Are Registration Charges Compulsory When You Opt for a Home Loan?

Purchasing a home entails a number of formalities from financial obligations to legal paperwork. Further, if one avails of a Home Loan, there will be several miscellaneous charges and fees attached apart from the Home Loan interest rates. One such fee is the registration charges. Besides, you will also be required to pay processing fees, service charges, administrative fees and so on. So yes, registration charges are indeed mandatory to be paid and must be taken into consideration while evaluating the actual cost of the housing loan. Let us learn more about stamp duty and registration charges.

Read Also: Quick Guide to Securing a Better Interest on Home Loans

What is a Stamp Duty Charge?

A Stamp duty is a tax on homebuyers who need to pay the government towards the sale or purchase of any property under the Indian Stamp Act, of 1899. It is levied while transferring the title of a property to another person. This fee is a fixed percentage of the property value, set by the local authorities, to validate your registration agreement. A registration document with stamp duty serves as legal proof of property ownership. 

What is a Property Registration Fee?

A specific fee is levied for registering the house in your name, which is known as a property registration fee. This fee is usually 1% of the property’s market value or total cost of the property. However, it should be noted that the registration fees may vary based on the type of property you are purchasing. Borrowers can also claim tax exemptions on property registration and stamp duty up to a maximum limit of Rs.1.5 Lakh under Section 123 of the Income Tax Act. 

Can I Get a Home Loan Inclusive of Registration Charges?

Among all the property-related charges, stamp duty and registration fees are two overhead costs not covered by Home Loans. Some lenders may, however, offer higher loan amounts that could include the cost of registration. These charges can go up to 7% – 10%* of the property value and differ from state to state as per government discretion. Hence, it is essential to keep aside adequate funds to meet these expenses. Stamp duty and property registration are mandatory facets of the homebuying process.

Also Read: 9 Common Myth about Home Loans You Need to Know

Registration and Stamp Duty Charges in India

The table below shows the prevailing stamp duty and registration charges levied in different Indian cities and states. (Note that these are subject to change and may not be relevant for all times)

Property Registration Process

The Indian Registration Act of 1908 mandates all properties to be registered in the area they are located by the respective sub-registrar. The process includes the following steps:

• Check your property’s value to calculate the applicable stamp duty.
• Purchase non-judicial stamp papers of the required amount. They can be purchased either online or offline.
• Hire an attorney to prepare the sale deed on your behalf.
• Pay the applicable charges for stamp duty and property registration.
• Visit the sub-registrar’s office to register the deed with two signatory witnesses.
• Submit requisite documents such as identity proof, address proof and a No-Objection Certificate for the property.
• The registration process will be completed after document verification. Then, the original documents will be handed over to you while the registrar’s office maintains their copies.

Also Read: Your Guide to Home Loan Sanctioning and Disbursement Process

How to Save on Registration and Stamp Duty Charges?

Many state governments extend concessional rates on stamp duty for joint ownership by a couple or home registrations by female buyers. Similarly, properties registered under urban and rural areas will have different stamp duties.

The government decides circle rates for a property primarily based on its location. Thus, an affluent neighbourhood will have a higher circle rate compared to one with developing facilities. Circle rates are usually lower than market rates.

You can register your house at the circle rate even if you buy it at the market price. In that case, the stamp duty and registration fee will be computed on the registered value granting you substantial savings. Property sellers stand to benefit from circle rate registrations as well. They can save on Capital Gains Tax and the difference in rates may be declared as the Deed of Transfer of Rights (DOTOR) fee that a buyer is required to pay the seller through a signed agreement.

However, the buyer should have substantial funds in hand—about 30% to 40% of ready cash while conducting property transactions at circle rates. This way the Home Loan amount will also reduce, as the sale deed will reflect the circle rate and not the market price. In spite of registering at the circle rate, if your lender offers Home Loans on the registered value or market value and not the sale deed price, you can still secure the desired loan amount.

To Conclude

It is compulsory for homebuyers to pay stamp duty and registration charges to complete the legal formalities of their property purchase. To avoid any confusion regarding these costs, you can assess the exact charges involved through the stamp duty calculator. You just need to select the state and city where your property is located from the drop-down menu and enter the property value. The stamp duty percentage and charges will instantly appear on the screen. This tool helps you arrange for the applicable amount in advance for easier home ownership.

*Terms and conditions apply.