Residential Land

Question 1

What is residential land?

Residential land commonly called a land plot is purchased to construct a house or even as an investment.

Can you avail a loan to purchase residential land?

Only 60-70% of the value of the land can be obtained as a loan from the bank or a housing finance institution and the rest of the amount needs to be financed by the buyer. Banks compute the value of the land based on the circle rates in the area. The maximum tenure of the loan is 15 years which depends on your retirement age.

The land boundaries need to be clearly demarcated and registered with the municipal Corporation. The land needs to have a clear marketable title so that it can be pledged as collateral for the loan. The land needs to be purchased from a developer or a society and not from an individual owner to get the loan sanctioned.

Question 2

Concepts & FAQ's Residential Land

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Tax Aspects Involved while taking a loan for the purchase of residential land

If the plot of land is purchased for construction purposes such as a residential house then the total amount taken is combined and tax benefits are available on the loan amounts. The tax deductions on interest are available only once the construction is complete. In the year of completion the interest on the land loan as well as the construction loan till the end of the previous year shall be taken together and one fifth of this cumulative interest plus the interest payable for the specific year will be eligible for deduction.
Interest accrued during the construction period can be claimed as deductions over five years in equal installments starting from the year of completion of construction. The principal repayments made on the home loan are eligible for income deductions under Section 80 C.
In case of a plot purchased for investment purposes if the plot is vacant it does not qualify for tax deductions. If the plot is rented out and the rental income is taxed as business income or income from other sources the interest paid on the loan to buy the plot is tax deductible. There are no tax benefits on the repayment of the principal of such loans.

Frequently Asked Questions

If you are a first time home buyer, what are the essential steps that you need to follow?

Save money.
Do some homework.
Check your credit report for probable mistakes.
Become pre-approved for a mortgage.
Collect some data on current real estate deals and make a comparison.
Take the help of a realtor (real estate agent).

What is the amount of down payment necessary to buy a house?

Usually, a down payment of 20% is required by traditional lenders. However, you can make a lower down payment in case you obtain private mortgage insurance (PMI). You can make a down payment as low as 5% through utilizing PMI.

In a home buying procedure, which fees are payable by the buyer?

The following fees are payable by the buyer:

Origination fees
Insurance impounds
Appraisal fees
Discount points
Credit report fees
Escrow payments
Interest adjustment fees
Homeowner's Association Fees
Mortgage insurance impounds
Prepaid insurance
One-time mortgage insurance premium (for FHA mortgages)
Tax impounds
Title insurance policy fee
Documentation fees

Few points to remember when investing in residential land

Check and see if the person who is selling the property is authorized to do so. Get the title deed examined by a lawyer.
Ensure that the title deed is in the name of the seller and no loan has been taken against the property.
Demand an encumbrance certificate to ensure the property is free from any legal dues and complaints.
Check to see if the property layout has been approved by the city development corporation and has a deeded right of way allowing the right to build a public road providing accessibility to the land.
Demand the release certificate from the bank ensuring that any kind of loan taken from the bank has been paid and there are no dues pending.
Have the land measured by a recognized surveyor to ensure the accuracy of the area and dimensions of the land as stated in the document.
The land should be located close to a market, hospital, school and should have proper water, drainage and electricity supply and should be well connected by road with good transportation facility. Or at least there should be possibility of development of such facilities in the near future.
Compare the residential plot with similar properties in nearby areas to get an idea of the cost of the plot and study the history of the plot before purchasing it.

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With the encumbrance certificate, your property is free from mortgage

Thursday, April 20, 2017, 12:47 PM

Check if the property you buy has an encumbrance certificate. The encumbrance certificate is evidence that the property you buy is free from any monetary/legal liabilities. It is evidence that the property can be sold as a free title and the ownership will come to you without any associated baggage. You can procure this document from the registration authority’s office.

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Home Loan EMI Calculator

loan summary

Monthly Payment (EMI)

24,959

Total Interest

34,90,279

Loan Amount

34,90,279

Total Payment

59,90,279

EMI payments starting from :

Year Wise Loan Details

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What is home loan?

You can avail a home loan from a bank or a housing finance Company to buy, construct or repair/renovate your house. You have to repay your home loan in installments called EMI (Equated Monthly Installments).

What is your home loan EMI?

You avail a loan from a bank or a financial institution to buy or construct your house. You have to repay your loan in installments called Home loan EMI's.

The house loan EMI's are divided into 2 Components:

Principal component: Amount you borrow to buy the house.

Interest component: Bank charges you an amount for the money you have borrowed to buy the house called interest.
The amount you borrow to buy your house and the total interest charged by the bank is divided by the tenure of your home loan.
The tenure of the home loan can be as long as 30 years.

Know your online home loan EMI Calculator

You can calculate home loan EMI using the Home Loan EMI Calculator for different combinations of interest, Principal and tenure. A home loan EMI calculator can do these calculations in seconds with a high degree of accuracy.

Follow 3 simple steps to calculate your home loan EMI's:

Step 1: You adjust the scale to select the home loan amount availed in the home loan EMI calculator slider.

Step 2: You then adjust the scale to select the interest rate on your home loan EMI calculator slider.

Step 3: Finally you select the tenure of the home loan on the slider of your home loan EMI calculator.

Answer

A residential land is mainly used for residential purposes and not for industrial and commercial purposes. Residential land can be used to construct an independent house or an apartment. The purchase of residential land especially in major cities both for investment or for residential purposes is a rewarding experience both for peace of mind and for its rise in value.

Historically there is only one way land prices move and that is up. The easy availability of financing and high disposable income has led to a rise in land prices in urban areas in our country and even in certain rural areas. An Investment in land outperforms all other forms of investment in the long run. Investment in land involves spotting the right opportunities depending on the size of the land and the location. The prices of land on the outskirts of the many major cities in India have risen more rapidly than the central business districts. Many a time investments in land on the outskirts of major cities has led to huge appreciation in value. This is due to the rapid development of good road connectivity, shopping centers, malls, airports and schools.

Answer

Even if one purchases a residential plot and does not know what to do with it, a joint development agreement with a developer is useful. Under such an agreement the developer constructs an apartment complex and a certain number of flats are handed over to the owner of the plot based on the prevailing market value of the land at that time of commencement of the project.

Answer

Most real estate experts will suggest that buyer be represented by an agent. Let us look at the reason because of which it is suggested: The real estate commission is basically paid by the seller & the commission amount is already mentioned in the listing contract. And when the buyer doesn't have his own agent, the same agent can represent both seller as well as the buyer, working as what is known as "dual agent".

Answer

On the proposed sale of your flat you may purchase another flat within two years of the date of sale of the original flat. If you have invested the entire amount of capital gain irrespective of your area of the flat, you would not have to pay any capital gains tax.

Answer

Yes. Reserve Bank has granted general permission to foreign citizens 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.

Answer

Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers' 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.

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Residential Land

Get the best advice onResidential Land

What is residential land?

Can you avail a loan to purchase residential land?

Ask Wealth Doctor

The Price Increases

You Save on Tax

Exiting is Easy

Not Affected by Time

The Title Deed

Sale Deed

DC Conversion

The Khata

Concepts & FAQ's Residential Land

What is residential land?

Why invest in residential land?

Ask Wealth Doctor

Tax Aspects Involved while taking a loan for the purchase of residential land

If you are a first time home buyer, what are the essential steps that you need to follow?

What is the amount of down payment necessary to buy a house?

Is it necessary to have my own agent while buying a house?

I have a flat which I want to sell and buy a new flat which will be bigger in area. What are my tax implications with regard to capital gains?

Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?

Can foreign citizens of Indian origin acquire commercial properties in India?

In a home buying procedure, which fees are payable by the buyer?

Few points to remember when investing in residential land

Residential Land Articles

Know the Benefits and Risks of a Bank Auction

The Infamous 80:20 scheme in Real Estate

How To Buy Agricultural Land?

Residential Land News

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EPFO notifies 8.55% interest rate on PF for 2017-18, lowest in 5 years

Residential Land Videos

Residential Land Education

Quick ways to double your money:#4 Real Estate

With the encumbrance certificate, your property is free from mortgage

Calculator

Home Loan EMI Calculator

Monthly Payment (EMI)

Total Interest

Loan Amount

Total Payment

Year Wise Loan Details

What is home loan?

What is your home loan EMI?

Know your online home loan EMI Calculator

Know the Benefits and Risks of a Bank Auction

The Infamous 80:20 scheme in Real Estate

How To Buy Agricultural Land?

How to Make Claim on a Life Insurance Policy?

ELSS - Utilizing the power of compounding

Why one must never neglect estate planning

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Residential Land