Why pay rent every month when you can own that same house by paying monthly EMIs for some time? Keeping in mind the staging of home loans is now below 7% per annum, it has been observed that most buyers find it rather lucrative when it comes to purchasing a property through housing loans. The easy availability of resale houses in the market that are ready to move in has strengthened the market’s customers over the years.
However, obtaining a home loan for resale flats is another ball game altogether in the secondary market as it is not as simple as it is for under-construction properties. Here, for a resale property, the buyer is on their own and will need to evaluate the banks and find the best offer for themselves.
This is why the buyers need to familiarise themselves with the home loan for resale flats. To help you out, here is a detailed guide to finding answers to all your questions regarding the same. So, let’s get started!
What is a Resale Flat?
Resale flats are apartments being sold by the person who was allotted the said property. In other words, when you purchase a property and then put it on sale, later on, the property is said to be on resale. So is it worth buying a resale flat? It may let you claim interest for your first EMI. They are also ready to move in and save you the trouble of investing in an under-construction property.
Is Purchasing a Resale Flat All Advantages Then?
It is better to purchase a resale flat but there are a few drawbacks too. Here are some of them:
- Renovation costs must be covered by you.
- The full loan amount may have to be paid immediately depending on the financial institution you are choosing.
- You may have t replace old fittings and fixtures which may incur an additional cost.
- The property may not look modern.
Eligibility Criteria for Home Loan of a Resale Flat
Two home loan eligibility criteria are taken into consideration when determining the home loan for resale flats:
1) Applicant’s Age
For a resale flat, it is mandatory for the borrower to at least be 18+ when applying for a home loan in India. This is because the banks tend to offer a loan for a resale property till the working life of an individual. That means, irrespective of when you plan to take a home loan, the tenure of the repayment automatically ends at the time of your retirement, that is at the age of 60.
Nevertheless, the financial institutions might stretch to a longer period, depending upon the credit score, repayment capacity, mortgage insurance, and the borrowers negotiating tactics.
2) Property’s Age
It might not be possible to buy a new house in certain Indian resale markets. Take Delhi and Mumbai for example, all real estate dealings take place in the secondary market as there are no new developments in place. This makes home loans for resale flats even more important for lenders just as it is for any new supply segment.
However, the age of the flat, apartment or property is still taken into consideration when the institutions assess their respective home loan applications. That means, if the property is in an unreliable condition, the home loan to purchase them might get rejected. Whereas, a property that is well maintained has a higher chance of getting a home loan
What’s The Impact of GST on Resale Flats or Properties?
The Goods and Services Tax (GST) affects the real estate industry but many are not aware of how it affects the resale properties. Typically, GST is not applicable for resale properties because they are considered immovable properties but a seller will have to pay registration and stamp duty charges (this may differ from state to state). More about GST and tax benefits coming up!
Home Loans for Resale Flat Offered By Major Financial Institutions
The secondary market segment is equally important for banks, which is why most leading banks offer loans to resale properties. To name a few banks:
- SBI
- HDFC
- ICICI Bank
- Axis Bank
Sl. No. | Name of the bank | Interest rate (p.a.) | Processing fee |
SBI | 6.95% to 7.70% | 0.40% of the loan + GST | |
HDFC | 6.90% to 7.85% | Up to 0.50% of the loan | |
Axis Bank | 10.05% to 11.00% | Up to 1% of the loan | |
Muthoot Fincorp | 12.00% to 18.00% | undeclared |
Documents Required for Home Loan for Resale Flats
A home loan for a resale flat is determined by the banks, only if they find the property worth the home loan request. Once approved they will send a team to evaluate the property in question. Banks won’t offer anything more than 80% of the total cost of the property as the loan amount.
In most cases, this process could turn into a rather problematic one. Why? Irrespective of the age of the asset, the properties located in old and established areas tend to be the prime residential markets in India, therefore, are priced much higher than new properties in the peripheries. This means, the seller could ask for a high price, while on the other hand, the bank would offer less.
In either case, the buyers should take into consideration that they might have to contribute much higher from their funds if the bank refuses to lend the amount they sought in the first place. This is why it’s always recommended to set at least 30% of the property’s total cost from your pocket as the tenure of the home loan for resale flats will also be shorter.
Home Loan For Resale Flats: The Initial Required Documents
If you are looking to apply for a home loan for an old house, it is mandatory to have an agreement signed between the buyer and the seller. This is where, as per the terms and conditions of the agreement, the bank could approve the application.
Therefore, the documents that are needed to buy an old house are:
- The signed agreement
- A duly filled application
- All documents that establish the ownership of the property since its inception, if held by various owners. If not the first allottee, the original documents of the subsequent sales
Note – If the flat is part of a builder-owned housing society, the sale agreement needs to be endorsed by the builder with a no-objection certificate for the proposed sale.
Is GST Incurred on the Purchase of the Resale property? And, What are the Tax Benefits?
GST or the Goods and Services Tax is applicable only on under-construction properties. However, there is a GST that the buyers will have to apply for when filling the home loan applications. This is because the financial institutions offer services as part of home loans, such as the processing fee, technical valuation fee, and legal fee.
Tax Benefits-
Under Section 80C, Section 24 (B), Section 80EE, and Section EEA of the Income Tax Act of India, the rebates for the payment of home loan principal and interests are available to the borrowers. Additionally, all the tax benefits that are offered to the buyers of under-construction properties are also available to buyers of old properties.
In both cases, the determining factors would be the income slab, the loan amount, and whether or not the house is your first purchase to avail of, under various sections of the income tax laws.
What Documents Are Required To Apply For a Home Loan For a Resale Flats?
Listed below is a list of documents that are needed to apply for a home loan of a resale flat:
- Home loan application form
- Copies of ID proof such as Voter’s ID, Aadhaar card, Driver’s license, Passport, etc
- Copies for address proof like the electricity bill
- 2 passport-size photos of the applicant are required during the home purchase process. Keep at least two of them handy to go with the home loan application.
- Property related documents such as Immediate title deed, Chain documents, Copy of agreement of sale, Copy of the sale deed, Property tax payment receipts, Nil-encumbrance certificates, Copy of the approved building plan, and No-objection certificate from the builder
- Income assessment document proofs such as a copy of PAN card, Bank statements for the last six months, and Income tax returns for the last three years
- Employment-related documents – Copy of appointment letter, Salary slips (for salaried employees), Proof of business income (for self-employed and business owners)
To Conclude: What are The Benefits of Purchasing a Resale Flat?
Resale properties are being sold by someone who bought them in the first place. It comes with its advantages and disadvantages (all of which have been discussed in the above article). The major advantage of availing of a home loan for a resale flat is that you can move in as soon as your home loan is processed and do not have to keep paying rent. The same amount can be paid as EMI for a select number of months and the house is yours! There are drawbacks too like sometimes you may have to pay the loan amount at once. So choose your financial institution wisely.
