HOME buyers have their plate full, at least in terms of financing options. A recent addition to the offer list is Canara Bank’s new home loan scheme. Let us take a look at some of the public sector bank schemes to check which of these involve the minimum outflow. After the stimulus package’s blanket offer (five-year fixed 9.25% interest rate for loans up to Rs 20 lakh taken till 30 June 2009), there are other equally luring offers. Be it the largest public sector bank SBI, or the likes of LIC Housing Finance, Bank of Baroda or Union Bank, every bank is vying for the same customer. However, there is a word of caution; one must keep the borrowing component low to avoid high leverage.

CANARA BANK’S NEW HOME LOAN

This scheme is applicable for home loans up to Rs 30 lakh. The interest rate will be 8.25% in the first year and 9.25% for the next four years. Thereafter, the benchmark prime lending rate (BPLR) will be applicable, less 2.5%, subject to a minimum of 10%.

For loans above Rs 30 lakh and up to Rs 1 crore, the rate of interest will be 9% for the first year, 9.75% for the next four years and BPLR less 2% subject to a minimum of 10.50%. These rates are only available for the new borrowers and up to December 31, 2009. The maximum loan tenure that can be allowed under this scheme is 25 years. The loan to value ratio would be 80%.

SBI had earlier unveiled its Happy Home offer. This scheme specified an interest rate of 8% for the first year, a discount of almost 200-250 basis points to the prevailing market rate. However, after the first year, it would be markedto-market.

OUTFLOW

The EMI for Rs 30 lakh loan would be Rs 29,104 in the first year, at an interest rate of 8.25%. For the next four years, the EMI would be Rs 30,783, calculated at 9.25%, resulting in increased outflow of Rs 1,679. But assuming that the minimum rate applicable after the fifth year would be 10% as per rules, the EMI payable would be Rs 31,774. This would be a marginal increase of 3.2%, which would not be heavy on the pocket.

A borrower would be protected against the rising interest rate regime, at least for the first five years. However, on the flip side, one would end up paying a higher EMI amount in case the interest rates decline during the first five years.

THE BEST OPTION

A cursory glance at the scheduled interest rates gives the impression that this is the cheapest home loan scheme, but it is not the case. A comparative analysis shows that the interest outgo of other public sector bank schemes is higher than LIC Housing or Bank of Baroda. However, the interest outflow is lesser compared to SBI’s offer. Nonetheless, each bank has its own payment schedule (whether the repayment will first be towards interest or principal). A customer must, therefore, undertake thorough analysis on his own before opting for a scheme. Happy home buying.

A gift is a common mode of transfer of property. It is the transfer of certain existing moveable or immoveable property by one person to another. The transfer should be made voluntarily and without consideration. The person transferring the property is called the donor. The person to whom the property is transferred is referred to as the donee. The donee must accept the property during the lifetime of the donor and while he is still capable of giving. In case the donee dies before acceptance, the gift is void. The gift can be effected through a gift deed.
Here are some points that need to be considered while drafting a gift deed:

To make a valid gift of property

The donor is the person who gives. Any person who is competent to contract can make a gift of his property. A minor, being incompetent to contract is incompetent to transfer. A gift by a minor is void.

However, a minor can accept gifts. A natural guardian can accept a gift on behalf of a minor with the condition that the person nominated in the gift deed will act as a manager of the gifted property. Such acceptance would amount to recognition by the natural guardian of the nominated person as the manager or the agent of the minor for the purpose of the property.

For a valid acceptance

The donee is the person who accepts the gift. A minor may be a donee. But if the gift is onerous, the obligation cannot be enforced against him while he is a minor. But when he attains adulthood he must either accept the burden or return the gift. A gift may be accepted by or on behalf of a donee.

A donee may also be a person who is unable to express acceptance. A gift can be made to a child and could be accepted on the child's behalf. The donee must be an ascertainable person.

Process of gifting

A gift involves the process of giving and taking which are two simultaneous and reciprocal acts. There must be acceptance of a gift as well. There is no particular mode of acceptance. It may be express or implied. Further, the property must be accepted by the donee during the lifetime of the donor. The fact of acceptance can be established by different circumstances such as donee taking the property or being in possession of the deed of gift. If a document of gift, after its execution or registration in favour of a donee is handed over to him by the donor, it amounts to a valid acceptance of the gift.

Competence to contract is an important qualification required for making a gift. A gift to be valid must be made by a person with his free consent and not under compulsion. However, a mere weakness of the intellect would not be sufficient to invalidate the gift.

The gift must be a certain existing movable or immovable property. It may be land, goods, or actionable claims, and must be transferable. There cannot be any gift of future property. A gift must be of tangible property. Only an existing and tangible property is capable of being gifted.

Absence of consideration must

A gift is a transfer without any element of consideration. Complete absence of monetary consideration is an important prerequisite. Where there is any equivalent of benefit measured in terms of money in respect of a gift, the transaction ceases to be a gift.

The transfer of property must be voluntary and made gratuitously. It must satisfactorily appear that the donor knew what he was doing and understood the contents of the instrument and its effect, and also that undue influence or pressure was not exercised upon clear intention to make a gift.

Acceptance

Even when a gift is made by a registered instrument, it has to be accepted by or on behalf of the donee to make it complete, failing which the gift will be void. The law requires acceptance of the gift after its execution, though the deed may not be registered. The acceptance may be signified by an overt act such as the actual taking of possession of the property, or such acts by the donee as would in law amount to taking possession of the property where the property is not capable of physical possession. Delivery of possession is an essential condition for the validity of the gift.

However, it is not necessary that in every case there should be a physical delivery of possession. Possession may be either actual or constructive. The donor should divest himself completely of all ownership and dominion over the gift.

Registration

A gift of immovable property can be made only by a registered instrument. A gift of immovable property, which is not registered, is bad in law and cannot pass any title to the donee. Documents should be stamped with appropriate non-judicial stamp, registered as required under the India Registration Act and attested by two witnesses. A mere delivery of possession without a written instrument cannot confer any title. A deed cannot be dispensed with even for a property of small value.

The current market conditions are good for those looking at investing in a residential property. Many good deals are available in the market. Many new housing projects are being launched by developers with attractive and affordable prices. Also, the housing loan interest rates are low. Attractive property rates together with low interest rates on housing loans and tax benefits make property investment a good value proposition for property buyers.
A home loan attracts a significant amount of saving from income tax. Home loan borrowers can claim a deduction of up to Rs 1.5 lakhs from their taxable income against the interest paid on a housing loan. The repayment of the principal amount of a home loan is eligible for an income tax rebate up to Rs 1 lakh under Section 80C. Therefore, a home loan brings a significant tax incentive for the borrowers, especially for those in the high taxable bracket.

Claiming IT rebate

According to the Income Tax Act, only those who have taken a housing loan from a recognised financial institution and solely or co-own the property can claim rebates from IT.

Tax deductions can be claimed upto a maximum of Rs 1.5 lakhs under Section 24 for the interest payments on housing loans. The interest on home loans taken for repairs, extension or reconstruction of an existing property also qualifies for the deduction of Rs 1.5 lakhs. One can also claim rebate under Section 80C for the principal amount payments made against a housing loan. It should be noted that the upper limit of Section 80C is Rs 1 lakh and it includes all tax saving instruments, for example, provident fund, life insurance policies, tax saving bonds etc.

Income tax and HRA

Many people have this question - is it possible to claim HRA benefits as well as home loan rebate/deductions under the income tax. The answer to this question depends on the situation and should be decided on a case to case basis with your employer or income tax advisor.

These are some typical situations:

Living in own house

If you are living in the house which you have bought with a loan, you will be eligible for tax rebate under Section 24 and Section 80C only. You will not be eligible for any tax rebate under the HRA clause.

Own home under construction

If you have taken a loan to buy a home but the home is under construction and hence you are forced to live in a rented place, you cannot claim income tax benefits on the housing loan. You can claim only HRA benefits till the date you get possession of your house. After that date you can claim the housing loan benefits and HRA benefits will stop. However, you can adjust the interest paid during construction period in subsequent years subject to your total limit of Rs 1.5 lakhs under Section 24.

Feasibility to occupy own house

Suppose your own home is in a different city than your work location or the home is in the same city but at a considerable distance from your workplace, you can claim the benefits of income tax rebate and HRA simultaneously.

Own house let-out

If you rent out your own house and live in a different rented place, you can claim the benefits of income tax rebate as well as HRA. However, the rent you receive would be added to your taxable income. Also, in case of rented property you can claim a flat deduction on account of repairs and maintenance at 30 percent of rent received minus property tax. The upper limit of Rs 1.5 lakhs on interest deduction is not applicable in this case.