Taking / Giving Property on Rent? Our Advise; ----- Be Wise

Hiring a place may seem very simple for the Landlord, as also the Tenant. Sometimes these become very unnerving if you miss out on some important aspects that need to be considered before moving into the house / letting out your house. Taking the paperwork lightly, may have serious implications for both parties. Apart from checking out the exteriors and interiors, the legal check on various aspects is equally essential. . Points to be considered:

Tenants. 

·       Check property ownership documents. Conveyance Deed is the best proof, however, Electricity / Water / Gas Bills are also acceptable.

·       If a Broker is involved, his registration should be checked. 

·       Brokerage to be paid to the broker varies from 15 days rental to 1 month in North India. It could be more at places. Must negotiate it.

·       Brokerage paid is part of expenses & you can use it for tax purposes.

·       You must inspect the house and see the house in detail before finalizing. Bring out the repairs required, like; toilet flushes, electricity points, modification required for ACs, Doors & windows, etc.

·       Photograph broken or dilapidated fixtures / fittings & exchange it on mail with owner to avoid problems while handing back.

·       Major & minor Repairs; major repairs due to fair wear-and-tear are done by the owner. In case of negligence, cost is borne by the tenants. All minor repairs are responsibility of the tenants.

·       You must read through the RWA by laws of the society to avoid inconvenience / regrets later.

·       Get a clear idea about the amenities near / around the property, public transport, neighborhood gentry, proximity to essential markets, schools, hospitals, etc.

·       Check the safety aspects, especially for working / single women. You could get the crime rate in the area on internet.

·       Find out the age of the property. If possible, speak to the previous tenants or the neighbours.

·       For Fully furnished apartments, normally a Lock-in period is required, as expenses are incurred on furnishing the house. Must check the deed in detail, including the rent increase percentage after expiry of contract must be mentioned in the Rental Agreement.

·       Lease Deed/ Rental Agreement - A rent agreement or a lease deed is a legal document that contains the details of the rights of a tenant to occupy certain property for a fix period of time in return of the rent paid by him to the property owner. This agreement is ideally drafted before the tenant occupies that place. Necessary Inclusions of the rental agreement or the Lease Deed would be;

·       Include start and end date of the tenancy

·       Monthly Rent amount payable and the date of payment- should generally be 10^th of the month, especially for salaried persons, to avoid cheque bounce.

·       Security deposit amount to be paid. This is refundable & should be mentioned in the Deed.

·       Service/maintenance charges. Is it included in the Rent or over & above the Rent.

·       Responsibility of the payment of repair and maintenance.

·       Conditions of termination of Agreement.

·       Notice period for vacating the house.

·       Provisions of electricity, water and power facility & their payment procedure.

Property Owner / Landlord. 

Rented Property generates additional income by way of lease or rent. But if leased to a wrong person, could cause numerous problems. It requires substantial care and a lot of aspects have to be kept in mind while selecting the right paying guests (PG) or purchasers on rent (rent party):

·       Must check financial capability and background of the prospective tenant (Second party). (Too good offers are dangerous. If the going rental is Rs X and you get offer of Rs 2X, reject it)

·       Police verification of the prospective tenant is a must. This process helps in background check of the tenant. Not doing this is a punishable offence under Section 188 of the Indian Penal Code.

·       Take the permanent address proof of the prospective tenant.

·       Take the bank statement of the bank from which the payment cheques are made.

·       Meet the tenants one on one, interact with them and get to know them. Don’t leave it on the broker – his sole interest is Brokerage.

·       Services of Registered Brokers only must be used. If he charges service tax, (currently 14%), he should deposit the challan & give details of it to you.

·       It is imperative for the landowner to ask the appointed broker to provide the agency registration number, valid signature and agency seal/ stamp on every page of the 'Lease and License' accord so that the broker can be held accountable to look after any legal disputes in future.

·       If possible, rent your property to Tenants with families. If renting to Bachelors, obtain “Comfort Letter” from the Employer of the prospective tenant & do a call check with the Company’s HR / Admin.

·       Lease Deed/ Rental Agreement - A rent agreement or a lease deed is a legal document that contains the details of the rights of a tenant to occupy certain property for a fixed period of time in return of the rent paid by him to the property owner. This agreement must be drafted before the tenant occupies the place. Necessary Inclusions of the rental agreement or the Lease Deed would be;

·       If the period of time is 12 months or less, registration is not compulsory. If more than 12 months, you are legally bound to register which costs a miniscule amount (nearly 1% of the total rent value, depending on the local laws), making it a very authentic legal document.

·       Clear mention of Dates; to and from.

·       Notice period required from both sides; owner and tenant.

·       Rental value and the security deposit made by the tenant and any advance payments done.

·       The annual rent is generally 2-3% of the capital value and differs according to the location and amenities provided. 

·       Date of monthly rent payment (usually around 10^th of each month, especially for salaried tenants).

·       Annual increase in Rent Clause.

·       Mode of payment; ECS mandate or Post dated cheques. AVOID CASH TRANSACTIONS.

·       Clear mention of the size of the property and the number of rooms, bathrooms, kitchen, etc.

Wishing you a Happy Letting out / in. You may make lifelong friends with your Tenants / Landlord. Happy Safe homes is what is important.

Know Your Lender For Your Shelter!

“A house is not a home unless it contains food and fire for the mind as well as the body.”

Benjamin Franklin

We have all dreamt of a perfect home where we’d like to experience life with our loved ones. Big or small we all have our own ideas of a dream home. But sadly, not always can we afford the home we dream of and that’s where the banks come in; helping us finance the home we want. But, do they actually help us? Let me help you find the best loan for YOU!

Costs related to a Home loan:

1. Pocessing Fees- This is the first prominent fee one needs to pay with the loan application. The fees varies from 0.25% to 1% of the loan amount and is non-refundable i.e. you have to pay it irrespective of whether your loan gets sanctioned or not.
2. Legal Advisor Fees- The fees you bear to get the property’s papers verified and scrutinized by a legal advisory or a lawyer and prepare a report on the basis of which bank will decide whether the property can be financed or not. This fee is also non-refundable and needs to be paid with the loan application.
3. Stamp Paper Cost-This is a nominal expense of about INR 300 which is required to buy legal stamp papers once the loan has been approved and write down legal home loan agreement between you and the bank.
4. Cost of Home Insurance Premium- Insuring your home is a recommended option, which some banks have as a mandatory requirement. This insures your home against any natural calamity and other threats which can potentially destroy your property.
5. Cost of Home LOAN Insurance Premium- Home loan insurance is different from home insurance. The first insures you against the home loan liability; the second i.e. home insurance, insures your property. Home loan insurance can also act as your guarantor, in case your credit report is NOT good and the bank wants you to provide a guarantee to support your home loan. This is a big expense if you opt-in for it. However, it is recommended to cover the Buyer’s dependents, in case of his demise.
6. Service Tax on Bank Fees- Service tax is another amount that is charged by banks on the amount that you pay them as fees.

Right Loan Provider  - Factors to Consider. Six factors for selecting right home loan provider:

1.   Processing speed- It should take not more than 10-15 days for a loan to be processed and additional 3-5 days for the loan amount to be disbursed.

2.   Lending criterion- Different banks have different lending criterions for the estimation of the loan amount and in general the approval of a loan. For eg- age, job profile, credit history, etc of the borrower.

3.   Repayment of loan-  Banks have terms and conditions for the repayment of the loan and also for an early part payment / repayment of loan. You must refer to the terms related to the settlement/ foreclosing the outstanding amount in detail before finalising a lender. As per RBI Directions, a bank can NOT charge Foreclosure Charges.

4.   Cost of loan- Banks have certain other charges related to loans, irrespective of the loan being sanctioned. Refer to the beginning of the article for a detailed explanation.

5.   Fixed vs. floating rates- In Floating Rates, Rate of Interest keeps changing, where as in Fixed, it is Constant. In Hybrid, the rate is Fixed / Floating for a period & changes thereafter. As a thumb rule, if the loan period ranges between 2 to 5 years, going with a fixed interest rate is better, and Floating rates are more suited for long term loans. You can even go for a hybrid loan, which enables the borrower to enjoy the best of both fixed and floating interest rates.

6.   Hidden charges- Hidden charges is something that tends to prick the pocket of borrowers the most. Thus, while narrowing down the options, it is advisable to compare the processing fee, down payment, valuation fees, prepayment costs and other charges levied by different lenders.

     In case of any further queries, we would love to hear from you. 

     Leave us a message on -Facebook; Blog; email- biraj@colonelz.com

Check it before you Cheque it!

“Home is a place you grow up wanting to leave, and grow old wanting to get back to.”

John Ed Pearce

Purchasing a home, while being very exciting, is also an extremely tedious experience. There are truck loads of options in the market, but not much information about them. To help you tide over your delusions & worries, we have created a 10 point checklist to rate the properties you are interested in, so as to help you take an informed decision.

Check It Before You Cheque It!

Before you decide to invest all your Green (or should I say Pink) Bucks, take a step back and get informed. Check the following before taking your Call.

·         Builder Related

Credentials of the builder- Make sure you do some research on the builder. Find out about a previous/old project done by the builder and pay a visit. You are likely to get similar Property & Services. Talk to the residents, get a feedback on the following:

a.        Condition of the Building, to include Sanitary & Plumbing fittings, Furnishing, Plaster work.

b.        Paint, Polish & state of walls & furnishings quality

c.        Sewage issues & Seepage problems

Amenities- State of maintenance & upkeep of Club, Sports facilities, Banquet halls, lawns, pathways, etc.

Maintenance & Security. While visiting the old project judge the security and over all cleanliness of the society. Find out how efficient is their waste disposal system.

Air & Lighting- Better ventilated property is more naturally lit & reduces electricity bills.

Price- Its Basic Price (BSP) & allied costs like Maintenance etc. Compare it with Similar Quality societies nearby.

·         Location. Extremely Important. General location (like next to NH, means high noise level) & specific location (park facing –so good view).

·         Connectivity- See it to believe it. Proximity to schools, bus stations, your work place, etc., as travelling relates to your fuel / travel costs.

Dwarka Expresway property buyers are stuck as road construction is stuck due to litigation. Avoid options where a road is to come up in the next 6 months, because it may not come up in the next 10 years.

·         Resale Potential-

o   Higher Occupancy of new flats means better Resale chances & value.

o   Enquire from Local brokers for resale price. Remember, they will praise the property on which they are likely to earn more –take it with a pinch of salt. Compare with prices of properties in the vicinity; would help you judge the market reputation of the property you are interested in.

·         Right Price – If you are selling, ask Brokers for Purchase Price & vice versa. Average the Sale & Purchase costs offered by Brokers. This is probably the Market price of the property.

·         Road Conditions Around Property –Must check the road condition & lighting, at least up to 500 meters from the project;  the condition of the roads as well as the lighting on the road.

·         Rental Potential- Often one buys a house for self use, but later changes his mind. Before investing in a house, find out the rental value. Annual rent of a house should be 2-4% of the total cost of the property.

·         Young Investor.   If you have a transferable job, or are planning to use the house a decade or later, most important aspect is – Is it likely to give Good returns on sale? 70% people change their mind in a decade or so, as to where to settle. So your Investment should be able to get you a property at the Place You Finally Decide to Settle.

In case of any further queries, we would love to hear from you. Leave us a message on -Facebook; Blog; email- biraj@colonelz.com

      An aware buyer is a smart buyer.