Property Mortgage Laws in India

The Transfer of Property Act, 1882 deals with the mortgage of immovable property in India. A mortgage is the transfer of an interest in real estate for the purpose of securing the performance of a loan or an engagement. Therefore, although the mortgage does not transfer the property to third parties, it generates interest in real estate. In this article, we look at some of the major laws and regulations regarding property mortgage in India.

Transfer of Property Act

The Transfer of Property Act deals with the mortgage of immovable property in India. A property mortgage is the transfer of an interest in a specific real estate to secure the payment of advanced funds in the form of a loan, an existing or future loan, or the performance of an engagement that may give rise to a peculiar liability.

Mortgagor - Mortgagee

Mortgagor: In a property mortgage transaction, a mortgagor is a person who borrows money in exchange for a mortgage on the property as an assurance to pay the loan.

Mortgagee: A mortgager person is a lender in a mortgage transaction. Usually banks or financial institutions.

Types of Mortgage In India:-

 

·    Simple mortgage

A simple mortgage occurs when a mortgage obligates the lender to pay the money according to the loan documents or gives the mortgagee the right to sell the property and act on the mortgage loan. In a simple mortgage, possession of the property cannot be given to the mortgagee.

·    Mortgage by conditional sale

A mortgage by conditional sale is when the mortgagee sells the mortgaged property to mortgage with a condition; the sale becomes absolute in case of default payment. In case of mortgage payment, the same property is void as per the terms.

·    Usufructuary Mortgage

The usufructuary is a mortgage when a mortgage saves possession of a property for the mortgage and authorizes the mortgagee to occupy the property until the debt is paid. Typically, the rent or profit of the property while in possession of the mortgage is applied in whole or in part towards the loan.

·    English mortgage

An English mortgage occurs when a mortgagee obligates himself to repay the loan on a certain date and has the property fully transferred to the mortgagee, subject to the provision that the mortgagee pays the property on payment of the loan amount. Will transfer back into the mortgage again.

·    Mortgage by title-deeds deposit

Mortgage by deposit of title deeds occurs when the mortgagee gives title to the real estate, with the intention of creating security until the payment of the loan, to the mortgagee.

·    Odd mortgage

Any mortgage that is not mortgaged by conditional sale or usury mortgage or English mortgage or title deed can be a simple mortgage.

Validity of property mortgage

Any mortgage other than a mortgage from the title deeds deposit is valid only when the mortgage is entered through a registered instrument that is signed by Mortgagor and verified by at least two witnesses.

If your property deal is cancelled How to get refund your amount???

Remediation of Token Money under Income Tax laws if property deal is cancelled

 

In the case of deals for the purchase of any real estate, the buyer usually pays some amount in the form of token money, when other terms and conditions are agreed for the transfer of the property. The amount of token money can vary from a substantial percentage of the value of the asset to being just a token. If the seller withdraws from his commitment to sell his property, there are no immediate financial implications, except that the buyer has the right to sue for specific performance in courts of law. However, it is not usually recourse.

 

If the buyer exits the deal, the seller has the right to forfeit the token money paid. In relation to such alleged token money, the buyer cannot claim any income tax benefit, as it is treated as a capital loss under the tax laws. However, the advance money that is seized becomes the seller's income in the year in which the deal is closed. Such confiscated funds are taxed on income from other sources and not under the 'main capital gains', even if the income is received in respect of a capital asset. Prior to the amendment of the law in 2014, the amount of the acquisition of the property must be deducted from the cost of the acquisition of the property in relation to which it was obtained, the year in which the property, which is the subject of the deal, was sold.

Stamp duty refund

 

Generally, for all property transactions, the buyer has to pay some amount as stamp duty. It is either a fixed amount or a percentage of the market value of the property. You will also have to pay a registration fee to register the agreement. The stamp duty and registration fee payable are determined by the respective state governments. Therefore, the rules for refund of stamp duty to be paid for property transactions will vary from state to state. You must pay the stamp fee before the execution of the document.

In Maharashtra, you are entitled, under certain circumstances, to claim a refund of the stamp duty within six months from your payment. You can claim a refund of stamp duty paid on such an instrument if it has not been executed. The government deducts 1% of the stamp duty, a minimum of Rs 200 and a maximum of Rs 1,000 of the stamp duty paid.

In case of cancellation of a transaction for the purchase of property and for which the agreement has already been registered, the Government of Maharashtra permits a longer period of two years from the date of agreement to claim the return of stamp duty. This refund is allowed only if the developer fails to hand over possession of the booked property and this fact is mentioned in the cancellation deed as a reason for the cancellation of the deal. The rules also provide that the cancellation agreement must be registered.

The buyer of the property can get a 98% refund of the stamp duty, if the stamp duty refund is applied. With the refund application, you are required to attach the original agreement, as well as the original cancellation deed, with both documents registered. However, you will not get a refund of the registration fee.

GST (Goods andServices Tax) refund

 

When you book an under-construction property as per the existing laws, the developer charges GST on the value of the agreement at a fixed rate. The rate will depend on whether the property falls in the 'affordable housing' category and also whether the developer is taking advantage of GST. For any reason, if you wish to cancel the booking and thus, surrender your rights to the property under construction, the builder may agree to refund the paid booking amount and installments, or even that you may agree to pay a higher amount. The although the developer may charge GST from you, he may or may not agree to refund this amount, as he would have already deposited the amount in the credit of the government. The builder will not be entitled to claim any refund in respect of GST, as he has already provided services to you.

When calculating capital gains, the GST you have already paid will be part of the cost of acquisition. Capital gains will be taxable as long-term, if your holding period is three years, or else, profit, if any, will be taxed as short-term capital gains.