There are many important things that homebuyers come across while making a deal but advance payment is one of the most crucial parts for a real estate property buyer. The purpose of advance payment is as simple, it assures the buyer’s interest in purchasing the property.
Advance payment is not the only initial cost, as the real estate property comes with so many other supplementary costs. Such as the legal transferring cost of the asset to the respective name. Also, the developer can demand an advance fee in various forms.
Insights of real estate property advance payments
# Token Amount
What is token money?
The token amount is paid while purchasing the property when the buyer of the property and seller or developer is on a verbal agreement. The token amount is an assurance to move forward with the real estate property deal.
• Token Amount is also known as booking amount. Developers don’t discuss the terms and conditions of the property until and unless they are confident about the buyer’s interest in buying the property.
This also includes a cross-check of a few documents and procedures to ensure the buyer’s interest in the property, as well as for security purposes.
• Good will deposit, booking amount, token money, bayana, and earnest deposit, can be asked for before moving further for the deal. All of these are considered advance payments paid by a buyer to validate the interest in purchasing the property. Token money may differ, from project to project but the minimum amount the developer asks for is fifty thousand to proceed further with the purchase.
Is the token amount refundable?
In case the customer fails to complete the purchase for some reason, the seller forfeits the token money. But in case both the sides have signed a notarized agreement stating the refund.
Because in most cases, the customer pays the token amount to the developer after the verbal promise itself.
# Stamp Duty
• Stamp Duty comes under a legal procedure as a buyer needs to pay for stamp duty concerning purchasing a property as per the laws. Though, it is suggested to not rush while processing the future with stamp duty. There are high chances that you won’t be interested in the property as such, or the buyer may back out for some reason.
In such situations, the purchase of stamp duty paper could be worthless.
Most of the time, such legal documents are not refundable so it is recommended to be careful about your choices.
Stamp duty can be paid in advance?
Stamp duty is required to be paid in advance in respect to proceed with the transaction for property purchasing. Mostly, stamp duty is paid either before or on the same day the transaction is executed.
# Advance TDS payment
• The Indian government has charged 1% property tax on properties worth more than Rs. 50 lakhs, since June 2013. This amount is considered to be deducted from the total sale before a buyer pays the seller.
• Tax deductions at source on advance payments are very usual nowadays, but it is suggested to contact your financial or legal advisor before making any payments.
# Home loan advance payment
• Making advance payments could be dangerous sometimes when it comes to home loans! When it comes to selling a residential property, the seller may ask for advance payment, for the current loan upon that property. Which will allow the deal to be completed with the requisite documentation.
• It is important for the lender to provide a No Objection Certificate, which will state that the loan has already been repaid and there are no outstanding charges on the property. But it is suggested that buyers should avoid making such payments.
Note: When it comes to buying a property with a running loan, the only possibility is when the existing owner of the property repays the entire loan amount in full before selling it.