Guide for first time home buyers- Business News

Guide for first time home buyers

The 2016 Real Estate Bill looks to protect home buyers.

  • New Delhi,  March 28, 2016  
  • |  
  • UPDATED   18:03 IST
Photo: Images Bazaar
Photo: Images Bazaar

The much-awaited Real Estate (Regulation and Development) Bill has been passed by Parliament. It aims to protect the interests of buyers and bring transparency to the real estate sector. Read up on the finer points of the Bill.

Benefits from the BILL

  • Mandatory registration of projects by the developers
  • Developers to disclose all project information; failure will lead to penalty of up to 10% of project cost. They can even go to jail.
  • Developer can't make any changes to approved plan; must take written consent of two-thirds buyers before changing plan
  • Builders will pay interest to buyers for any default/ delays at the same rate as they charge them
  • Builders liable for structural defect for five years
  • Duplicity in prices to go as project costs now on the basis of carpet area
  • Transparency vis-a-vis details of real estate agents
  • Timely delivery of projects
  • Full disclosure on apartment size
  • Separate project account, where builders must keep 70% of buyers' money, will grow their confidence
Right time to buy property?
  • Real estate markets are down; it's a good time to go for that first dream home as developers are offering discounts and freebies to clear unsold inventory
  • For short-term period, prices to remain low but in the long run, prices will rise
  • From investment point of view, buyers should wait, look at markets to recover
  • The law will take at least a year to implement, buyers should be cautious on under-construction projects
Buy Ready-to-move or under-construction property?
  • Under-construction projects will give cost benefits
  • Check authenticity, track record in both cases
  • Under-construction properties give time for funds and offer flexibility in payments. But if delayed, then EMI and rent can put stress on your financial situation.
  • For investment purpose, do check the governemnt clearance, due diligence, legal sanctity, taxes paid in both cases. Ready-to-move properties easily available. You get what you see.
  • First-time home buyers should buy a ready-to-move property. It's costly (25-40% higher) but relatively a low risk.
  • Ready-to-move will help you get rid of builder/land issues/area, amenities etc. But you have to check all documents yourself.
Tax benefits
  • No service tax on ready-to-move houses, under-construction properties come with 15% service tax on a portion of the price
  • Principal repayment of up to Rs 1.5 lakh is eligible for deduction under Section 80C in loan taken for ready-to-move-in properties, but after taking possession
  • For under-construction properties, one has to wait until possession to claim tax shield as the interest paid during construction period can only be deducted in five equal installments after completion
  • To enhance eligibility, it's advisable to take joint home loan or add a co-applicant. It also doubles your tax benefits.
  • Under Section 80EE, Budget 2016 has proposed additional Rs 50,000 tax benefits for first-time home buyers, provided value of house is not over Rs 50 lakh and loan amount is less than Rs 35 lakh

Quote: "A lot will depend on the effective and timely implementation of this bill in each and every state. This bill can single-handedly make the real estate sector on a par with global developed markets that are evolved and mature in terms of investments and buyers' trust." -Ashwinder Raj Singh, CEO-Residential Services, JLL India

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