Currently, stable property prices and low interest rates seem attractive, there are indeed some advantages of buying a new home. Even with the fallen incomes, if the right measures are followed, one can definitely get benefitted by investing in a new home.

But what does really make sense? Renting vs. Buying a house? 

You will know with this article…

The COVID-19 pandemic has constrained people to rethink buying a new home. This thought still prevails despite conditions that are in favor of homebuyers.

Currently, stable property prices, attractive schemes from developers, and record low interest rates are making people think of buying a new house. But, the choice to buy a house needs cautious thought, particularly when pay levels are falling, property costs are expected to stay humble and rental yields are on a decline. 

People need to understand that in the pandemic-led slowdown, it is important to hold on to liquidity and invest sensibly.

But, should I buy or rent a house?

For the people who have their jobs and pay levels intact, and who have been hoping to buy their own house for a long time, it is indeed a good time to purchase a home. 

If the price structure for the homes in the course of the last 4-5 years favors your choice, there are sufficient ready-to-move homes in the market. And the fact that buyers may hold the negotiating power in this market just makes it more tempting.

Well, it’s an ideal time for those who have been looking to buy a home for a long time. For the first time ever in the last 15 years, the real estate market has turned into a buyers’ favor. 

For the people with a few or more financial crises, they need to hold a choice to buy a home until they see an adjustment in their incomes.

With the economy under heavy stress, developing joblessness, and outward movement from urban areas, the rental rates, and property costs may continue to stay under tension.

Even if you can buy the house, thoughtful consideration is essential.

Here are some major benefits of buying a home right now…

• Low interest rates

This year, we saw the lowest repo rate. The move from the Reserve Bank of India made homebuyers to think strongly about the new home purchase as interest rates were brought down.

• Attractive schemes for homebuyers

In order to move fast, most real estate developers are bringing attractive offers on available inventory. Sales need to start again and hence, profitable payment plans, schemes, and discounts are being offered on flats and apartments. If you check around, many developers are also offering refundable booking amounts, cashback offers, free cancellation to help homebuyers. So, this could be a great time to strike a deal for a new home if you are willing to discuss it.

• Possible price rise in the future

As we mentioned earlier, property prices are stable right now. The slowdown caused by the COVID-19-led lockdown brought the real estate industry to pause. With everything reopening gradually, there can be an upward shift in property prices. So, if you invest right now, you can be lucky enough to reap the benefits of appreciated property prices in near future.

It is critical to take note that while those paying home loan EMI can guarantee an allowance of up to Rs. 2 lakh on the interest components of the home loan in a year.

For those who want to know the benefits of buying a property right now, you can read our article on the things you should know before buying a home in a pandemic.

Ideally, the COVID-19 pandemic is a once in a blue moon event and the benefits it brings for homebuyers are amazing. 

For some, renting might be a good decision, but buying a home right now will bring you more benefits in the future.

Home and hearth should be secured while chances are in one’s favor.

Advance payment is one of the crucial things a homebuyer comes across while striking a deal for a real estate property. Advance payment for the purchase of flat safeguards buyers’ interests.

The property comes with many other supplementary costs such as costs incurred towards legally transferring the asset to the name. A real estate developer may ask the buyer for advance payment in various forms.

So, what if a real estate developer asks the buyer for advance payment and what a buyer should know about such situations?

We are discussing these things through this article.

Kasturi Housing always safeguards the interests of a buyer and maintains complete visibility with property dealings.

Booking amount or token money

Many developers sometimes avoid discussing the terms of conditions of the property transaction unless they are aware of the genuine interest of the buyer. To make sure the buyer has serious intentions towards the property purchase, many times, sellers may ask for: 

• Goodwill deposit
• Booking amount
• Token money
• Bayana
• Earnest deposit. 

This is asked way before the actual deal is discussed.

All the above terms mean the same; advance payment. A buyer has to pay a certain amount to validate the intention to make the purchase. Typically, a seller may ask for an amount ranging from Rs. 50,000 to Rs. 1 lakh as a token amount.

Stamp Duty

Abided by law, a buyer has to pay the stamp duty while buying the property. But, one should not hurry while doing so. There can be a situation where you are not interested in a certain property, or even a seller backs out. In these cases, all your investment in stamp papers could go in vain. These legal documents are non-transferable and non-refundable. So, make a decision carefully.

Advance TDS payment

Since June 2013, the law states that a sale of property worth more than Rs. 50 lakhs in India, a tax of 1% has to be deducted on the total sale consideration before a buyer pays to the seller. 

The buyer has to deposit this 1% TDS to the Government along with the PAN of both the buyer and seller while submitting the Form 26QB. This ensures that the seller doesn’t avoid taxes on capital gains. This TDS on advance payment is a common thing these days but you should be consulting your financial advisor before making any payment.

Home loan advance payment

Attention pre-owned property buyers! Home loan advance payment could be risky.

An event could occur when the seller of the residential property has an ongoing home loan on the property, they would ask the new buyer to make advance payments, which could complete the sale with necessary documents required.

Here, the lender has to furnish a No Objection Certificate i.e. NOC saying the loan has been repaid and no pending charges are due on the property. It sounds so simple, but buyers should refrain from making such payments.

Some frequently asked questions

1. What is token money?

While purchasing the property, the token amount is paid when the buyer and seller are on a verbal agreement and want to move forward with the deal.

2. How much money should be paid as a token?

There are no firm rules about how much money should be paid as a token amount.

3. Can I buy the property with a running loan?

The property can be sold only after the existing owner repays the loan amount in full.

Want to know more about property deals and how to safeguard your intentions to buy a property?

• Home loans are at the lowest rates ever.
• This is the right time one needs to take advantage of a home loan interest rate reduction.

So, here’s everything you need to know about home loan benefits at lowered interest rates.

Everything around us is gradually opening up and we all are trying to get back to normal with necessary precautions. The Coronavirus led pandemic made Indian financial institutes to lower their home loan interest rates of record-breaking 15 years!

At a time when the economy is still trying to hit the mark and homebuyers are prioritizing job security, finance institutes in India – both public and private are worried about the consumer sentiments.

Both the attractive home loan interest rate reduction and stable property prices are attracting buyers to invest in properties, especially luxury homes (as investments).

Although everyone is discussing record low-interest rates, a new homebuyer needs to know the aspects of getting the most out of low home loan interest rates and thus we have tried to talk about these aspects with this article.

Are lower home loan interest rates available for all homebuyers?

Slashed home loan interest rates are introduced for new customers. In simple words, they are trying to sell a new product to new and fresh customers when there is stiff competition. This doesn’t mean that current customers of the banks cannot be benefitted from the new and lowered interest rates. Existing customers can easily avail of home loan benefits with low-interest rates too but there is a slightly different way for them.

Introduction

The housing sector is one of the most expensive sectors in India, especially in urban areas. Owning a house is a dream that everyone has, but not all of them are economically sound to achieve this dream. Therefore, the next best thing that one could do is renting a house. However, the existing renting laws were old and archaic and have not been amended in a long time. Therefore, either the tenant or the owner has found a way to get around the law by finding a loophole and exploiting it ever since. Moreover, looking at the present situation, there was a dire need for new renting law, which is when the Model tenancy Act, 2020(hereinafter referred to as ‘The Act’) came into effect. 

Why do we need the Model Tenancy Act, 2020?

As per the census conducted in 2011, there was 1 crore ‘vacant house’ that hasn’t been put up for rent, in the urban area. Moreover, the number of people looking to rent has also grown exponentially over the years as more and more people are shifting towards urban areas for livelihood. Therefore, the Government seeks to unlock the ‘vacant houses’ and grow a legal framework for the renting laws in India. Furthermore, to define the duties and obligations of both the tenant and the owner of the property. Therefore, it will be not out of place to state here that, the main objective of the Act is to bridge the gap between the tenant and the owner.   

Essential Features of the Act 

1.  The act establishes a legal framework for urban as well the rural areas.

2.This act will take into account the tenancy related to commercial, educational, and residential use but, there are no provisions for industrial use in the Act.

3.  It was established practice amongst the owners to give their property for rent via oral agreement, just so that they could save some time and money. However, this Act abolishes this practice and directs the parties to have a proper written legal agreement.

4.  Furthermore, it will be mandatory for the parties to submit the tenancy agreement to the rent authority. For the convenience of the parties, this process will be carried out via a digital platform.

5.  Under this Act, the states shall establish a 3 tier redressal mechanism in case of any dispute between the landlords and tenant. Moreover, disputes related to the tenancy will no longer be dealt with by civil courts. Therefore, in case of any dispute, the parties should first approach the rent Authority and if the parties do not agree with the decision, then they can approach the Rent court. Further, the final remedy available to the parties is the rent tribunal.

Key legislation for the tenant

1.  The Act states that if the owner wants to increase the rent of the property, then the owner has to give notice to the tenant before such an increase, that to 3 months in advance. Earlier in some cases, the owner used to increase the rent according to his will, and the renter scummed to the pressure as they didn’t want to shift. 

2.  This Act puts a cap on the deposit that the owner can take. Earlier the sum of deposit fluctuated anywhere between 8 to 12 months of rent agreed by both parties, however, in most cases, it was left to the discretion of the owner to decide the deposit of the property. But, now the Act clearly states that for residential properties the sum of the security deposit will be up to 2 months of rent and for non-residential properties, the sum of the security deposit will be not more than 6 months of rent.

3.  Under this act, the landlord will be responsible for activities like structural repairs except the damage caused by the tenant, whitewashing of walls, and painting of doors and windows. 

4.  Further under some circumstances when the parties are in dispute the landlord withholds the essentials from the tenant like the supply of electricity or water. However, the Acts states that essential service should not be withheld from the tenant in case of a dispute. In case of any repair work, the landlord has to give prior notice of 24 hours to the tenant. 

  Key legislation for the Owner

1.  Under the previous legislation, the eviction of tenants was a very long and tedious process. However, what this Act has done is made the eviction of tenants very easy. For instance, if the term of tenancy under the contract has expired and now the tenant has to vacate the house and does not do the same and continues to reside then the owner can charge, for the first two months double of what they agreed up on, if still don’t vacate the property then the owner can charge 4 times the rent agreed. 

2.  This Act further says that the tenant cannot carry out any structural change or assemble any permanent structure within the property, without the written consent of the owner.

3.  Under this Act, The tenant will be responsible for drain cleaning, switches, and socket repairs, kitchen fixtures repairs, replacement of glass panels in windows, doors, and maintenance of gardens and open spaces.

4. Under this act, the tenant cannot sublet the property without the permission of the owner. 

Drawbacks

1.  Firstly this Act deals prospectively and does not take into account the existing disputes. This means that any dispute that arises after the formation of the act will only be dealt with.

2.  The act is optional for the states to implement as land and urban development are state subjects under schedule seven of the constitution. Therefore, there is always a fear that such a revolutionary step taken by the government will not be implemented by the state government, such an event occurred sometime back with Real Estate Regulation and Development Act (RERA). 

3.  Lastly, adding to the aforementioned point, it will take a lot of time for the states to instill a new law into their systems because it’s a lot of work for the states, in order to smoothly transition from the old laws to implementing policies of the new law that too without any roadblocks.

Conclusion

This Act is revolutionary, but right now its success is dependent on a lot of external factors. However, it would be unfair to criticize such a revolutionary Act just on basis of its current situation, it is a fairly new act and has been enacted very recently. Therefore a lot of changes are yet to come and a lot of mistakes are yet to be corrected. For now, it will be safe to say that if the Act turns out how the government wants it to be it would be a huge boon for the renting market in India, as the experts suggest that there is huge opportunity for the government to generate revenue.

 

 

References

1.  The Model Tenancy Act, 2020

2.  https://economictimes.indiatimes.com/industry/services/property-/-cstruction/model-tenancy-act-implications-and-benefits-for-indias-rental-housing/articleshow/83198983.cms?from=mdr

3.  https://www.firstpost.com/india/explainer-the-model-tenancy-act-and-how-it-is-different-from-the-rent-control-act-of-1948-9680131.html

4.  https://indianexpress.com/article/explained/explained-what-is-the-model-tenancy-act-7342764/

[Disclaimer-The opinions expressed in this publication are those of the authors only. ]

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