Frequently Asked Question

1. How do I know if I am ready to buy a house?

You can find out by asking yourself some questions:

Do I have a steady source of income (usually a job)?
Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
Do I have a good record of paying my bills?
Do I have few outstanding long-term debts, like car payments?
Do I have money saved for a down payment?
Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer "yes" to these questions, you are probably ready to buy your own house.

2. How do I begin the process of buying a house?

Start by thinking about your situation. Are you ready to buy a house? How much can you afford in a monthly mortgage payment? How much space do you need? What areas of town do you like?

3. How does purchasing a house compare with renting?

The two don't really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing
Owning a house has many benefits. When you make a mortgage payment, you are building equity. And that's an investment. Owning a house also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own house, they are worth it.

4. How does the lender decide the maximum loan amount that can afford?

The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. When determining your maximum loan amount.

5.What is a carpet area?

Carpet area is defined as the net usable area measured up from the inner faces of the wall to wall.

6.What is built up area?

Built-up area is the net area of the flat, including space covered by the wall thickness, which is the property of the purchaser. This is generally 15% more than the carpet area of the flat.

7.What is super built up area?

The super built up area is the gross area of the flat, including the proportionate share of the common spaces. These common spaces could be divided in to two segments, common spaces on each floor and common spaces in the building. Common spaces on each floor- the staircases, lobby, lift etc. On the floor of the flat should be divided proportionately among the flat on the floor. Thus, super- built -up area=built-up area + common spaces on each floor. In most cases it is the super-built up area for which you are charges a rate per square feet. To ascertain that you are not being taken for a ride, take the help of a surveyor. But as per the new rule of high court in Agreement only carpet area value is mentioned.

8.What else to look for?

If you are purchasing an old property, demand to see electricity bills, water tax receipts, and house tax receipts of the past from the previous owner. Ensure that he has cleared these dues and that these liabilities don't fall on you. The list of precautions and measures you can take are endless. But if you cross check the above matters you would be able to protect your investment and have a peaceful living.

Home Loan

1.What are the types of housing loans available?

Various housing loans are offered by financial institutions. Prominent among these are:

  • Home Loans

    This is the basic housing loan for the purchase of a new home which covers cost of the flat, deposits and charges, stamp duty and registration charges.

  • Home Improvement / Extension Loans

    For implementing repair works and renovations in a home that has already been purchased by you.

  • Home Construction Loans

    For the construction of a new house.

  • Bridge Loans

    For people who wish to sell the existing house and purchase another and need finance for the new house, until a buyer is found for the old house.

  • Balance Transfer

    To pay off an existing housing loan and avail of the option of a loan with a lower rate of interest.

  • Refinance Loans

    To pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present house.

  • Loans To NRIs

    As per requirements of NRIs who want to buy a house in India.

2.Who can apply for a housing loan?

Any Indian citizen, including Non Resident Indians, with a steady source of income can borrow funds for financing the cost of a flat from housing finance companies and banks.

3.Can a Non Resident Indian avail of housing loans?

Yes, depending upon the eligibility criteria and policy of the bank.

3.How much can a person borrow?

Loans are generally disbursed between 70%-80% of the cost of the flat. The balance money is to be funded by the flat purchaser from his own contribution. The percentage of loan would vary from bank to bank.

4.How is the rate of interest calculated in India?

Interest rates vary from time to time and from institution to institution. The interest calculated either on a daily or monthly reducing or yearly reducing balances.

5.What is a fixed-rate housing loan?

A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.

6.What is a floating interest rate housing loan?

A floating interest rate loan is a loan where the interest rate payable is linked to the market conditions such as the base rate and rises and falls with the bank rate varies. Hence a borrower bears the risk of interest rate fluctuations.

7.What are the repayment period options?

Repayment period options range generally from 5 to 20 years. Repayment period depends upon the age of Borrower.

8.What are the charges for availing a housing loan?

  • Processing Fees

    payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount.

  • Prepayment Penalty

    between 1% and 2% of the amount being pre paid is charged by some institutions when a loan is paid back before the end of the agreed duration. Many banks now don't levy penalty on partial Prepayment

  • Stamp duty and registration fee

    as per prevailing rate of Government Authority.

  • Miscellaneous costs

    such as administrative costs, legal documentation charges, technical consultant charges.

9.What security is required for a housing loan?

The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.

10.What is the time required for approval of a loan application?

Varies from Bank to Bank but usually it is 15 - 20 days for a salaried person and 20 - 30 days for a self employed person depending on the applicant's documents.

12.What is the time required for disbursement of loans?

Usually loans are disbursed within 10 - 15 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower's own contribution has been paid by him to the Vendor / Builder / Developer.

13.Do institutions accept joint loan applications?

Yes but it varies from Bank to Bank.

14.What are the documents required at the time of making an Application for a housing loan?

  • Photographs
  • Proof of age
  • Identity papers
  • Proof of residence
  • For salaried individuals :

    Latest salary slip, Bank statements reflecting salary credits for the previous six months

  • For self employed individuals :

    certified copies of balance sheet, profit and loss statement and tax challans or tax returns for the previous 3 years

  • For partnership/private limited companies :

    the Articles of Association, partnership deed and details about the firm

  • For NRIs :

    Latest salary certificate specifying, Name (as it appears in the passport), Date of joining, Passport Number, Designation, Perquisites and salary, Photocopy of labour card/identity card, Photocopy of valid resident visa stamped on the passport, Photocopy of monthly statement of local bank account, Property related documents.

Tax Benefits

Tax benefit of taking Home Loan under section 80C of Income Tax Act – Repayment of Principal Amount

The amount paid as Repayment of Principal Amount on Home Loan by you is allowed as tax deduction under Section 80C of the Income Tax Act. The maximum deduction allowed under section 80C is Rs. 1.5 Lakh. (Increased from 1 Lakh to Rs. 1.5 Lakh in Budget 2014)
The amount paid as Stamp Duty & Registration Fee is also allowed as tax deduction under Section 80C


Tax benefit of taking Home Loan under Section 24 of Income Tax Act – Payment of Interest on Home Loan

Tax benefit on Home Loan for payment of Interest on Home Loan can be claimed as deduction under Section 24 as well as under the newly inserted Section 80EE (inserted in the Budget 2013, to be applicable from 1st April 2013) Tax Benefit on Home Loan for payment of interest is allowed as a deduction under Section 24 of the Income Tax Act. As per Section 24, the Income from House Property shall be reduced by the amount of interest paid on Home Loan where the loan has been taken for the purpose of Purchase or Construction or Repair or Renewal or Reconstruction of a Residential House Property. The maximum tax deduction allowed under Section 24 of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs (increased in Budget 2014 from 1.5 Lakhs to Rs. 2 Lakhs)


For the purpose of simplicity and easy understanding, a comparison of Tax Benefit on Home Loan under Section 24 and Section 80C has been made here under:-


Particulars Section 24 Section 80C
Tax Deduction allowed for Interest Principal
Basis of Tax Deduction Accrual basis Paid basis
Quantum of Tax Deduction allowed Self Occupied Property: Rs. 2 Lakhs Non Self Occupied Property: No Limit Rs. 1.5 Lakhs
Purpose of Loan Purchase or Construction or Repair or Renewal or Reconstruction of a Residential House Property Purchase or Construction of a new House Property
Eligibility for claiming tax deduction Purchase or Construction should be completed within 3 years Nil
Restriction on Sale of Property Nil Tax Deduction claimed would be reversed if Property sold within 5 years

Tax benefit of taking Home Loan under Section 80EE of Income Tax Act – Interest on Home Loan (First Time Buyers)


In Budget 2013 inserted a new section in the Income Tax Act which provides additional tax deduction of Rs. 1 Lakh to first time home buyers in respect of Interest on Home Loan provided that:-
1. The Loan is sanctioned between 1st April 2013 and 31st March 2014
2. The Amount of Loan sanctioned for the acquisition of Residential House Property does not exceed Rs. 25 Lakhs
3. The Value of the Residential House Property does not exceed Rs. 40 Lakhs
4. The Assessee does not own any House Property on the date of sanction of Loan
5. This deduction under Section 80EE is only available for Financial Year 2013-14

The Deduction under Section 80EE shall not exceed Rs. 1 Lakh and shall only be allowed for Financial Year 2013-14. However, in case where the interest payable in Financial Year 2013-14 is less than Rs. 1 Lakh, the balance amount shall be allowed as deduction in Financial Year 2014-15.

In other words, in case the taxpayer has only been able to claim Rs. 40,000 as deduction whereas he was allowed a deduction of Rs. 1,00,000, the balance deduction of Rs. 60,000 which the taxpayer was not able to claim in the Financial Year 2013-14 can be claimed in the Financial Year 2014-15.

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