the property in the market.

5.Property Valuation:-

The loan amount is highly dependent on the cost of the property. The banks property valuation may evaluate the property at a much lower rate.

6. More down payment:-

Most banks wish to make sure that you accept responsibility for the maintenance and good up keep of the resale property. You may have to pay about 20% of the price as down payment. 

7. Age of the property:-

Down payment could be more in case of older properties. Banks usually lend only on properties that are up to 20 to 50years old depending on your lender. The tenure of the loan also decreases with the age of the property.

8.Fees charged by housing societies:-

Some societies that ask for a heavy fee for transfer of ownership. It is best to consider this cost also when coming to conclusion while purchasing resale property in co operative and other societies.

Advantages:-

Buying resale property would give you 

1.A chance to settle in your own house fast and save you of high rents paid and the need to frequently shift your place of living. 

2.Tax deductions on the interest paid on loan from the bank


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Monday, 5 November 2012

Ways to buy a home and SARFAESI Act,2002

Those who are looking for a home have three options

1.Buying an under-construction property

2.Buying a resale property

3.Buying a property auctioned by the Banks.

1.Buying an under construction property:

A property under construction would definitely be cheaper than one available for purchase or occupation. Typically , these under-construction properties quote at least 20% lower than the prevailing rates in a locality.

Before investing in an under- construction property we must know the risk factors

1.EMI's on sanctioned loan:

The delayed possession of the house exert severe financial pressure on the buyers if he has to pay the EMI as well as the rent at the same time. Moreover, if the project gets stuck(or) even defaults, the home buyer is still liable to pay the interest and the principal component of the disbursed amount to the banks.

In an under construction property, a bank disburses the loan amount in tranches to the builder. However, you may be expected to pay the EMI on the sanctioned loan amount and not the disbursed loan amount. This huge EMI outgo from the first month can also be a strain on the pocket.

If the project delays or defaults, the liability is on the borrower to pay off the dues. The loan will be settled only after the borrower has paid off the interest and the principal component of the loan amount disbursed to the builder.

2.No objection Certificate:

 Also do check if it is already mortgaged with a lender, if the property is already mortgaged with a lender, do insist on a no-objection certificate from the lender before entering into a purchase agreement with the builder.

3. No tax benefits in under-construction phase.

    A home loan borrower can claim tax exemption on interest payments up to Rs.1.5 lakhs and another Rs.1 lakh under section 80c towards the principal repayment. 
    The section 24 of the Income Tax Act states that if a property is still to be constructed, there will not be any deduction on the interest payment all of those years. The interest for the pr-construction period can be availed for deduction in five equal installments from the year the construction is complete. The tax rebate on principal repayment may not be allowed when the property is under construction.
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