The real estate market has been witnessing changing trends of sale and purchase of houses. The average age where one purchases his first home has also come down by around 10 years (from 40-45 to 30-35). More than a matter of pride, owning a house has become a prerequisite for a financially secure life.

Another trend that is slowly receiving impetus is that of co-ownership or joint ownership of property. There is no thumb rule as to who can co-own a property with whom. Some couples decide to purchase a house jointly. This not only helps establish equality between men and women but also ensures financial benefits and financial security for the family in the long run. Some entrepreneurs buy office spaces in partnership to divide assets equally among them and to get several loan benefits.

But, what are the legal implications of joint ownership of property?

Joint ownership is when two or more parties own a property together. In India, three types of joint ownership enjoy legal status:

• Tenants in common: Two or more people co-own a property but do not specify their particular share. In such an ownership, when one co-owner dies, his share of the property is passed on to his legal heirs.
• Joint Tenancy: Two or more people co-own a property in equal shares. This type of ownership provides rights of ownership to the co-owners who outlive other co-owners (the concept of survivorship). This means that when one co-owner dies, his share is divided equally among the other co-owners.
• Tenancy by entirety: This is a type of joint tenancy in which the tenants (or co-owners) are namely the husband and wife. They enjoy an equal share in the property and need the other's consent to sell the property.

According to Section 44 of the Transfer of Property Act, every co-owner has a proprietary right to the entire property. By implication, the sale of a jointly owned property requires the consent of all co-owners. However, if the agreement gives co-owners exclusive rights to certain parts of the property, a co-owner can sell his portion without consent from his partners.

Joint ownership of property may seem a good idea at the surface level. After all, it's only fair, especially in marriages, to divide assets in half-and-half, right? Still, it is important to weigh the pros and cons of such an arrangement. Following are some considerations that must precede one's decision:

Home loans in Joint Ownership

In a joint property purchase, if one buyer is applying for a loan, all the buyers have to apply for the loan.

A majority of people opt for home loans while purchasing a new house. There are several home loan benefits people can enjoy from a joint ownership. Among other things, banks look at the applicant's net monthly income while assessing his loan application. In case there is more than one applicant, the net monthly income would increase. Consequently, the eligible amount would also increase. Moreover, with more than one applicant, chances of loan sanctions become higher as chances of bad debts minimise.

However, the demerit of this is that each applicant's credit history will affect the chances of loan sanction. If one applicant has a poor credit score, then it might affect the bank's decision. At later stages, too, the repayment history of a joint loan affects the credit history of all buyers. If one buyer defaults on payments, the credit-worthiness of other buyers will also get impacted.

Tax Benefits in Joint Ownership

When two or more people are involved in the joint ownership of property, they become eligible for income tax deductions on principal and interest amounts. According to Section 80C of the Income Tax Act, co-applicants can avail a benefit of Rs. 1.5 lakh per person, per year on the principal amount and up to Rs 2 lakh on the interest amount.

EMI Management in Joint Loans

Applying for a joint loan means greater flexibility in terms of loan repayment. Co-owners can decide, as per their convenience, the best way of structuring EMIs. They can either open a joint account or can proceed with their personal accounts. To reiterate, delays in repayment by one applicant will affect the credit history of the other applicants also.

Property transfers in Joint Ownership

When one enters into a joint ownership contract, the type of contract specifies the provisions of property transfer. Therefore, in case of a sudden mishappening, the property can be transferred smoothly to its respective inheritor without much legal hassle.

While there are no rules dictating who can co-own a property with whom, the general trend is for couples to enter into joint ownership. Many husbands may do so to ensure the financial security of their wives. However, it is strongly advised to not include a non-earning member in a joint property purchase, especially if one plans to take a loan. In case of the sudden demise of the husband, the onus will fall on the wife to repay the home by virtue of being the co-applicant.

Many people insure their home loans through Home Loan Protection Plans. However, these a protection plan would clear only the home loan amount attributed to the deceased person's share. A term insurance plan, then, would be a better option.

Like any concept, joint ownership is also one that has its own merits and demerits. The extent of benefits buyers would get from such a contract will depend on their financial and personal circumstances. However, it is recommended to decide after great deliberation whom one wants to co-own a property with.