New Delhi: Buying a home with a brother or sister can make homeownership more achievable. Two incomes can potentially improve loan eligibility, while sharing the down payment and EMIs can make a larger property more affordable. But buying together also means making decisions about ownership, money and the property that can continue for years after the purchase. That is why experts say siblings should settle the key terms before they buy, rather than figuring them out along the way.
“There is no general legal prohibition on siblings owning property together. However, whether a brother and sister can jointly take a home loan depends on the lender’s policy and the structure of the transaction,” said Atul Monga, CEO & Co-Founder, BASIC Home Loan.
Here are certain factors that you should consider before buying a home with a sibling:
1. Calculate the percentage of ownership
Start by working out what percentage of the property each sibling will own. For instance, if a brother and sister buy a house worth Rs 1 crore, they can have a 50:50 ownership or any other proportion that they decide.
“The share of ownership should be unambiguously indicated in the relevant property documents. It should also be considered alongside each sibling’s contribution towards the down payment, loan and other costs. Getting this clarity at the beginning can help avoid confusion later about each person’s rights in the property,” Monga said.
2. Agree on each sibling’s contribution
A joint purchase does not have to mean equal financial contributions. One sibling could contribute Rs 15 lakh towards the down payment and the other Rs 5 lakh. Their EMI contributions could also differ. The same applies to registration costs, maintenance, renovations, insurance and other property-related expenses.
Before you buy, make sure you’re on the same page about who’s contributing and how much. It may help to write these contributions down so you can manage the arrangement over time.
3. Know the responsibilities of a loan and EMI
A co-owner gets ownership rights through the property documents, while a co-borrower has repayment obligations under the loan. Depending on the lender and the transaction, co-owners may also be required to be co-applicants.
Siblings should therefore understand who will be the borrower or co-borrower, how the EMI will be divided and how payments will be handled if one sibling is temporarily unable to contribute.
An agreement between the siblings about splitting the EMI does not by itself change their obligations to the lender.
4. Set rules for how the property will be used
Decide how the property will be used from the outset. Will both siblings live in it? Will one sibling occupy it? Will it be rented out? Or is it purely an investment?
If one sibling lives in the property, agree on how to handle maintenance and other expenses. If it is rented, decide how rental income will be divided, who will manage the tenant and how major repairs will be approved.
It is also useful to establish how decisions about renovations, alterations or other significant expenses will be made.
5. Agree on an exit plan
A good joint purchase should include a plan for what happens when one person’s plans change. Before buying, siblings should agree on whether either person can sell or transfer their share and whether the other sibling will have the first option to buy it.
“If one sibling wants to buy the other out, figure out how you will value the property. The arrangement should also consider the outstanding home loan, transaction costs and the amount payable to the existing sibling. If neither sibling wants the property, they have to come to an agreement on how to sell it and divide the money,” he said,
6. Plan for changes in circumstances
A home loan can run for many years, and family circumstances can change during that period. Siblings should therefore discuss what should happen if one co-owner dies, faces financial difficulty or wants to transfer their interest in the property.
This should include succession and estate planning, and making sure the right ownership and estate planning documents reflect their intentions. Families can get professional legal and financial advice to set these arrangements up correctly.
Clarify the agreement before the purchase
Purchasing a home with a sibling can be a smart way to combine resources and make homeownership more affordable. But the real advantage of a joint purchase comes from knowing exactly how the arrangement will work.
Before paying the booking amount, siblings should be clear about ownership, contributions, loan responsibility, property usage, decision-making, exit terms and succession. Then document the agreed terms properly. Buying a home together shouldn’t be only about being able to afford the purchase. It should also create an ownership arrangement that works for both siblings.
