Glossary

Term

Definition

Agreement to Sell

An Agreement to Sell also called as an “Agreement for sale” is an agreement or contract between the buyer and seller and it sets the terms and conditions based on which the property transaction would be completed. An agreement to sell may or may not result in the actual sale of the property and it precedes a sale deed. A buyer ensures that the agreement to sell is registered in the local registry office.

Balance Transfer

Customers can transfer their current home loans to another financial institution or lender who offers a better rate of interest, better services or even longer tenure for payback.

Conveyance Deed

A Conveyance deed transfers the title of the property from one person to another. While a sale deed also transfers the legal title of the property from one person to another, but this is only in case of a sale taking place. A Conveyance deed can also transfer the title of a property in case of gift deeds, mortgage deeds, exchange deeds, etc.

Deed of Assignment

A Deed of assignment is a document that is used to transfer contractual rights to another. It is signed between a seller and a buyer when the Seller transfers all his rights, interest and ownership to the buyer of that particular property.

Gift Deed

A legal document in which a donor (e.g. owner of a property) grants a part or entire asset (movable / immovable) as a gift to someone without any monetary consideration in return. This document must be registered with the local authorities as per the court of law.

Home Construction Loan

Once a customer buys the land and would like to construct on it he can apply for a construction loan. This loan could either be disbursed in one installment or as per the stages of the construction.

Home Improvement Loan

These loans can generally be availed when a customer needs to renovate or repair his home.

Home Loans

This is a loan that is taken by customers to purchase a new or resale house or apartment in either an under-construction project or a completed project.

Joint Development Agreement

An agreement signed between a land owner and a developer or builder to construct a project is called a Joint Development agreement. Here the land is in clear possession of the land and the builder or developer will spend on the construction, approvals and legal paperwork to complete the project. The Land owner gets to unlock the value of his land without investing a single rupee and the developer does not have to spend on purchase of land. This is a win-win situation for both the parties.

Land or Plot Purchase Loan

This loan is available for customers who would prefer to buy their own land and then construct a bungalow or home on it

Lease Rental Discounting (LRD)

The financial institute will use the lease rentals to calculate future cash flow. Lease rentals are considered the payments that will be received in the future by the Lessor. The Property Owner can use these rental receipts which will be drawn up during the duration of the lease as collateral while applying for the loan. The rent is directly transferred to the bank as EMI instead of going to the Lessor.

Loan against Property (LAP)

A customer can mortgage his commercial or residential property in order to get a loan against the property. The borrower can use these funds to meet his personal, professional, working capital or business requirements.

Long Term Capital Gains (LTCG)

  • The Immovable asset held for a period of more than 24 months immediately preceding the date if its transfer will be treated as long term capital asset.
  • Profit or gain arising from sale of this immovable asset after 24 months is called Long term capital gains.

MOU

Many a time the buyers or sellers when going through with a property transaction prefer to sign an MOU outlining the terms and conditions of the transaction.

NIL Encumbrance Certificate

A Nil Encumbrance Certificate is a document generally procured from the sub registrar’s office or registration office under whose jurisdiction the property is registered. The certificate implies that there are no registered liabilities in the form or mortgage or a loan against the property. The shortfall of this certificate is that any unregistered transactions are not included in the Nil Encumbrance certificate.

Sale Deed

A Sale Deed is the document through which the seller transfers his right, title and ownership of a property to the purchaser. Before execution of the sale deed a buyer should scrutinize the title documents of the seller and check if there are any encumbrances, lien or mortgages on the property. A Sale deed must be registered with a government appointed authority and the necessary stamp duty paid.

Search Reports

A Search report is prepared after the person or his advocate visits the office of the registrar and inspects or pulls out the property documents and also traces the history of the property. In many cases banks which are lending or financing the property have their own advocates who specialize any in the exercise. The information obtained from this Search is then used to issue a Title certificate or Title report.

Short Term Capital Gains (STCG)

  • With regards to Immovable properties (Land or building or both) the period for short term capital gains is to be considered as 24 months instead of 36 months with effect from Assessment Year (AY) 2017-2018.
  • The Immovable asset held for a period of not more than 24 months immediately preceding the date if its transfer will be treated as short term capital asset.
  • Profit or gain arising from sale of this immovable asset within the 24 months is called Short term capital gains.

Stamp Duty

Every state government prescribes or fixes a value for the stamp duty and registration charges that are to be paid to the government during the sale or transfer of a property. All documents or instruments related to the transfer of immovable properties including but not limited to agreements to sell, sale deeds, mortgage deed, deed of partition, leave and license agreements, lease deeds, gift deeds, power of attorneys, etc. must be properly stamped before registration.

TDS for NRI’s on Sale of Property (TDS u/s 195)

In case of sale of a property by a NRI the buyer should deduct 20.66% TDS on the sale price for long term Capital Gain and 33.99% for short term Capital gains.

TDS on Brokerage or Commission (Section 194H)

TDS may be applicable when making payment of commission or brokerage for any real estate transactions. Commission or Brokerage includes any payment received or receivable by the broker for any services in the course of buying, selling, leasing or in relation to any real estate transaction.

TDS on Rent (Section 194-I)

The person (not being an Individual or HUF) who is responsible for paying any income to resident by way of rent is liable to deduct tax at source in case the aggregate of the amount of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to payee exceeds Rs. 1,80,000/-.

  • Rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any:-
  1. land; or
  2. Building (including factory building); or
  3. Land appurtenant to a building (including factory building); or
  4. Machinery; or
  5. Plant; or
  6. Equipment; or
  7. Furniture; or
  8. Fittings

TDS on Sale of Property
  • Since June 2013 it is mandatory for buyers of immovable property to deduct TDS from the amount to be paid to the seller.
  • It is the responsibility of the buyer to deduct TDS if the transaction value exceeds Rs. 50 lakhs.
  • The buyer is required to deduct TDS @ 1% on the total consideration and deposit the same in the account of the income tax authorities in the prescribed format.
  • Certain categories of properties including agriculture land have been excluded from the definition of Capital Asset. Capital gains may not be applicable on Agricultural land.
Title Reports

A Title report should reveal and details any mortgages, liens, encroachments, easements, recorded against a property and determine the legal owner of the property. This document will state if there is existing mortgage, litigation, condition or claim which is likely to affect the title of the buyer adversely. Many times, the Lawyers or Financial Institutes combine the Title and Search Report and produce it as one document.

Top Up Loan

A customer who has already taken a home loan is eligible for a top up loan. The interest rates on a top up loan are much lower than that of a personal loan. The financial institution will check the credit score, repayment ability and income of the applicant before granting the top up loan.

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