How can a Senior Citizen avail a Home Loan by investing Long Term Capital Gains?

Dear Sir

My father-in-law is a senior citizen (retired 68 years age) wants to sell his existing property and intends to jointly invest along with his elder daughter in a new property. The existing property is 20 years old and the long term capital gains calculation is as follows:- Purchase Cost = Rs 3 Lacs; Purchase Year = 1993; CII (1992-93) = 223; Selling Price = Rs 27 Lacs; Sale Year = 2012; CII (2011-12) = 785; Indexed Purchase Price = 3785/223 = Rs 10.56 Lacs; Long Term Capital Gain = 27 - 10.56 = Rs 16.43 Lacs; Income Tax on Capital Gains = 20%16.43 = Rs 3.28 Lacs.

He wishes to avail exemption of the LTCG tax by investing around Rs 18 Lacs (i.e., greater than LTCG) in the new property. However he is faced with a problem which is cashflow. The new property is priced around Rs 35 Lacs. His elder daughter is employed and is eligible for a Loan Sanction of maximum Rs 20 Lacs. To transact for the new property they (father & daughter) need to approach a bank for a home loan. However the banks are declining to give loan to joint applicants (in this case one employed and one retired). Even considering they jointly fund an initial equity of 15% of Rs 35 Lacs = Rs 5.25 Lacs, they still need a loan sanction of close to Rs 30 Lacs. Currently they are unable to do any of transactions.

Is it possible to open a Capital Gains Account and seek a loan for the balance portion [Rs 30 Lacs less Rs 20 Lacs eligibility of employed daughter] i.e., Rs 10 Lacs. Otherwise can someone please advise how to proceed in this regard. What can be his possible way to transact or deal with the situation. How can he invest in the new property as a joint owner.

Thanks & Regards Satyaki Basu

asked Mar 10 '12 at 23:40 by Satyaki Basu 1111

If existing property (being sold by your father-in-law) is a residential house property (flat/apartment/house etc.), section 54 would apply. In this case, if he buys a property for his share value more than long term gains, there won't be any income tax on capital gains.

His daughter needs to get loan for her part of share in new property. As maximum loan she can get is Rs 20 lakh, there should not be an issue in buying new house, as rest of the funds would be provided by her father.

They must present their case with home loan company, I am sure some bank would agree to provide such loan. May be some private bank would do with some extra rate of interest.

Try applying through loan agents before 30st march, as they have pressure of achieving maximum target before end of financial year.

answered Mar 13 '12 at 22:28 by Pankaj Batra 5.2k320


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Asked: Mar 10 '12 at 23:40

Seen: 2,428 times

Last updated: Mar 13 '12 at 22:28