BankBazaar.com | Updated On: November 29, 2014 12:51 (IST) | NDTV Profit
With the real estate sector growing at a quick pace, the property transactions have witnessed a substantial increase recently. While, some people sell their properties to offset a good return on their investment, others are forced to sell because of migration to new cities. Whatever be the reason for selling of a property, there are some things that each seller and buyer must always take note before exchanging any finances or signing up on any agreements. Let us take a look at this
Taxation is one of the most essential aspects that must be kept in mind while selling any residential or commercial property. The taxation aspect depends on the timing of the sale of the property. In case a seller sells his property within three years of buying the same, he or she is liable for a short term capital gain tax. The amount of profit earned during the sale of the property is added to the annual income of the seller and is taxable according to the income tax bracket of the individual. The new budget has however offered some changes in capital gain exemptions in case the seller invests in certain specified bonds.
In case a seller sells his or her property after three years of purchase, the sale proceeds are liable for long term capital gains. The good news however is that all long-term capital gain arising from sale of a capital asset is exempt under Section 54/54F, if invested in purchase or construction of a house property, subject to certain conditions.
Individuals who sell properties can also reduce their tax obligations if they invest the gained amount in the capital gains bonds within six months from the date of sale or before the filing of returns. This benefit is available under Section 54- EC of the Income Tax Act 1961, up to a limit of Rs. 50 Lakhs per financial year.
2. Liabilities and loans:
In this world of financial uncertainty, there are a number of cases where a property owner with a housing loan obligation needs to sell or dispose off his or her property. Selling a property with any liability or loan is not at all complicated if all documentation and paperwork is followed in honesty. There are two scenarios possible for all property sales. Either the buyer would offer the money from his or her own pocket or the buyer would like to take a housing loan for buying the property. Let us discuss both the options in detail
a) If buyer pays from own pocket: In case the buyer wants to buy the property for sale using his or her own funds without the involvement of any bank or NBFC, the process is quite simplistic. He can make a down payment to the seller or to the seller’s loan account to close the existing liability of the property. The seller can then get the original documents from the bank and transfer the documents in the name of the new seller. This option will be risky for the new buyer as he or she is giving payment upfront to the seller without any documentation. To avoid such a scenario, the seller can approach the bank and request for a loan outstanding letter and make payments favouring the bank and verify the documents.
b) If buyer pays through a housing loan: In case the buyer wants to take a housing loan for purchase of the property, the bank will issue the outstanding amount favouring the existing loan account on receipt of an NOC from the existing lender. This will be made after initiating an agreement between the two banks.
If the buyer wishes to take home loan from the same bank, both the buyer and seller need to visit the concerned bank branch and initiate a loan swapping process known as book transfer. The process is a tripartite agreement between the seller, the bank and the buyer whereby the new buyer will repay the home loan while the old buyer or the seller acts as a guarantor to the bank. Before allowing such a facility, the new buyer needs to get his loan amount sanctioned and only if he or she is considered to be genuine in terms of repayment capacity.
c) If you are planning to buy another: There are many people who wanted to sell their existing property and use that money for an immediate property purchase in another location. And in many such cases, often the seller will be held up due to lack of funds due to the delay in getting the sale deed executed or actual sale taking place. Banks have now introduced short term loans known as ‘bridge loans’ to fund such temporary financial requirements, in case if you have identified bother a seller and a new property to purchase, You may check with your bank for such interim arrangements.
3. Legal documentation and registration:
It is recommended to always consider legal help before buying or selling of any property, as some properties may be involved in legal disputes or have incomplete property documents. A large number of cases have been recorded where disputed properties are sold at discounted rates where the new seller is unaware of the legal proceedings of the property in question. To account as a legal owner of a property the buyer must get it legally recorded at the sub-registrar’s office by paying the adequate stamp duty and registration charges. The charges depend on the type or property, location, size and city. The process in majority of sub-registrar’s offices has now been computerized and property documents are issued in real time.
BankBazaar.com is an online loan marketplace.
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