General
- What is meant by 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.
- How does property valuation help?
Typically, if a real estate agent is asked to judge the value
of a piece of property, he would do so based on information
of recent sales or purchases of similar properties in that
area.
Though this may give a fair idea of the property’s market
value, an official property valuation would carry more weight.
E.g. if you need to use this piece of property as a security
against a loan, the bank’s loan approval process would
be faster and smoother if the property is certified by an official
valuer. Many banks now insist on valuation certificates before
issuing loans using properties as security. The value thus certified
may also have chances of getting a higher amount of loan sanctioned.
Another benefit of official valuation is that it is a useful
negotiating tool when selling the property.
Such certification also becomes essential in situations where
the correct value of the property has a legal bearing—such
as, a will statement, insurance papers, business balance sheets
etc.
- What is the meaning of a property’s
market value? How is its stamp duty decided?
The price that a property can command in the open market is known
as its market value. Stamp duty is based on the market value
or the agreement value of the property, whichever is greater.
- What does the term ‘Leasehold
Property’ mean?
When a piece of property is given or ‘leased’ to
an individual (known as the ‘Lessee’) for a stipulated
period of time, by the owner of the property (known as the ‘Lessor’),
the property is referred to as Leasehold Property. A certain
amount is fixed by the Lessor to be paid as lease premium and
annual lease. The land ownership rights remain with the Lessor.
Transfer of property requires prior permission.
- What does the term ‘Freehold
Property’ mean?
When ownership rights for a piece of property are given to the
purchaser for a price, that property is referred to as Freehold
Property. Unlike in the case of leasehold property, no annual
lease charges need to be paid and the freehold property can be
registered and / or transferred in part(s).
- Are there any benefits in converting
a leasehold property to a freehold one?
There are several benefits: if you convert the property to a
freehold property, you become a full-fledged owner by getting
the sale deed and having it registered. A freehold property has
better marketability and can be sold, mortgaged or kept for standing
security, which cannot be done with leasehold property.
- Are there any income tax considerations while transferring newly acquired property?
If the transfer takes place within three years of purchase, the
income tax exemption under Section 54F of the Income Tax Act
does not hold good.
- What constitutes conclusion of sale
of a property?
An agreement of sale, coupled with actual possession of the property
would be considered as a conclusion of the sale. Usually, the
entire amount is paid at the time of handing over possession.
Residential
- What is the difference between
carpet area, built-up and super built-up area?
The area of an apartment or building, not inclusive of the
area of the walls is known as carpet area. This is the area
that is actually used and in which a carpet can be laid. When
the area of the walls including the balcony is calculated along
with the carpet area, it is known as built-up area. The built-up
area along with the area under common spaces like lobby, lifts,
stairs, garden and swimming pool is called super built-up area.
- When there are apartments of different
sizes in a complex, how is the maintenance charge calculated?
Legally, the actual area owned by the individual is the basis
for calculation of maintenance charge.
- Why do Co-operative Housing Societies
collect a Sinking Fund?
Co-operative Housing Societies have a statutory obligation to
collect a Sinking Fund. This is done so that in case the building
needs to be repaired or reconstructed in the future, the society
has sufficient funds to carry out the work. The amount to be
contributed is decided by the General Body of the society; it
should be at least ¼ percent per annum of the cost of
each apartment, excluding the cost of the land. This fund may
be used after a resolution is passed at the General Body meeting
with the prior permission of the Registering Authority. This
could be to carry out reconstruction, repairs, structural additions
or alterations to the building as the architect thinks is required
and certifies.
- How is a lease agreement created?
A lease agreement can be reached in either of two ways, depending
upon each case:
•In cases where the lease contract is from year-to-year
/ exceeding one year’s rent / reserving yearly rent,
then a registered instrument can be created, which both the
lessor and the lessee must execute.
•In cases other than the above, an oral agreement followed
by delivery of possession is considered enough.
- What are the charges to be paid
while gifting property?
When a gift of property is made, a gift deed needs to be
made by a lawyer. Stamp duty on the market value of the property
also needs to be paid, as well as the necessary registration
charges.
Corporate
- Can corporate bodies use residential
properties as office space?
It is illegal to put residential properties to commercial use.
However service-based industries are allowed to operate from
residential areas, on the condition that they will vacate the
property if any complaint is received from other residential
owners.
- Before purchasing property owned
by a company, what aspects should be considered?
Before purchasing property from a company, it is necessary
to verify with the Registrar of Companies that the property is
not mortgaged or is not being used as a security against a loan,
otherwise it is not considered a freehold property.
NRIs
- Do NRI's require permission
of Reserve Bank to acquire immovable property in India?
No. NRI's do not require any permission to acquire any immovable
property in India other than agricultural / plantation property
or a farm house.
- Do NRI's require permission
of Reserve Bank to transfer immovable property in India?
No. NRI's do not require any permission to transfer any immovable
property in India. Permission is required only in the case of
transfering of agricultural or plantation property or farm house
to another citizen of India NRI or PIO.
- Do PIO's require permission
of Reserve Bank to purchase immovable property in India for
their residential use?
Reserve Bank has granted general permission to foreign citizens
of Indian origin, whether resident in India or abroad, to purchase
immovable property other than agricultural land/farm house/plantation
property, in India. They are, therefore, not required to obtain
separate permission of Reserve Bank or file any declaration.
- In what manner should the purchase consideration for the immovable property be paid by PIO's under the general permission?
The purchase consideration should be met either out of inward
remittances in foreign exchange through normal banking channels
or out of funds from any non-resident accounts maintained with
banks in India.
- Can such property be sold
without the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of
such property. However, where another foreign citizen of Indian
origin purchases the property, funds towards the purchase consideration
should either be remitted to India or paid out of balances in
non-resident accounts maintained with banks in India.
- Can sale proceeds of such
property if and when sold be remitted out of India?
In the event of sale of immovable property other than agricultural
land/farm house/plantation property in India by a NRI or PIO,
the authorised dealer may allow repatriation of the sale proceeds
outside India, provided all the following conditions are satisfied:
-
• The immovable property was acquired by the seller in
accordance with the provisions of the Exchange Control Rules/Regulations/Law
in force at the time of acquisition, or the provisions of the
Regulations framed under the Foreign Exchange Management Act,
1999;
• The amount to be repatriated does not exceed (a) the
amount paid for acquisition of the immovable property in foreign
exchange received through normal banking channels or out of funds
held in foreign currency non-resident account or (b) the foreign
currency equivalent, as on the date of payment, of the amount
paid where such payment was made from the funds held in non-resident
external account for acquisition of the property; and
• In case of residential property, the repatriation of
sale proceeds is restricted to not more than two such properties.
- What other facilities are
available for repatriation?
Authorised dealers can allow remittance up to USD 1 million for
any purpose, per calendar year from balances in NRO accounts
subject to payment of applicable taxes. The limit of USD 1 million
per year includes sale proceeds of immovable properties acquired
by the NRI/PIO's while they were resident in India and held for
a period of 10 years and above. In case the property is sold
after being held for less than 10 years, remittance can be made
if the sale proceeds were held for the balance period in NRO
account or in any other eligible instruments.
- Can PIO's acquire or dispose
of immovable property by way of gift?
Yes. Reserve Bank has granted general permission to foreign citizens
of Indian origin to acquire or dispose of immovable properties
other than agricultural land/farmhouse/plantation property by
way of gift from or to an Indian citizen, NRI or PIO.
- Can NRI's/PIO's rent out
the properties (residential/commercial) if not required for
immediate use?
Yes. Reserve Bank has granted general permission for letting
out any immovable property in India. The rental income or proceeds
of any investment of such income is eligible for repatriation
- Can NRIs obtain loans
for acquisition of a house/flat for residential purpose from
financial institutions providing housing finance?
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 NRI's for acquisition
of a house/flat for self-occupation subject to certain conditions.
The purpose of loan margin money and the quantum of loan will
be at par with those applicable to housing loans to residents.
Repayment of loan should be made within a period not exceeding
15 years out of inward remittances or out of funds held in the
investor's NRE/FCNR/NRO Accounts.
- Can authorised dealers
grant loans to NRIs for acquisition of a flat/house for residential
purposes?
Authorised dealers have been granted permission to grant loans
to NRI's for acquisition of house/flat for self-occupation on
their return to India subject to certain conditions. Repayment
of the loan should be made within a period not exceeding 15 years
out of inward remittance through banking channels or out of funds
held in the investors' NRE/FCNR/NRO accounts.
- Can authorised dealers
grant housing loan to NRI's where he is a principal borrower
with his resident close relative as a co-applicant / guarantor
or where the land is owned jointly by such NRI borrower with
his resident close relative?
Yes. Such housing loans availed in rupees can also be repaid
by the close relatives in India of the borrower.
- What are the guidelines
for acquisition of agricultural land / plantation property
/ farmhouse by NRIs and foreign citizens of Indian origin?
All requests for acquisition of agricultural land / plantation
property / farm house by any person resident outside India may
be made to The Chief General Manager, Reserve Bank of India,
Central Office, Exchange Control Department, Foreign Investment
Division (III), Mumbai 400 001.
For further information please visit the FAQ Section of http://www.rbi.org.in
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