Shaveta Dua and Sonam Lalhotra | Magicbricks | Oct 16, 2017, 14:14 IST
An NRI or a non-resident Indian can easily take a loan from any of the lenders in India for buying a property in the country. Magicbricks tells you how you can avail of a home loan without physically being present in India.
1) A resident Indian as a co-applicant or a co-borrower or a co-owner of the property should be a part of the application that is to be submitted
2) The minimum age of the borrower should be 24 years
3) The borrower needs to submit last three months’ salary slips and bank statement of the salaried account to the lender
1)There are a lot of online platforms available wherein you submit an online application with all the details
2) Such platforms help shortlist the right lender. They also give an option of uploading all the requisite documents online and then manage the entire process on your behalf
3) You will have to issue a power of attorney in the name of your co-applicant, maybe your family member or whoever is going to be the joint owner of your property or co-applicant to the loan in India
4) Additionally, you’ll have to go to the Indian embassy in your country and take the power of attorney format from the lender to whom you’re applying. There is a definitive format which has to be signed in favor of your Indian co-applicant in the application, after which the Indian Embassy will put a seal of approval on it
Switching banks: If you wish to transfer your home loan from one bank to another in the wake of lower interest rates, first check if there is a switching cost with the lender from whom he has taken the loan. If there is no cost of switching then there could be other costs involved such as fee which the new lender will charge. Stamp duty may also be applicable if you are creating a mortgage deed in favour of the new lender.
Be flexible: Taking a loan on fluctuating rate of interest is recommended because fixed rate of interest is generally 50 – 100 basis points more than the flexible rate of interest. They also attract a foreclosure charge whenever you want to switch. Thirdly, the Indian market rates may go down. If you are going to take 9.4 per cent floating rate right now, it is quite likely that in the next 12 months you might be at 8.75 per cent. Instead, if you go for a 10 per cent fixed rate of interest, you will be stuck at 10 per cent even if the market comes down to 8.5 or 8.75 per cent
Pre-payment: If you wish to make a pre-payment then you should tot up the numbers diligently. How much interest cost is getting saved by reduction in tenure? If you feel that is more as compared to the tax benefit which you would have availed by investing this money somewhere else, then you should go for it
What you must know
1) For a salaried customer, the maximum tenure possible is 30 years. For a self-employed person, it is 20 years
2) First get a loan approval for yourself and then decide on the value of the property you want to buy. Your savings should give you enough financial buffer
3) The age of the property does not matter much. If the property is well-maintained and the residual age of the property is at least 12 years, then the bank will definitely fund it
4) The home loan interest rates remain the same for Indian residents as well as NRIs
5) As in the case of Indian residents, if a female is the joint owner of a property, a five basis points reduction in the rate of interest is available under home loan
6) Two NRIs can also opt for a joint home loan in India but only if they are blood relatives and they stay in the same house
Deepak Singh | Magicbricks | Updated: Oct 17, 2017, 15:25 IST
If you have been protracting your decision to buy a house then this festive season is the right time to loosen your purse strings. Although the festive season is considered an auspicious time to buy new things, including real estate, here’s a list of five reasons why prospective home buyers should buy a property now.
Post the real estate slowdown, most developers had been waiting for the re-emergence of positivity back into the market. Buyers’ renewed enthusiasm in the real estate has brought cheers for developers who are now trying to liquidate their existing inventory and recover costs. To make the most of this development, builders are offering a number of discounts and freebies to attract end-users.
Low property prices
Property prices have decreased in the last couple of years. Although prices have remained stagnant for a while now, this is the ideal time to indulge in a hard bargain with the seller to extract the best deal for yourself.
Discounts and freebies galore
Developers are trying to encash the market sentiment and attract buyers by offering them freebies to make the deal look attractive. Munish Mishra, Sales Head, Wave City, says, “There is no better time than the festive season to avail attractive offers. We have tied-up with LG to offer various products such as AC, refrigerator, LED TV, washing machine, oven, etc. to our customers.” But a word of caution, don’t fall for the freebies instantly. Judicially analyse the freebies and try to monetise them as well. You may ask your builder to give you the value of the freebies as discount on the property and if the offered price is reasonable then go ahead and accept the offer. If festive offers from developers include important amenities such as free car parking, then go for them but make sure to bargain hard on the final property price.
Lower home loan rates
Lowering of repo rate by the Reserve Bank of India has led to a decline in the home loan interest rates. In September 2017, banks were providing home loans at an interest rate of 8.35% which is attracting home buyers. Renu S Karnad, Managing Director, HDFC, says “low interest rates help buyers in reducing their borrowed costs. Interest rate is one of the important factors that a home buyer looks at while buying a home. Lower interest rates not only helps in reducing the borrowing costs but also improves their loan eligibility.” She further added, “CLSS under PMAY for interest subsidy of 6.5% for EWS and LIG categories and the extension of the scheme for MIG category (interest subsidy of 4% on Rs 9 lakh loan and 3% on Rs 12 lakh loan) by another 15 months till March 2019 is in itself much more than a festive offer.”
A RERA-compliant project means that the developer can’t take you for a ride anymore. Policies like RERA and GST have instilled a sense of compliance in developers and thus, they are most likely to fulfil their promises now. Sanjay Shenoy, Joint Managing Director, Legacy Global Projects, also expects such policies to bring cheer to the market. He says, “We expect a marked upswing as buyers are now more confident that their interests are being taken care of, with a strong policy in place.” Adding that there are attractive options for buyers this festive season, he explains, “There is a plethora of attractive options for a home buyer today. Differed payment schemes, EMI free investment options and other flexible payment options which reduce the cash flow burden of clients continue to be a big hit.”
On an average, the gross returns by active funds exceed returns from Nifty by more than 11%. This outperformance is after accounting for the costs of managing an active fund
Nilesh Gupta & G. Sethu | First Published: Mon, Oct 02 2017. 01 59 AM IST | Live Mint
In 1975, John Bogle launched the first ever passive fund, Vanguard 500 Index Fund, and heralded an era of passive investing. Bogle was influenced by Eugene Fama’s view that the capital market was informationally efficient and that sustained success in stock picking was impossible. Since then, trading has increased; more and better investment research is being undertaken; high-speed communication networks have taken away the advantages to a privileged few; and most importantly, institutional investors dominate the markets. In this environment, it is not easy to pick stocks or enter and exit the market successfully and consistently. The torchbearer for passive investing today is the exchange-traded fund (ETF).
In the US, during FY 2003-16, total net assets of equity index funds increased by 3.5 times (from $0.39 trillion to $1.77 trillion), while that of active equity funds increased by just 0.7 times (from $2.73 trillion to $4.65 trillion). More importantly, during this period, a net amount of $1.29 trillion moved out of active equity funds while $0.46 trillion moved into index equity funds. Why is passive investing gaining over active investing? It’s because active investing has not been able to deliver returns (net of costs) that are more than from passive investing. Passive funds posted an expense ratio of 0.09% in 2016 while active equity funds were seven times more expensive with an expense ratio of 0.63%.
The FT reports that over a period of 10 years, 83% of active funds in the US underperform their benchmark, with 40% funds terminating before 10 years.
This global trend prompted us to examine the India story. Since 1992, Indian stock markets have seen many developments. Trading has increased; there are more institutional investors; regulations have improved; transactions have become faster; settlements have become shorter; number of analysts covering the market has increased; communication networks are good. We should expect active funds to struggle to beat the market, right? You could not be more mistaken.
We examined the returns and expense ratios of 448 actively managed mutual fund schemes from the period of FY 1996 till FY 2017, a total period of 21 years. We used their net asset values (NAVs) to compute the returns from holding these schemes for each financial year. Remember that the NAVs of mutual fund are published after deducting all the costs incurred in running the scheme.
In most of the years, when the market booms the active funds beat the index (such as Nifty) by a wide margin. When the market is bearish, their performance is mixed. In some bearish years, they beat the index, but often they lose much more than the index.
On an average, the gross returns by active funds exceed returns from Nifty total returns index by more than 11%. Remember that this outperformance is after accounting for the costs of managing an active fund. What about the costs of managing a mutual fund? The expense ratio for active funds from FY 2008 to FY 2017 averaged 2.32% per annum and for ETFs it was 0.61%, leading to a difference just greater than 1.7%. On an average, in India the extra returns provided by actively managed mutual funds have been much higher than the extra cost charged for delivering the return.
This is in contrast to the data from the US. Even in the halcyon 1960s, active funds in the US beat the market only by about 3%. What are the possible reasons for this outperformance? Some market experts argue that several quality stocks are not part of the index and hence index funds or ETFs cannot invest in them. Some note that the evolving nature of the market is not reflected in the index.
It may also be possible that the relatively smaller size of the mutual fund industry in India could be helping active fund managers get such high returns. In India, the mutual fund industry has only 13% of market capitalization as compared to 95% in the US. It is possible that in the past, mutual fund managers had better information available. If either of the reasons turn out to be true, we might find that, in the future, the actively managed mutual funds do not outperform the market by such large margins.
So, should Indian investors invest their savings in actively managed mutual funds? Irrespective of what the data says, the answer is not so simple. Here we have only considered the average returns of all actively managed mutual funds. A retail investor who is likely to invest only in a limited set of schemes would be concerned about choosing those schemes that give better returns in the future.
This analysis has not considered the risks taken by the mutual funds to get returns. A fund can easily beat the market by taking more risks. We need to compute the risk-adjusted returns to answer this question. On doing that, we may understand how the active funds in India generate such high returns compared to the market index. Is it a story of great fund management skills? Or is it inefficiency of the market? Or is it a case of taking high risks? Investors and the regulator have a responsibility to understand this.
Nilesh Gupta is assistant professor and G. Sethu is professor at the Indian Institute of Management, Tiruchirappalli
To avoid last-minute hassles, it is always good to plan taxes and loans in advance.
Sep 15, 2017 06:29 PM IST | MoneyControl.com
In order to avoid any last minute hassles while filing your tax returns, you need to ensure that you plan your taxes in advance. If you have the right foresight and plan your loans and taxes properly, then you can surely save a lot of money.
Here are some key details on planning your taxes and loans…
There are a few components which can help in bringing down your tax liability. For this, you need to reallocate your salary. Like medical expenses which are reimbursed by the employer, certain food coupons, house rent allowance, leave and travel allowance etc., should be used efficiently to bring down your tax liability.
Proper use of tax exemption
There are several tax saving options under 80C and 80D. Under 80C, you have options like NSC, PPF, a premium of life insurance, 5-year FD with banks and post office etc. 80D includes premium paid in Mediclaim policies.
Your tax plan and financial plan must go hand in hand
Your tax-saving plan has to be in tandem with your financial plan. Opt for tax-saving options which will contribute to achieving your financial goal.
The loan factor
There are loans which can actually help in reducing your tax burden. So, you should ensure that you make use of this benefit to the maximum.
Exploiting the loan factor:
If you are planning to take a home loan for buying a home, then restructure it in the best possible way as it can give you tax benefits. Under Section 80C, the principal repayment of housing loan can give you a deduction of up to Rs 1,50,000 and under Section 24B, the interest paid on a housing loan can get you a deduction of up to Rs 2,00,000.
Now, if the home loan amount is huge, then it may cross the tax exemption limit. In such cases, you can opt for a joint loan with spouse or parents or siblings. This will help both the individuals to get the tax benefit. It, thus, becomes a useful tax-saving option for the entire family. It should be noted that stamp duty and registration charges that are paid while transferring the property are also eligible for income tax deduction under the Section 80C.
If you take a loan to buy a second home, then to you can get the advantage of tax deductions under Sections 80C and 24B. Under Section 80C, the principal loan amount will be considered and under Section 24B, the interest paid towards the loan will be considered.
Education loan can also be taken for self or for your spouse or children. You can get tax benefits if you take the loan from a scheduled bank or a notified financial company. You can easily claim a deduction for payment of interest. The tax benefits can be enjoyed for a maximum period of eight years or on the term of the loan repayment.
Personal loans also come with the tax advantage. Personal loans which are taken for renovating or repairing home are helpful. Personal loans taken to make down payment of home loan will also give you the advantage of tax benefit.
To sum up…
Thus, there are different ways and means of reducing your tax liability. Loans give you the dual advantage. They take care of your financial needs i.e., buying a home or higher education of your children and at the same time, they also give you the much needed tax-benefit. So, explore all the pros and cons of the various loans and use them to plan your taxes effectively.
Sarbajeet K Sen | Sep 14, 2017 11:37 AM IST | Source: Moneycontrol.com
Poor performance of a fund must set the investor thinking on whether to continue with the investment.
When did you last review your mutual fund portfolio? Maybe a long time ago. Many investors might feel relaxed after investing in mutual funds with the thought that their money is safe with experts trained in investing and stock selection.
However, the mutual funds landscape is a mixed lot. There are good, high-performing funds and there are laggards who are unable to keep up with performance of the leaders.
Did you check which of these category of fund you have invested? If it is one of the top-performing ones, giving you good returns, you need not worry. But if it is one of the funds that have not performed well in comparison, it might be time to think of a switch to another fund.
So when did you last review your mutual funds investment portfolio to know whether it needs a change? If you do it periodically, well and good, but if you have not reviewed for a long time, you should assess how your various fund investments have been performing.
“Investors should review their mutual fund portfolio at least once in 6 months. They should look at the performance of the fund, the sectoral allocation that they chose and whether there have been any big changes,” S Sridharan, Business Head, Financial Planning, Wealth Ladder Investment Advisors
Sridharan says if the review shows that the fund has performed poorly, it should signal a possible exit and switch to another fund. “Poor performance of a fund must set the investor thinking on whether to continue with the investment. However, exit decision should not be based only on performance of the fund. Investors should look at other parameter like what went wrong and whether the fund manager has the capability of revising the portfolio to the positive side in the near future,” he said.
Vikash Agarwal, CFA & Co-Founder, CAGRfunds, says one should avoid unnecessary churn in portfolio. “The essence of money-making is regular investments in well-managed diversified equity mutual funds. One should avoid unnecessary churns in the portfolio which may enhance cost in terms of exit load and tax implications,” he said.
However, Agarwal says there can be multiple reasons which might merit a review and change of one’s mutual fund holdings. Some of these are:
–Continued underperformance of the fund such that the fund is unable to beat its benchmark
-The fund is able to beat the benchmark but the returns are not commensurate with the levels of risk being taken by the fund
-A particular stock/debt instrument holding which forms a significant holding of the fund is likely to underperform due to a fundamental issue. Example: If a fund has significant exposure to a company which has acquired a loss making company, it might merit a deeper review of the fund
–Change of fund manager: In case there is a change in fund manager, then it is useful to review the fund as the fund style and philosophy might undergo a change and it might not be suitable to investment objective anymore
“If your fund is showing such characteristics then it is ideal for you to exit and switch to a better managed fund,” Agarwal said.
By Namrata Dadwal | ET Bureau | Updated: Sep 18, 2017, 03.42 PM IST
A financial emergency can hit any time—a sudden hospitalisation, a natural calamity or even an unexpected celebration at short notice.
While money pundits say you must have an emergency fund equal to six months’ expenses in place, not everyone follows this rule diligently.
So, where do you get cash instantly to tide over a financial disaster? Don’t despair. There are a few ways you can get money in a pinch, depending on how urgently you want the funds. “The key things that will determine where you get the money from are how urgently you want the funds, the tenure of the loan, the interest and how expensive will it be to source the funds,” says Navin Chandani, Chief Business Development Officer, BankBazaar.com
Before you opt to borrow money, be sure that it is really needed. Even then, borrow as little as possible. Remember, it is a loan and you need to ultimately repay it. If you are unable to do it on time, you could end up in a debt trap.
1. BORROW FROM YOUR EMPLOYER
Interest rate : 5-8% ( Could also be interest-free.)
“If you need funds ASAP, consider your workplace first. Many companies extend an advance on salaries,” says financial trainer P.V. Subramanyam. The funds could be equivalent to 1-6 month’s takehome pay and will be deducted from the salary over 3-24 months.
Upside : The loan can be custom-ised to your needs, and you will be able to get the money within three days.
Downside : The loan will be taxable as part of your salary. It will be exempt only if the funds are used for certain medical treatments or if the amount is less than Rs 20,000.
2. CASH WITHDRAWAL ON A CREDIT CARD
Interest rate : 2-3.5 % a month
A credit card can be used to withdraw money from an ATM, the amount being equivalent to 40-80% of your card limit. However, there might be a cap on daily cash withdrawal. Most banks will allow you to over-extend your limit on a caseto-case basis. Be ready to cough up an over-limit fee over and above the usual interest rate on cash advance.
Upside : Instant cash, available anywhere, anytime.
Downside : A transaction fee of 2.5-3%. Interest is levied on the money from the day it is withdrawn until it is fully repaid.
3. TOP-UP LOAN
Interest rate : 9-13%
Already have a home loan? If yes, you can use it to get a top-up loan of up to Rs 50 lakh for a maximum of 20 years or till the balance tenure of your original home. This option works if you have repaid the original home loan for some years as the combined value of the home loan and the top-up cannot exceed 75% of the value of the house.
Upside : You can get a loan quickly, in three days, since the bank has your documents.
Downside : Any default in repayment could cost you big.
4. PERSONAL LOAN
Interest rate 13-24%
One of the quickest options for borrowing money. You can get a loan within 30 minutes to three days, depending on your relationship with the bank. In fact, you might already have a preapproved loan in your name from your bank which will make the process faster.
Upside: Quick disbursement if you borrow from your own bank.
Downside: High interest rate and processing fee of 2-3%. You will also have to pay GST on EMIs. For prepayment, a foreclosure fee of 2.5% of the outstanding amount is charged.
5. LOAN AGAINST PROPERTY
Interest rate 9.5-13%
If you want a large loan and own a house, you could take a loan against property. You can loan Rs 5 lakh to Rs 10 crore, depending on the market value of your house. The loan tenure varies between 2 and 15 years. Both residential and commercial properties can be used as collateral. Banks could to lend you up to 65% of the value of your property. However, the house must be insured. Processing fee is 1.5-2% while prepayment charges are 2-3% of the outstanding.
Upside : Quick disbursement, lower interest charges.
Downside : If portfolio value declines, you will have to put in the differential or pledge more funds/shares.
7. LOAN AGAINST GOLD
Interest rate : 10-17% from banks
14-26% from non-banking financial companies
You can get 60% of the value of your gold and can borrow from Rs 10,000 to Rs 25 lakh. The tenure is usually 6 months or 12 months but you can renew the loan at a nominal charge. While you can repay part of the loan whenever you want, gold you have pledged as collateral is released only after you repay the entire loan.
Upside : You can get funds within a day.
Downside : Gold appraisal charges of Rs 250-2,500. If you are unable to repay loan, you will lose the gold.
Navneet Dubey | Sep 19, 2017 04:18 PM IST | Source: Moneycontrol.com
Equity mutual funds can give you good returns if you keep your money invested over a long period of time to overcome market cycles.
Your dream of becoming a ‘crorepati’ may seem difficult. But in reality, if you plan your finances and invest in the right instruments someday you will have your dreams realised someday. One of the best ways to try and achieve the crorepati dream could be investing in equity mutual funds for good returns over a long period of time. There is a definite correlation between the time and money. If you have less money to invest then you have to wait for a longer time to get your goal accomplished and if you have more money to invest you might reach your goal earlier if you plan and invest properly.
However, before investing in mutual funds, especially –equity MF’s, you should ask yourself two questions:
how much you have to invest and over how long to reach your Rs 1 crore destination.
Here we try to get you answer to both the questions.
How much to invest monthly?
As a young investor, you may easily take a higher risk by saving less amount and gain more returns to achieve your financial goals. While being in the middle of the age, you can take the moderate risk to head toward becoming a crorepati.
Thus, at an early age even if you have less money to invest, you can become crorepati by investing Rs 700 per month (which is the least amount) for 35 years, at an assumed 15% rate of return to accumulate the desired amount.
However if you start later, you need to invest more money to reach your financial goal. For instance, you will need Rs 5500 per month for 25 years, at an assumed 12% rate of return, you will be able to make Rs 1 Crore approximately.
A larger amount of Rs 13,500 per month for 20 years, at an assumed 10% rate of return, will enable you to make Rs 1 Crore.
How to select a fund?
To earn 12-15% of return on your investment, you need to select good equity stocks or one can go for equity mutual funds to mitigate the risk to an extent. While selecting, equity MF, you need also check that your portfolio should have mid-cap/small-cap funds for around 30-40% and the remaining 60-70% should have a diversified fund, a large-cap fund, etc. to maintain an aggressive portfolio with right asset mix.
Whereas to maintaining a return of around 10-12%, you should invest in balanced fund/hybrid fund, etc. to maintain a moderate risk portfolio. In such case, one can avoid or reduce the investment amount in mid-cap/small-cap funds or avoid making investments in risky stocks.
Are there alternatives?
Investing money in pension plans, NPS can also help you achieve this financial goal. However, the returns offered under such schemes are not stable and market linked. Moreover, in some instruments, returns are subject to change as per the government rules. Also, investing in an instrument like fixed deposits, national savings certificate, etc. may not help you achieve the goal within the maximum time period as mentioned thereon.
One should also have to remain invested for a longer time period and follow proper asset allocation strategy to achieve the target amount. It is must to take the help of a financial adviser before making such financial decisions.
In the grid given above, make sure you know that any investment made in equity mutual fund or equity stocks are not guaranteed. The returns are also volatile and not fixed as they are dependent on the financial market.