Over the last six months, many buyers may have booked apartments by making part-payments. Some of them may be staring at a job loss or a salary cut as a result of the lockdown to contain the COVID-19 pandemic, as many businesses have been adversely affected. If you fear that you could face such a situation in the near future, read on to understand how you can plan better and get out of such stressed situations.
Evaluate developer-buyer agreement
Evaluate the sale agreement or contract with the developer while paying the booking amount. It will have details of cancellations and refunds, and the amounts payable. “Usually, the developer would deduct 5-10 per cent of the booking amount and refund the remaining sum. If terms for cancellation are missing, then you can claim 100 per cent refund from the developer,” says Abhinav Kaul, Vice President - Strategic Partnerships, BankBazaar.
If there is no agreement signed, the buyer is entitled to cancel a booking and claim full refund. Keep the proof of payment through a cheque or electronic transfer, acknowledgement letter, application form copies, etc., ready while claiming the refund from the developer.
What if the developer refuses to repay if the property agreement is done? “A buyer can raise a complaint before Real Estate Regulatory Authority (RERA). However, refund may take time as it’s a legal process. It requires courts to be open and lawyers to file the cases which can happen only post lockdown,” says Sukanya Kumar, Founder and Director of RetailLending.com.
Make sure you cancel your bank home loan in time
You must write to the bank where you applied for a loan and cancel the application. If the loan is sanctioned and you cancel it, the processing fee (0.25-1 per cent of the home loan amount; a maximum of Rs 25000) may not be refunded.
Raj Khosla, Managing Director and Founder, MyMoneyMantra says, “A borrower can postpone the disbursal of the sanctioned home loan amount for up to six months. This clause may vary from bank to bank.” However, when your financial situation improves in the near term, you can purchase the same property with the sanctioned loan amount.
Kaul says, “However, once the loan is disbursed, even if it is partial disbursement, you cannot ‘cancel’ a home loan from a bank.” This is because when the loan disbursal happens, the loan account number is already created and the agreement between borrower and the lender is in force. In such a situation you need to foreclose the loan if you don’t want to continue paying interest on disbursed loan amount. No pre-payment charges can be levied on foreclosure of floating rate loans. But, if you have a home loan with a fixed rate of interest, banks will charge around four per cent on the outstanding principal.
Once you foreclose the bank home loan, you need to write to the lender asking for the ‘no objection certificate’ (NOC). Make sure this paper is duly signed and has the lender's stamp.
Still want buy? Make a plan
Despite having financial challenges, if you want to buy a property, there are some options. “First, ask for discount from the developer as property prices have gone down due to the COVID-19 impact on real estate sales,” says Khosla.
Prashant Thakur, Head-Research, ANAROCK Property Consultants says, “Due to job loss or income depletion, you shouldn’t go and cancel the booking of a property immediately.” Thakur suggests applying for the three-month loan moratorium.
Explain your present financial condition to the bank officials. Says Thakur, “The bank may ask you to pay only the interest on the loan disbursed. This will not impact your credit score and you can resume your EMI after your financial conditions improve.” You can even refinance the home loan with higher tenure and lower EMI.
If you have a home loan insurance that also covers job loss, you can claim 3-6 months’ EMIs from the insurance company. Lastly, you could even use emergency funds to pay EMIs for at least three months, if such amounts had been kept aside while making a financial plan.
“If you have done the booking this year with just 5-10 per cent of the total amount, then it’s better to get out of the transaction with whatever refund you can get from the developer if you fear a job loss or a pay cut,” says Khosla.