PTI | Updated: Jan 9, 2018, 16:01 IST | Times of India
MUMBAI: Even as a lot of thrust is being given to the affordable housing segment, a report has flagged concerns about the growing delinquencies in this segment, which are expected to continue in 2018.
Competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment, a joint report by Moody’s and its domestic affiliate Icra said today.
“While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” Icra’s structured finances head Vibhor Mittal said.
In a note on asset backed securities (ABS) co-written with its parent Moody’s, the report said gross-nonperforming assets in the affordable housing segment have inched up to 1.8 per cent as of September 2017.
The average cum 90+ days past due level for affordable housing was nearly seven times the level observed for traditional housing loan pools, it said.
Going into the reasons for the higher stress in the low ticket size loans, Mittal said, “this would be driven by factors like intensifying competition– resulting in some easing in lending standards — and a higher share of lending to the self-employed segment.”
It can be noted that the Modi government is targeting to ensure that there is a house for all by 2022 and has provided a lot of incentives for the affordable housing segment, including making it as a priority sector lending for banks and huge interest subvention and direct cash subsidy.
However, housing loans continue to be seen as the best performing retail loan asset class in the country, demonstrating low and stable delinquencies over the years, in 2018, it said.
This is possible because of the underlying collateral, which is self-occupied residential property, absence of steep correction in property prices and moderate loan to value ratios, the report said.
Moody’s said the impact of demonetisation and the implementation of the goods and services tax (GST) will lead to higher delinquencies in ABS for loans against property (LAP) to small and medium enterprises.
“Introduction of a GST in July 2017 and demonetization have placed stress on the SME sector,” Icra’s assistant vice- president Dipanshu Rustagi said.
The report also said auto ABS-backed by commercial vehicles loans will remain stable on the back of healthy domestic economic growth.
Icra said the microlending segment is on a “road to resurgence” after the note-ban setback with an increase in repayment rates to 94 per cent in September from the low of 87 per cent seen during December 2016 during the peak of the note-ban move.
Several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments, say Mehta.
Sarbajeet Sen | Retrived on 1st Jan 2018 | MoneyControl.com
The real estate sector has seen some major changes in 2017 including ushering in of RERA. It also had to bear the impact of demonetisation, which slowed down sales. In an interview to Moneycontrol, Harshil Mehta, Joint MD & CEO, DHFL, tells how he sees property prices and home loan rates moving in the New Year.
Year 2017 saw the Real Estate Regulation Act (RERA) coming into play. How has the new Act impacted the real estate market?
RERA is a well-timed effort by the government and a good step towards accomplishment of ‘Housing for All by 2022’ and other housing and housing-development related initiatives. Several states have implemented RERA and has positively impacted buyer sentiments as a result of the mandatory disclosures of project details and strict adherence to project deliverables such as the area, legality, amenities and the quality. It has also ushered a more transparent ecosystem for developers and housing finance companies. DHFL has also undertaken a drive to assist developers in various states to help them understand the regulatory implications of RERA and become RERA compliant.
How do you see home prices moving in 2018, especially in the affordable segment?
We do not foresee any reduction in prices in the affordable housing segment because of the increasing demand and the limited supply to meet this demand. To attract buyers and maintain sales volume, developers are launching attractive offers and other benefits to encourage customers to fulfill their aspiration of owning their dream home.
Home loan rates have come down substantially. Do you think there is a likelihood of further lowering of rates by lenders?
Owing to the last few monetary policies, home loan rates have stabilised and we do not foresee any further reduction.
So, for those waiting to buy property, do you think this is a good time?
Yes, it is a good time for the buyer.
What is the loan bracket that you are seeing the largest offtake?
We have been seeing a steady offtake in the affordable housing segment that ranges from Rs 15-30 lakhs. The affordable category has received a strong boost led by the government’s various incentives and efforts to stimulate the industry. All these efforts have started to show visible impact on the ground. Benefits from the recent Credit-Linked Subsidy Scheme (CLSS) under PMAY and lower interest rates have further given a boost to the consumer’s loan eligibility.
What is the home price segment DHFL is targeting?
Since inception, DHFL has always targeted the affordable housing finance segment catering to the low and middle income in the semi urban and Tier-2 and Tier-3 towns. This has remained unchanged for the last 33 years. As we mentioned earlier, we are witnessing strong uptake in the affordable finance segment driven by the incentives and conducive industry dynamics particularly from Tier 2 and 3 towns and cities which are emerging as India’s new growth engines.
Is government’s push for affordable housing having a bearing on loan offtake?
The Indian housing finance industry and, in particular, the affordable housing segment, is witnessing one of the most exciting times. Over the last few months, the Government has been taking several significant, growth-oriented steps to develop demand as well as generate greater supply through impacting policy frameworks towards greater financial inclusion. Granting infrastructure status to the real estate industry, announcing the extended CLSS to include MIG 1 & 2 and most recent announcement on RERA, are some commendable efforts to stimulate demand of affordable housing. These customer friendly measures and efforts have definitely given a strong fillip to loan offtake.
What are the market and sub-markets where you are seeing a high demand for home loan?
Affordable Housing has clearly been a central growth agenda for the Government. Initiatives such as ‘Housing for All by 2020’, PMAY, CLSS, home loan rate cuts and housing regulations such as RERA has considerably sparked interest for affordable housing options across the consumer pyramid. Most of the first-time home buyers fund their property purchase through home loans. As a result, there has been a surge in home loan demand across India specifically the Tier-2 and Tier-3 markets.
What according to you are the best emerging real estate investment destinations across the country?
Post the launch of the Smart Cities Mission in 2015, the Government shortlisted cities from all regions of India having high economic and industrial potential. Smart cities will become catalysts in improving the quality of life and give a major fillip to the real estate in urban locations. Considering the upcoming infrastructure projects and other growth drivers, several cities under the Smart Cities initiative hold a distinct advantage and can be safe bets for ‘smart’ real estate investments.
What more, according to you, needs to be done to boost the housing sector?
For all the benefits to make real impact, customer centricity is becoming key. Financial institutions and HFCs need to focus on making the entire experience of home purchase more seamless and customer friendly. Companies need to think how we can address their financial needs across their whole financial life cycle through customised products.
To further boost the affordable housing sector, external commercial borrowings (ECB) should be extended to housing finance companies to enable onward lending to developers in the segment. Also, single-window clearances is another step towards increasing development in the affordable segment and ensuring timely delivery.
Interview: Ravi Narayanan, senior general manager and head – retail secured assets, ICICI Bank.
By: Shritama Bose | Updated: November 28, 2017 12:20 PM | Financial Express
The home-loan market seems to have slowed down, first because of some postponement of demand with demonetisation, and then with the implementation of RERA. Where do you see things going from here?
The supply in the system had anyway started reducing in the last two years. Between September 2016 and September 2017, supply has dropped by over 10-12% in residential real estate in the top 40-45 cities. Till a year back, the inventory overhang used to be about 18-20 quarters in the industry. Along with supply, absorption of units was also coming down because of various reasons, one of which could be demonetisation. People expected a price correction. With RERA coming in, my estimate is that the supplies will go down still further because the act has put in various guardrails as to how the builder must manage the finances available for the project. This augurs well because inventory overhang should not be so much. The second outcome of RERA will be a rise in customer confidence. So once this whole dust settles, we will see pick-ups rising. So there will be a decrease in inventory and an increase in sales and that should be good for the industry.
Won’t that also cause asset prices to rise?
It will follow a pattern. There is an oversupply right now. If the demand-and-supply gap comes down drastically, then the prices will go up. In the next six to eight months, a lot of consolidation might happen in projects underway, which may not be amenable for prices to go up. Prices will remain, more or less, at the same level or there may be some fall in prices. Also, in the last six-seven years, real estate has seen a slight downturn. Typically, the industry follows an eight-to nine-year cycle. So in my opinion, 2018 will again see a rise in sales.
A development that followed demonetisation was the expansion of the credit-linked subsidy scheme (CLSS) for housing. Are you seeing supply and offtake picking up in that category?
Over 60% of new home launches in the industry in the first half of FY18 had ticket sizes under Rs 25 lakh. Because of this scheme under the Pradhan Mantri Awas Yojana, a lot of projects have started coming up in this category. Builders are also entitled to certain benefits if a part of their projects are of sizes below a certain threshold.
So is the phenomenon of builders allocating more space to smaller units a countrywide one?
This is happening primarily in Mumbai and Pune. Some of it is happening in Chennai and Bangalore. But, it is not happening across the country as yet. That’s partly because you have to keep operating costs and land cost under control to be in affordable housing. It is a very price-sensitive market. However, given the focus on this sector from this government, there’s bound to be more players flocking to it.
In mortgages, banks have continuously been losing market share to housing finance companies (HFCs). Have they actually weaned away bank customers for their growth?
No, because the mortgage industry is really big. The mortgage book of the country is now at Rs 15 lakh crore; over the next few years, at a CAGR (compound annual growth rate) of 20%, it should go up to Rs 50 lakh crore. When the pie is so large, everyone will have a share. It’s just a question of how each player orients themselves. Today, most banks are focused on the metros, while HFCs are operating in the peripheries (of cities). So we are not meeting each other much. But very soon, it will all become one playground. Banks venturing into the peripheries will be much faster because we anyway have branches.
With interest rate-cuts and increased liquidity with banks following the demonetisation, loan products have more accessible.
Adhil Shetty | Published: May 11, 2017 4:02 PM | Financial Express
Consumers with healthy credit scores today would be receiving loan offers aplenty. With interest rate-cuts and increased liquidity with banks following the demonetisation, loan products have more accessible. Yet availing a home loan for the very first time remains a complex experience that loan seekers view with trepidation.
There are often misconceptions about what a home loan can do, and what it costs. For instance, you may be of the belief that the loan granted will match the property price. That is untrue, as financial establishments expect you to pay the margin amount.
The margin amount is another term for down payment for your new home. It could be anything between 15% and 20% of the home’s net value. For a first time home buyer, it is no easy task raising this money.
Here are some ways to help.
1. Strategic savings
Nothing beats strategic savings and for this you need to start your planning early. It involves you visualizing your long-term fund needs—including the need to buy a home—and beginning to save and invest accordingly. Begin with simple and accessible investment tools such as mutual funds or recurring deposits. Slowly and surely, you’ll be able to build your deposit over time. You can be efficient at this by locking in your savings at the start of the month. The earlier you start, the sooner you build this fund for your down payment.
2. Take loans but exercise restraint
There could be a situation where you are in urgent need of funds for the down payment. You could consider taking a personal loan to meet the need. Yet, you need to do this in a controlled manner. Having an existing loan will reduce your ability to take on, and repay, additional loans such as a home loan. You would find your finances stretched as you attempt to pay two EMIs at once. This isn’t an ideal situation to be in and is recipe for a financial disaster, in case you were to temporarily lose your ability to generate income. Therefore any loans for down payments need to be taken thoughtfully, and settled as soon as possible to reduce monthly EMI liabilities.
3. Mortgage another property
If you are confident that your current income can take care of EMIs of more than one loan, you could consider a loan against property. You can claim this loan against several options. For example, an existing property or home could be mortgaged. You could also claim it against assets such as shares, jewelry, PPF account, and LIC policies. There also exists the option of taking a loan against rent.
4. Withdraw from your PF account
As per the new EPFO norms, you are now allowed to withdraw up to 90% of your EPF corpus. Not just that, you could also withdraw from this corpus to pay for your EMIs. This scheme was recently implemented keeping in line with the Housing For All initiative of the central government. A word of caution: your PF corpus is meant to help you generate a pension income in retirement, so if you intend to redeem it for a property purchase, you must replenish it soon, or create a backup pension fund to meet your future needs.
5. Deferred down payment
You have the option of requesting a deferred down payment when purchasing a house from a well-known property developer. Under this, you will have the choice of dividing the down payment into multiple instalments. These instalments can be paid over a jointly agreed period of time. Let us say that you have to make a down payment of Rs. 10 lakh. Ask the builder for a time frame of five months to pay Rs. 2 lakh per month.
6. Liquidate your investments
Before you decide to make a property purchase, take stock of your savings, investments and assets. Anything from a vehicle to a part of a property you own can be liquidated for a down payment. Bank deposits, gold, mutual funds, shares etc. can be disposed. This should be carefully done so as to not disturb other financial objectives.
7. Approach an NBFC/ HFC
Non-Banking Financial Companies (NBFCs) and House Finance Companies (HFCs) provide loans that can help you cover a larger part of your fund requirement. For example, they may provide a loan to cover your registration and home repair costs as well. The entitlement of the loan, of course, will be calculated on the basis of your ability to repay.
Always remember to not act in a hurry. Think long and wise about the route you are taking to raise the down payment for your house. It is also advisable to wait and let an offer go if you cannot make the down payment, as there will always be another good offer in the future.
(The writer is CEO, BankBazaar.com)
Source : https://goo.gl/8ixiEW
May 12, 2017 | 11:39 IST | SOURCE : Economic Times | Retrieved from Timesnow.tv
In an effort to make its ‘Housing for all by 2022’ a success, the government has allowed for EPFO members to withdraw up to 90 percent of their provident fund (PF) accumulations to make down payments to purchase a house and to pay housing loan EMIs.
Pre-requisites for PF withdrawal
In order to dip into the provident fund saving, the new rule highlights that the PF holder will only be eligible if he/she has been a contributing PF member for at least 3 years, and is buying property in a registered housing society that has at least 10 members.
Further, the property has to be purchased in the member’s name and cannot be purchased jointly with anybody else, except your spouse.
How the money can be used
The money withdrawn can only be used for an outright purchase, as a down payment for a home loan, for buying plots or for the construction of a house. The transactions can be made through central government, state government and even from a private builder, including promoters or developers.
Can the money be used to buy resale flats as well?
Unfortunately no, EPFO will only make payments directly to a cooperative society, the state government, central government, or any housing agency under any housing scheme, or any promoter or builder, in one or more installments. The rule will not apply to real estate purchases in the secondary market or resale transactions.
Can you withdraw both employee and employer contribution?
An EPFO member can withdraw his own share of PF contribution plus interest as well as the employer’s share of contribution plus interest.
Can you EMI payment through PF?
A PF member can use his PF contribution to pay full or part EMIs for a home loan taken in the member’s name. The EMI will be directly paid by EPFO to the government, housing agency or the bank.
How to apply
A PF member can apply individually or jointly through a housing society to get a certificate from the EPFO.
Through Annexure I form, an employee can ask for the balance and the deposits made in the last three months before applying. This will help the EPFO determine how much EMI can be arrived at.
Also, the employee has to mention the name and details of the bank or housing society to whom such certificate is to be issued.
The EPFO then issues a certificate showing the outstanding balance and last three month’s deposit in the account. Alternatively, members can take printouts of their PF passbook downloaded from the EPFO website and submit it to housing agencies or banks.
If a member wishes to use PF money to meet EMI’s, then in addition to Annexure I, an authorisation by the member is to be filled in a prescribed format. It will carry details such as PF amount, PF and loan account number, lender name, address etc. One has to get this form authorised from the lender i.e. branch manager of the lender who has sanctioned the loan. Once approved, EPFO will start transferring EMI’s online to the lender’s account.
What if an employee leaves his/her job?
The EPFO has made it clear that under no circumstances would it be liable for any default of payments to the lender. The EPFO will not be party to any agreement made between an EPFO member and a society or builder.
In case a member quits his job, the responsibility of repaying the loan would rest with the employee and not the EPFO.
While dipping into your PF account to make a down payment makes your life easier, it is important to remember, your PF is meant to take care of your post retirement needs, and depleting it may jeopardise your retirement.
So make sure you have a backup plan to meet postretirement needs through equity mutual funds or PPF.
Real estate experts feel that home prices have bottomed out and they are likely to move higher in the new financial year. They say that this could be one of the best times to buy your home since loan rates, too, are attractive.
Sarbajeet K Sen | Source: Moneycontrol.com | Retrieved on 6th Apr 2017
The real estate sector has seen one of the worst times post-demonetisation with sales falling across the country, bringing down home prices. With the financial system having been successfully remonetised to a large extent, what is the outlook for the sector in the coming financial year?
Will activity in the real estate sector pick up 2017-18? Will sales pick up? How will home prices move in the coming fiscal? What will the factors driving real estate be post April 1?
The Confederation of Real Estate Developers Association of India (Credai) is optimistic that the new financial year would be good for the real estate sector and rising sales will lead to home prices moving up.
“The outlook for real estate in 2017-18 is very positive. The recent flurry of reforms and policy initiatives have set the tone for the future growth of the sector. This growth will be driven by efficient implementation of the initiatives and the subsequent rise in demand. We will see the residential sector take center-stage and be the driving force of the sector,” Getamber Anand, President, Credai told Moneycontrol.
Anand says that residential real estate prices have bottomed out and they would move up in coming months. He says those planning to buy homes should finalise the deal now.
“Prices in most markets have bottomed out and stabilised. Imbalance between demand and supply will result in an increase in property prices in the main markets. The recent policy moves have also restored consumer faith in the sector and the fence-sitters are slowly realising the timing is right for a purchase,” Anand said.
He also pointed out the loan rates are some of the lowest now. “With Pradhan Mantri Awas Yojana (PMAY) and the exemptions provided on housing loan in the Income Tax Act, the effective rate of interest for a home loan of about Rs 35 lakhs works out to about 5 percent only which improves the affordability factor and will further elevate the demand in the sector,” Anand said.
Surendra Hiranandani, Chairman & Managing Director, House of Hiranandani, agrees that low loan rates would push demand. “Post-demonetisation, interest rates have been reduced significantly on the back of huge inflows of deposits in the banking system making home loans cheaper. The various reforms undertaken by the government will address concerns faced by home buyers. Increased transparency and credibility will make it more attractive for consumes to invest in real estate,” Hiranandani said.
He also feels that homebuyers should seize the opportunity. “Homebuyers must use this opportunity and invest in properties that are available at attractive prices. They can purchase homes of their choice by full cheque payment. Those looking to buy resale properties can now avail higher finance through banks as the entire payment will happen through cheque,” Hiranandani said.
Hiranandani also feels home prices will move up after the turn of the financial year. “Home prices are expected to pick up in the second quarter of 2017 as the overall economy improves after demonetisation. Also, with Real Estate Regulation and Development Act (RERA), GST and other regulatory changes coming into effect in the coming months there is bound to be better transparency and credibility in the sector.
However, new launches would get impacted due to the implementation of these rules, so the demand for available inventory and ready-to-move-in homes will increase. The rise in demand will ensure that prices will move up again in good quality projects. This is the perfect time to buy a property,” he said.
PM had announced interest subsidy of 4% on housing loans of up to Rs 9 lakh of those with annual income of Rs 12 lakh and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per year.EMIs for house in an urban area to shrink if bought under PM Awas Yojna
TNN | Mar 23, 2017, 02.31 AM IST | Times of India
NEW DELHI: Your monthly home loan installment or EMI for a new property will come down by around Rs 2,000 if you are buying your first home in a city or town under the PM Awas Yojna (PMAY) and if your annual household income is in the range of Rs 12-18 lakh.
The government is offering an interest subsidy of 3-4% on borrowings of Rs 9 lakh to Rs 12 lakh even if the overall loan is higher. Loans availed from January are entitled for the subsidy announced by PM Narendra Modi as part of the post-demonetisation package.
On Wednesday, 70 lending institutions including 45 housing finance companies, 15 scheduled banks, regional rural and cooperative banks signed MoUs with National Housing Bank for implementation of the scheme for the middle class in urban areas.
Union housing and urban development minister M Venkaiah Naidu said that middle income groups (MIGs) make substantial contribution to the economic growth of the country besides paying taxes and deserved support to fulfill the dream of owning a house which is a basic and genuine aspiration. He urged banks and other lending institution to adopt pro-active approach to deliver the benefits to people.
The benefit will be extended to families as comprising of wife, husband and unmarried daughters and son. Moreover, unmarried and earning young adults buying their first house will be eligible to avail the benefit.
Though PM Narendra Modi had announced these subsidies on December 31to meet the aspiration of owning a pucca house for the tax paying large middle class, the operational guidelines could not be notified because of election code of conduct. TOI on February 15 had first reported about the interest subsidy scheme kicking off from January 1.
PM had announced interest subsidy of 4% on housing loans of up to Rs 9 lakh of those with annual income of Rs 12 lakh and of 3% on housing loans of up to Rs 12 lakh of those earning Rs 18 lakh per year.
“Those who have been sanctioned housing loans and whose applications are under consideration since January first this year are also eligible for interest subsidy,” a housing ministry spokesperson said.
As per the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower. The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries upfront in one go thereby reducing the burden of EMI.
Sriram Kalyanaraman, managing director and CEO of National Housing Bank said the interest subsidy of 4% will bring down EMI of beneficiaries by Rs 2,062 per month on a housing loan of Rs 9 lakh and interest subsidy of 3% will bring down EMI by Rs 2,019 on a loan of Rs 12 lakh, considering normal housing loan interest rate as 8.65%.
He added said during 2015-16, against total new bookings of 28.9 lakh units with loans of up to Rs 10 lakhs each, public sector banks and housing finance banks advanced loans of Rs 9.5 lakh crore and accounted for 64% of total bookings.
Source : https://goo.gl/SfohoV
By Dipak K. Dash, TNN| Updated: Feb 15, 2017, 02.37 PM IST | Economic Times
The rebate in interest rate is likely to push housing demand in urban areas and thereby help the sector to revive.
Anyone who has applied and got a home loan sanctioned after January 1 and has less than Rs 18 lakh annual income, will be eligible for interest subsidy of 3-4%. Prime Minister Narendra Modi had announced the interest subsidy on December 31, though the annual income criteria was not announced.
This benefit interest subsidy can also be availed by unmarried and earning young adults for acquisition/ construction of a new house including repurchase. Moreover, flats measuring up to 960 sq ft and 1,184 sq ft will be eligible for 3% and 4% interest subsidy respectively for the specified income group.
TOI on January 4 had first reported that the housing ministry had moved a proposal to provide 4% rebate on interest rate for loans up to Rs 9 lakh and this can be availed by those who earn up to Rs 12 lakh annually in urban areas. Similarly, people earning up to Rs 18 lakh annually will be eligible to avail 3% rebate on interest for loans up to Rs 12 lakh.
Sources in housing finance sector said that though the government had finalised the policy, it has not yet announced it because of election code of conduct. In fact, the ministry had held a meeting with banks and housing finance companies where the operational guidelines for “credit linked subsidy scheme for middle-income groups (CLSS-MIG)” was discussed.
The rebate in interest rate is likely to push housing demand in urban areas and thereby help the sector to revive.
By Harsh Roongta | Facebook post
Ok – I admit that the headline is to grab your attention. But in this budget the finance minister has proposed several clever changes in the tax laws that will discourage investments in multiple properties yet at the same time encourage first time home buyers to buy their homes rather than live on rent.
Currently 4 factors drive investments in multiple real estate properties. First- Real estate is the only asset class left that still easily allows laundering of large unaccounted “black” income. Second – most investors have the ability to take loans for buying a residential property. Third – these loans are very cheap as the interest paid on these loans is fully tax deductible and the resultant loss can be set off against business income or salary income. Fourth- the “capital gains” on sale after 3 years are treated in a concessional manner and can be completely tax free if reinvested in another property and become fully laundered after the second round of investment.
The proposed changes hit at the first and the third factors. The restrictions on receiving any cash in excess of Rs. 3 lakhs is bound to create difficulties in paying and/or accepting large sums of cash that are typically required on these kinds of property purchases. Another factor is the effective removal of the tax deductibility of home loan interest on multiple properties makes the home loans much more expensive. I think these 2 factors will have a far greater negative impact then the small positive factor of making the long term capital gain period at 2 years instead of 3 years earlier. These kind of properties are rarely held for decades and hence the other positive factor of change in indexation date will have no impact on holding of multiple properties.
Once the impact of these factors sink into the market it will have a further adverse effect on the already low demand for high value properties. Meanwhile the government has already announced a slew of measures to encourage the buying of reasonably sized (650 sq ft carpet area or around 1000 sq ft – saleable area or a decently sized 2 BHK flat) affordable homes in urban areas. Full details of the new subsidy scheme are still awaited. If newspaper reports are to be believed then households having income of upto Rs. 18 lakhs per year will also be eligible for a one time subsidy of around Rs. 2.20 lakhs through their home loan lender. The existing subsidy scheme is well designed with no restriction on sale of the houses bought under the scheme nor is there a limit on the value of the houses or the loan amount. The limits are only on household income and flat size. It also requires that it should be the first purchase for the household and the women of the house should be the owner or joint owner and the house should be in an approved project. It’s a scheme that is already working well for lower income households (income upto Rs. 6 lakhs per annum) and there is no reason it will not work equally well for the wide swathe of middle income households that are expected to be covered. Developers are also given tax benefits on profits from affordable home projects. Both these things can create a massive demand for “affordable” homes. Hence Real Estate is dead. Long live Real estate.
By Saikat Das, ET Bureau | Updated: Dec 26, 2016, 09.16 AM IST | Economic Times
MUMBAI: Housing finance firms downplayed stress in the real estate sector as fallout of the sudden demonetisation early last month in meetings with regulator National Housing Bank, but fear consumer sentiment expects prices to fall, and that could hamper home sales in the coming months, crimping growth, multiple sources familiar with the matter told ET.
In the past two weeks, NHB has held three meetings in Delhi, Mumbai and Chennai with 81 housing finance companies to assess the impact of demonetisation.”We have held regional level conferences of housing finance companies (HFC) assessing the situation in light of demonetisation,” Sriram Kalyanaraman, CEO of NHB, told ET. “We also discussed the challenges and opportunities in this sector and also how the HFCs can work more towards fulfilling the Housing-for-All goal (by 2022).”
Kalyanaraman did not elaborate on the challenges but some participants said they drew the regulator’s attention to escalating consumer expectations on falling prices. Rental yield and mortgage loan yields have fallen to about 3.4% (tax adjusted), which could be a key trigger to rake up housing demand from home buyers living in rented accommodation now, a head of a large HFC said.
Many consumers are holding back their decision as they expect sharp fall in prices.This could hurt home loan demand, they said, seeking NHB’s intervention to scotch such speculation. The regulator believes that there could be some short term corrections (10-15%) in home prices but it would eventually rise when genuine tax payers line up for transparent deals.
The regulator encouraged HFCs to promote small value affordable housing finance loans to coax salaried people being keen on buying homes. “We do expect a surge in affordable housing both on supply and financing side,” said Kalyanaraman, thanks to falling interest rates, higher transparency with RERA (Real Estate Regulation Act) and expected lower land prices.
By Sanket Dhanorkar | ET Bureau on 21st Nov 2016 | Economic Times
For many city dwellers, owning a home is always a distant dream. Unaffordable real estate prices compel them to stay in rented properties instead. However, several events and trends taking shape now could soon turn that dream into a reality.
The government’s surprise move to clamp down on black money hoarders through the ban on Rs 500 and Rs 1,000 currency notes is expected to have a cooling effect on certain pockets of the residential market in the country. The housing market is a hot-bed for the indiscriminate use of black money. Many developers, resellers and homebuyers insist on having hard cash as a component of payment in real estate deals.
The recent ban on high value currency notes is expected to deal a body blow to this practice. Another likely side effect of the move is a down ward pressure on the interest rate structure. This would come as a relief to people who cannot afford the high EMIs on housing loans. In addition to these factors, many developers are also aggressively turning towards the affordable housing segment. This effectively opens up another avenue for those who find themselves priced out of the housing market in metropolitan cities.
Further, with many states likely to enforce the buyer friendly provisions of the Real Estate Regulatory Act, homebuyers can expect more transparency. This would also provide them protection from delays in construction and handover, as well as other unscrupulous practices employed by developers. In the following pages, we will outline the opportunities these developments are likely to present for homebuyers, and delve into the emergence of the affordable housing segment.
Fewer new homes in the market
Number of new projects declined in top 9 cities
All cities have witnessed a drop in launches
What awaits housing?
Industry experts believe that the housing market will experience a lull in the coming months, as these developments take their toll. Homebuyers can expect property prices to come down in certain pockets, which would provide an opportunity for them to make their move.
Rohit Gera, MD, Gera Developments, asserts, “There is no doubt that sales which involve the exchange of cash will be affected. This will impact land prices too. If land prices crash on this account, there will be a likelihood of property prices coming down as well.”
As CARE Ratings points out in its report, developers are already grappling with the problem of slow sales, which is leading to rising inventory levels in all major micro markets. Given the growing uncertainty and negative impact on demand caused by demonetisation,people are likely to postpone their plans to buy property, which would lead to further increase in inventory levels. As a result of this, developers and sellers could be compelled to cut down prices to drive sales. Most experts are of the opinion that the secondary market will be visibly impacted, since it deals with a significant amount of cash. ..
Ashwinder Raj Singh, CEO, Residential Services, JLL India, says, “The real estate sector will definitely be affected by the demonetisation exercise, as it has traditionally seen a very high involvement of black money and cash transactions. However, almost all such incidences have been in the secondary sales market, where cash components have traditionally been a ‘must’.” He further states that projects undertaken by reputed and credible developers in the top eight Indian cities will remain more or less unaffected.
This is because buyers who invest in such projects take the home loan route, and all transactions are carried out through legal channels. Hence, the primary market is likely to remain relatively untouched by the radical step. However, home buyers can look forward to better pricing in the secondary or resale market.
“For buyers, this could be a great opportunity to get a deal, especially in ready to move-in projects, as real estate prices are likely to face a downward pressure and a few sellers may be more willing to negotiate and lower the prices of housing units,” says Khurshed Gandhi, Managing Director, Consulting Services, India, Cushman & Wakefield.
Excess inventory build up in this segment has already put a lid on prices, making existing possession-ready properties a more viable option for buyers. For those who are keen on buying directly from the developer, the options might be limited.
However, the demonetisation move could prove to be a boon for those who have been looking for deals in the high-end or luxury housing segment. According to Rohit Poddar, MD, Poddar Housing and Development, this segment could face a big impact in terms of pricing. “A large cash component is the norm in the luxury housing segment, as many buyers insist on using cash.
But with the government clampdown, sales in this segment are likely to dip, leading to price cuts. Some developers have already slashed prices.” The affordable luxury segment, which is priced within the reach of buyers slightly below the HNI category, may offer good opportunies in the coming months.
Home loan rates will soften
If you have been putting off buying your dream home because you’re not ready for the high EMIs, you can expect to have more breathing room now. This is because lending rates are likely to come down further. Due to demonetisation, a large amount of cash in circulation will be brought within the purview of the formal banking system through low-cost current account and saving account deposits. Since this will reduce the dependence of banks on higher cost borrowings, banks are likely to slash the marginal cost of funds based lending rate (MCLR). This will accelerate the fall in home loan interest rates, since CASA ratio is used in computing MCLR.
Fixed deposit rates have dropped across banks
Increased liquidity has brought down deposit rates, which would in turn lower lending rates.
If home loan rates are cut by 25 BPS
The surge in low-cost deposits is likely to bring down bank deposit rates and ultimately lead to a drop in lending rates as well. Here’s how a decline in home loan rates will impact borrowers.
If you have a loan of Rs 50 lakh at 9.5% for 20 Years : A 25 basis point cut will reduce the EMI by Rs 812 per month.
Rs 46,606 Old EMI at 9.5% : Rs 45,793 New EMI at 9.25%
Lenders usually leave the EMI amount unchanged and reduce the loan term when rates are cut. The extent of reduction will depend on the balance tenure of the loan. The longer the remaining tenure, the greater the impact.
Balance loan tenure at 9.5% : 5 Years
Number of EMIS reduced at 9.25% : 1 EMI
Balance loan tenure at 9.5%: 10 Years
Number of EMIS reduced at 9.25%: 2 EMI
Balance loan tenure at 9.5% : 15 Years
Number of EMIS reduced at 9.25% : 5 EMI
Balance loan tenure at 9.5%: 20 Years
Number of EMIS reduced at 9.25% : 12 EMI
MCLR rates change
The 15-20 bps reduction in Axis Bank’s MCLR shows the emerging trend
While the currency notes ban has left less cash in the hands of consumers, thus driving down consumption for the time being,taking older Rs 500 and Rs 1000 notes out of circulation is also expected to have a longer term deflationary impact on the economy. It will bring about a slowdown in highticket purchases such as white goods, jewellery, high-end retail and of course, real estate.
“Banks that have excess liquidity will look to sanction more loans going forward, and will probably effect another round of interest rate cuts on home loans,” says Adhil Shetty, CEO, BankBazaar.
“The sudden decline in money supply and simultaneous increase in bank deposits is going to adversely impact consumption demand in the economy in the short term. This coupled with the adverse impact on real estate and informal sectors, may lead to the slowing of GDP growth,” says Sunil Kumar Sinha, Principal Economist and Director -Public Finance, India Ratings & Research.
This will probably lead to a softening in inflation, which may prompt the RBI to carry out interest rate cuts and give more leeway for banks to lower their lending rates. “With this move, we also expect that the RBI will reduce rates, which will have a direct impact on home loan interest rates, thus giving consumers more cash flow to invest in real estate,” says Brotin Banerjee, MD & CEO Tata Housing Development Company. Several major banks like SBI, HDFC and ICICI, have only recently slashed home loan rates
SBI continues to offer the lowest interest rates under its recent festival offer of 9.15% for loans of up to Rs 75 lakh sanctioned in November and December this year. Private lenders HDFC and ICICI Bank now offer interest rates at 9.2% for home loans of up to Rs 75 lakh, down from 9.35%. Experts predict another 10-15 bps reduction in interest rate soon.
Until recently, developers were more focused on offering solutions in the premium and upper-mid range segments, since they expected high demand in this space. However, there has instead been a visible shift in demand from big ticket purchases mostly led by investors, to purchases by end-use customers, who now constitute almost 90% of aspiring home buyers. As a result of this, builders are increasingly shifting their attention to the affordable housing segment.
“Not only are prices down in most cities, but developers have also introduced schemes and incentives to make deals more lucrative.” Anuj Puri Chairman & Country Head, JLL India
Data from Cushman & Wakefield, a real estate consultancy firm, shows that the number of launches in this segment in the first half of the year has doubled from the same period last year. In the top eight cities alone, 17,000 new affordable housing units were launched, out of a total of 60,000.
Pune saw the highest supply, with 4,170 new units being launched. Bengaluru came a close second with 4,155 units. Affordable housing is distinct from low-cost housing, which is meant for the economically weaker section and is equipped with only basic housing facilities.
These units are typically up to 300 square ft. in size, and priced up to Rs 15 lakh. Affordable housing, on the other hand, is mostly meant for the middle-income families who can afford to spend Rs 30-50 lakh. These are mostly located on the peripheries of the bigger cities. Anuj Puri, Chairman & Country head, JLL India, says, “Constraints like the nonavailability of land and high costs often make housing within primary city boundaries unaffordable. Therefore, affordable housing projects are largely located in the outer peripheries of these cities.”
However, these provide all basic amenities, and some large projects even have social amenities such as landscaped gardens, schools and shopping centres. “Staying on the outskirts is no more considered to be an inconvenience. Additionally, these newer locations are well planned and offer a lot of green spaces as compared to city centers,” Banerjee points out. However, to keep costs under check and improve affordability for the buyer, developers typically offer units in 1RK and 1BHK size, with a reduced saleable area of up to 350 square ft. for 1RKs and up to 500 square ft. for 1BHKs.
The average size of affordable housing units launched in the first quarter of 2016 was reduced by 11% from those launched in the corresponding period in 2014. In Delhi NCR, this reduction was to the tune of 8%. Many projects in this segment are coming up in the form of integrated townships, which attempt to provide maximum value for money to buyers. With more serious developers entering the segment, there has been a distinct improvement in product quality. “The sales of smaller builders are being cannibalised by branded developers, who offer a better quality of lifestyle,” Poddar observes.
Homes are getting smaller with time
Apartment sizes sold in top 9 cities
Bengaluru, Mumbai and Pune are driving sales for smaller sized units
Is it right for you?
If you resent shelling out large amounts of rent, but have been afraid of taking on the burden of high EMIs, affordable housing could be your way out. “Thanks to the recent spate of price declines driven by the market realities, affordable housing has never been more accessible to the common man. Not only are prices down in most cities, but developers have also introduced various schemes and incentives to make the deals more lucrative,” Puri adds.
Further, in recent times, the government has also introduced various special incentives in terms of tax benefit to both the developer and homebuyer. There are also several schemes aimed at promoting public-private partnerships for the development of affordable housing projects, in order to realise the government’s vision of ‘Housing for All’ by 2022.
Units lie unsold across segments
Noida and Mumbai together account for 41% of unsold inventory in this segment
The Budget 2016 directive allowing 100% deduction on profits earned by developers of affordable housing projects provides an added incentive to builders. It is also likely to lower the chances of delays in the construction and handing over of possession, which has become the norm in recent years. This is because the budget has put the onus on the builders to finish houses within three years of starting work, if they are to avail of the exemption for affordable homes.
“The affordable housing policy has been drafted to incentivise timely delivery, and will motivate developers to finish their projects and handovers according to set timelines. Further, with the Real Estate Regulatory Authority coming in soon, timely delivery will become a norm,” says Jayashree Kurup, Head, Content and Research, Magicbricks.
Old inventory remains unsold
NCR accounts for nearly 30% of unsold inventory aged more than 2 years
The government’s move to exempt service tax on the construction of affordable houses of up to 60 square metres will also fuel interest in this segment, and keep prices low. There is also a cost benefit for developers in building these units. The project completion time is much shorter in this segment, and sales are realised much more quickly than for mid-and-high range properties.
Further, for first-time homebuyers, the government offers an added tax deduction of Rs 50,000 per annum on interest payment for housing loans of up to Rs 35 lakh, for properties valued at under Rs 50 lakh. This is over and above the Rs 2 lakh deduction allowed on interest payment on any housing loan under the Income Tax Act.
According to experts, affordable housing is better suited for end use, than it is for investment. Since the scope for price appreciation is limited in the segment owing to smaller unit size and remote locations, homebuyers should consider various aspects before opting for affordable housing project, asserts Gulam Zia, Executive Director, Advisory, Retail and Hospitality, Knight Frank India.
According to Puri, focusing only on the price tag is a bad idea, as this can trick the buyer into investing in an inferior project, or one located in an area with little connectivity. “Since most affordable housing projects are ough background check of the developer before putting the money into any project is crucial. “Buyers should verify the developer’s credentials based on their project completion timelines, reputation in the market, customer feedback, and how much experience they have in the construction business,” cautions A.S. Sivaramakrishnan, Head, Residential Services, India, CBRE South Asia.
Better than renting
Given the conditions at present, Kurup advises that young couples who pay rent should consider buying ready-to-move-in apartments which have EMIs of up to 25% more than their monthly rent. However, it is important to ensure that the distance to their workplaces does not increase so significantly that the expense it adds to their monthly outflow. “Buy according to your current needs, and ensure that the price fits into your budget. Over the next five years or so, your property value will go up, and then you can sell it and use the proceeds to upgrade,” Kurup adds.
Puri believes the market is currently very well suited for young working couples and professionals. “The ideal strategy for them is to invest in a well-located ‘starter home’ in a project by a reputed developer, with a view to upgrading in the future.
“Affordable housing is better suited for end use than for investment, given the limited scope of price appreciation in the segment.” Gulam Zia Executive Director – Advisory, Retail and Hospitality, Knight Frank India
By then, suburbs which are currently in the initial stages of development would have sufficient infrastructure to support constructed in remote locations, in order to take advantage of the availability of cheaper land, the most important criteria for selecting the right project is availability of transportation facilities in the vicinity, and its connectivity with the city centre,” Zia adds.
“The buyer should also evaluate if the lifestyle offered by the affordable home is in line with their aspirations,” Gandhi adds. Social infrastructure, like education centres and healthcare facilities, should also be within a reasonable distance from the housing project. Most importantly, conducting a thora decent lifestyle.” He points out that Navi Mumbai, Bengaluru, Chennai and Pune are obvious investment destinations because of their accelerated growth and employment opportunities.
“Cities which have a robust economy and multiple employment opportunities are the best options for homebuyers in the affordable segment. Cities like Mumbai, Pune, Bangalore and Hyderabad are therefore likely to witness sustained demand for affordable housing projects in the future,” Gandhi concludes.
Grey market interest rates down to 5%
Interest rates have dropped to 5% from as high as 30% in the grey market, where a flourishing under-the-counter lending business has been stifled by demonetisation. Under grey market lending schemes, investors pool in money that is lent to real estate developers, small companies and people in distress at high interest rates. These loans are given in cash without written agreements.
Now loans can’t be given or repaid in the demonetised Rs 500 and Rs 1,000 notes, which were the most widely used. “The interest rates charged were anywhere from 18% to 30% per annum,” said an investor who is part such an arrangement. “Those who were to return money borrowed earlier are offering it in high denomination notes, and we ourselves are stuck with these. Interest rates have come down to minimum, about 5% per annum or even less,” he added.
Affordable projects coming up
The launch of affordable housing projects has doubled in the first half of 2016-17, far ahead of other segments.
More launches across cities
Ahmedabad and Delhi saw the highest proportion of launches in affordable housing segment in recent times.
Source: Cushman & Wakefield
Infrastructure adds advantage
Planned infrastructure projects that promise better connectivity can boost affordable housing in some pockets.
Prabhakar Sinha | TNN | Nov 9, 2016, 05.58 AM IST | Times of India
NEW DELHI: The government’s decision to withdraw existing currency notes of Rs 500 and Rs 1,000 from circulation will severely impact the real estate sector, especially secondary market transactions where 60:40 – the ratio of legal to black money – had become a norm of sorts.
The primary market, where one buys a house in a project directly from a developer, will not be directly impacted by the measure. But market players said that the impact on the secondary market is set to hit the overall sentiment, which has remained subdued for the past few years.
“The effects of the currency measure will be far reaching and immediate, and will shake up the sector in no uncertain way,” said chairman and country head of JLL India, Anuj Puri.
President of the Confederation of Real Estate Developers’ Associations (Credai) Getambar Anand, however, argued that most of the houses in the primary market are sold on bank finance. “Therefore, the black money element will not have any impact. As the values of units are publicly known, they cannot sell other units at a discounted price in white and the rest on cash payment,” the head of the industry lobby group said. But given the widespread use of cash when it comes to payments to local authorities and politicians in office, a lot of the transactions by developers are conducted in cash, some of which “managing” their own books.
As PM Narendra Modi said, real estate and land purchases are seen as one of the most prominent segments of the cash economy.
In most developed areas in metro cities, the initial transaction is through legal channels. But when it comes to a resale or a secondary market transaction, the seller often seeks cash payment to save on capital gains tax. For the buy er, the attraction of cash deals is that they can report a lower value to the registration office and reduce the stamp duty burden. In addition, this is an outlet of cash lying idle with buyers which cannot be parked in the banking or financial sectors to reap returns.
Because of black money, the value of real estate in many markets in metros have appreciated sharply.
After the PM’s announcement, the expectation is that use of cash will nearly vanish, at least for the next few months, resulting in a sharp drop in prices in the secondary market. This will have an effect on the primary market as well.
Chandralekha Mukerji | ET Bureau | October 5, 2016
2016 is looking to be one of the best years for home buyers.
More tax benefits, rate cuts on loans, stagnant property prices, new launches in the ‘affordable’ segment with freebies and attractive payment schemes.
Many of you will be looking to take advantage of these benefits and buy a house.
While hunting for a house at the right price, you’ll be haggling with the bank to cut a loan deal too.
Even if you get a discount on both, your tax bill can burn a hole unless you know the rules well. Here goes a list of six lesser known and often-missed tax benefits on home loan.
You can claim tax benefit on interest paid even if you missed an EMI
Unlike the deduction on property taxes or principal repayment of home loan, which are available on ‘paid’ basis, the deduction on interest is available on accrual basis.
Meaning, even if you have missed a few EMIs during a financial year, you would still be eligible to claim deduction on the interest part of the EMI for the entire year.
“Section 24 clearly mentions the words “paid or payable” in respect of interest payment on housing loan.Hence, it can be claimed as a deduction so long as the interest liability is there,” says Kuldip Kumar, partner-tax, PwC India .
However, retain the documents showing the deduction so that you can substantiate if questioned by tax authorities. The principal repayment deduction under Section 80C, however, is available only on actual repayments.
Processing fee is tax deductible
Most taxpayers are unaware that charges related to their loan qualify for tax deduction.
As per law, these charges are considered as interest and therefore deduction on the same can be claimed.
“Under the Income Tax Act, Section 2(28a) defines the term interest as ‘interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit, claim or other similar right or obligation)’.
” This includes any service fee or other charge in respect of the loan amount,” says Kumar. Moreover, there is a tribunal judgement which held that processing fee is linked to services rendered by the bank in relation to loan granted and is thus covered under service fee.
Therefore, it is eligible for deduction under Section 24 against income from house property .Other charges also come under this category but penal charges do not.
Principal repayment tax benefit is reversed if you sell before 5 years
You score negative tax points if you sell a house within five years from the date of purchase, or, five years from the date of taking the home loan.
“As per rules, any deduction claimed under Section 80C in respect to principal repayment of housing loan, would get reversed and added to your annual taxable income in the year in which the property is sold and you will be taxed at current rate,” says Archit Gupta, CEO, ClearTax.in.
Thankfully , the loan amortisation tables are such that the repayment schedule is interest heavy and the tax-reversal rule only apply to Section 80C.
Loans from relatives and friends is eligible for tax deduction
You can claim a deduction under Section 24 for interest repayment on loans taken from from anyone provided the purpose of the loan is purchase or construction of a property.
You can also claim deduction for money borrowed from individuals for reconstruction and repairs of property .
It does not have to be from a bank. “For tax purposes, the loan is not relevant, the usage is.
” The taxpayer should be able to satisfy the assessing officer how the loan has been utilised for constructing or purchasing a house property and completion of construction was within five years and other conditions are met,” says Gupta.
“The interest charged should be reasonable and a legal certificate of interest should be provided by the lender along with name, address and PAN,” says Gupta.
This rule, however, is only applicable for interest repayment.You will lose all tax benefits for principal repayment if you do not borrow from a scheduled bank or employer. The additional benefit of Rs 50,000 under Section 80EE is also not available.
You may not be eligible for tax break even if you are just a co-borrower
You cannot claim a tax break on a home loan even if you may be the one who is paying the EMI. For one, if your parents own a property for which you are paying the EMIs, you can’t claim breaks unless you co-own the property.
“You have to be both an owner and a borrower to claim benefits. If either of the titles are missing you are not eligible,” says Gupta. Even if you own a property with your spouse, you can’t claim deductions if your name’s not on the loan book as a co-borrower.
You can claim pre-construction period interest for up to 5 years
You know you can start claiming your home loan benefits once the construction is complete and you receive possession.
So, what happens to the installments you made during the construction or before you got the keys to the house? As per rules, you cannot claim principal repayment but interest paid during the period can be accrued and claimed post-possession.
‘The law provides a deferred deduction on the interest payable during pre-construction period. The deduction on such interest is available equally over a period of 5 years starting from the year of possession’, says Vaibhav Sankla, director, H&R Block.
Sukanya Kumar (more) Founder & Director, RetailLending.com | Source: Moneycontrol.com
Know all that is required to avail home loan subsidy offered by the government.
Government of India, on 17-Aug ’16 has announced a long-awaited scheme for the urban dwellers, under which a home loan interest subsidy of 6.5% has been announced which reduces burden from the home buyer. A welcome move!
Some pointers and some insights here on this Credit Linked Subsidy Scheme(CLSS):
This subsidy is for economically weaker section (EWS) of people residing in urban areas which even include slum-dwellers. Annual household income should not exceed Rs 3 lakh. The marginalised sections of the society such as disabled, transgender, women, widow, scheduled caste and tribes will get priority. Lower income group(LIG) who has annual household income between Rs 3 and 6 lakh will be eligible.
Those who do not have any other home-ownership in his own or family’s name will qualify.
Your age should not be more than 70 years as on date.
Besides public sector banks (PSU) and home finance companies (HFC), some co-operative banks and microfinance institutions are also extending this offer. The long list of lenders include HDFC, LIC Housing Finance, PNB Housing Finance, Dewan Housing, GIC, ICICI HFC, Tata Capital, L&T Housing Finance, Muthoot Finance, Yes Bank, Indiabulls, Axis Bank, DCB, Federal Bank and almost all PSU banks.
Max subsidy is on a loan amount of Rs 6 Lakh for a maximum loan tenure of 15 years, at an interest of 6.5%. Hence, if the rate of interest by the lender is 10%, then the actual payable by the borrower under the subsidy scheme is 3.5%.
FOR WHAT PURPOSE:
The subsidy is allowed to borrowers buying a home either under-construction from a builder, a ready-to-occupy house, self-construction, or extension (adding new room, kitchen, bathroom etc.)
The maximum size should not exceed 30 sq. mt.(carpet) for EWS, and 60 sq. mt.(carpet) for LIG applicants.
Currently, HUDCO and NHB has been identified by the Govt. as Central Nodal Agencies (CNAs) to tie up with lenders to extend this facility.
An applicant will apply for a home loan in any of the lenders ( CLSS lender list ) where upon credit appraisal, the specific form supplied by the CNAs will be sent to HUDCO/NHB. They will come back with an approval after due verification and give their nod to the lending company. The disbursed loan will be adjusted with the subsidy, which, thankfully, the government is paying upfront.
Q: How much time will it take for HUDCO/NHB to approve the subsidy?
A: It is said that it will take 30-45 days time post all verifications done by the CNA to check the eligibility criteria.
Q: How much time will it take for the subsidy to arrive to the lender?
A: The lender does not have a clear answer to this. For them, it is just another loan. Once the subsidy is approved and received, they will act on it.
Q: What will happen if the purchase/construction area is more than the specified sq. mt.? Will the subsidy be declined?
A: It is okay to have a higher construction area or loan amount exceeding Rs 6 lakh. The balance area sq. mt. and the additional loan amount will not get the subsidy benefit. For example if your loan amount is Rs 6 Lakh, then the subsidy is on the whole and for a 15 year tenure at 6.5%, it is INR 2,20,187.05 (if the lender’s ROI is 10%). For a Rs 12 lakh loan amount, keeping the tenure and rate same, the subsidy amount will remain unchanged. Subsidy calculator here .
Q: Will there be one EMI for the subsidised as well as non-subsidised portion of the loan (in case of loan amount exceeding Rs 6 lakh) or it will be split?
A: It will not be split. The lender will consider this as one loan.
Q: When will the loan be disbursed? Will it have to wait till the subsidy confirmation comes in?
A: Lenders do not give one answer to this question. It is quite possible that they haven’t yet formed a firm decision over it. Some say they will hold on to the disbursement till the subsidy confirmation comes in, some say, they will disburse the loan anyways and they are just a facilitator and are not worried much as to when or whether it comes along.
Q: Will the builder / seller wait till subsidy confirmation for the borrower comes? Will the borrower be okay for the disbursement of loan without subsidy-confirmation?
A: A self-construction may wait, but a builder or a reseller to wait till the subsidy confirmation comes in, is going to be a long haul. Wonder how practical will it be.
Q: Govt. says the borrower should not be more than 70 years. Will the lenders comply?
A: Surely enough, the lenders I spoke with did not want to comply. They will stick to their own policy of the maximum age limit while doing a loan. So, if an applicant is 60, some may decline giving a loan to him or her.
Q: How will the subsidy get adjusted with the payable amount by the borrower?
A: The subsidy, as mentioned earlier, will come at one shot from government. The subsidy is basically to give relief to the borrower and instead of paying a monthly EMI of ‘X’ amount, he should pay lesser. However, the lenders are going to straightaway reduce the principal outstanding of the borrower by that Rs 2 lakh odd amount and adjust his tenure! So, his loan may now become a few years lesser, but monthly outflow remaining the same. A few borrowers who are educated and understand mortgage may, and I repeat may, seek an adjustment on the EMI and the lender will oblige. But how many borrowers in this category will actually know that this is an option too?
Q: Is this a real benefit to the borrower?
A: If the monthly outflow does not reduce while acquiring a home, then the benefit is definitely not looking attractive initially. Over the period of time, buy reduction of the tenure, it will bring joy to the borrower’s face, but the tough time is now. isn’t it?
K. R. SRIVATS | NEW DELHI | AUGUST 22, 2016 | The Hindu Businessline
Discussion paper likely in a month, says PFRDA member
If you are a National Pension System subscriber, soon you may get to dip into the pot for a home loan and realise the dream of having ‘pension with a house’ on retirement.
The Pension Fund Regulatory & Development Authority (PFRDA) is toying with the idea of allowing NPS funds to be used to support home loan needs of subscribers, said RV Verma, Member, PFRDA.
The regulator feels an NPS subscriber should be allowed to use the NPS corpus either directly or as a collateral for financing the house. This will be an improvement over the current regime, where any premature withdrawal means diminishing of balance.
“We are preparing a discussion paper on ‘Housing for NPS Subscribers’. Rather than allowing NPS contributions to flow into the capital market or specified securities, the same could also be used for supporting home loan needs of NPS subscribers. This discussion paper is expected to be ready in a month,” Verma told told BusinessLine here.
Any move to allow pension funds to be used for financing a home is expected to “reduce homelessness” in the country and is in line with the government’s objective of ‘Housing for All by 2022’. This facility will be available across the entire NPS subscriber universe — both government employees and non-government individual subscribers.
This idea of allowing NPS monies to fund home purchase could be a win-win for the government and subscribers. Besides pension and a house, subscribers will get fiscal benefits by way of tax breaks for contributing to the NPS corpus and also for repayment of housing loan principal and interest.
For the government, the benefit comes in terms of reduced allocation from the fisc towards house building advance, Verma said.
As on date, an NPS subscriber is allowed partial withdrawal — capped at 25 per cent of the contribution if he has been with the scheme for at least 10 years.
Aug 02, 2016, 10.22 AM | Source: PTI | MoneyControl.com
“By providing home loans at subsidised interest rates from 4 percent, TCHFL will help individuals to realise their dream of buying their own home,” the company said in a release.
Tata Capital Housing Finance (TCHFL) announced a new home loan scheme ‘Prapti’ targeted at low income group under the affordable housing plan.
“By providing home loans at subsidised interest rates from 4 percent, TCHFL will help individuals to realise their dream of buying their own home,” the company said in a release.
Tata Capital said ‘Prapti’ is a step towards government’s Pradhan Mantri Awas Yojana envisaging to provide affordable houses to the urban poor by 2022.
The scheme specifically caters to segments like the lower income group (LIG), economically weaker section (EWS) of society, Scheduled Caste (SC), Scheduled Tribe (ST) and women residing in the peripheries of metros, tier I, II and III cities.
The scheme is applicable for households with an income of up to Rs 6 lakh per annum, the company said.
“Housing Finance is an integral part of Tata Capital’s wide portfolio of retail offerings. This product can reduce the effective cost of interest thereby expanding the opportunity of home ownership,” said Govind Sankaranarayanan, Chief Operating Officer-Retail Business & Housing Finance, Tata Capital.
The ‘Prapti’ home loan scheme, with low interest rates and flexible loan repayment options will equip a larger base of the lower income segment to realize their dream of purchasing their own home, TCHFL Managing Director R Vaithianathan said.
TCHFL, a wholly-owned subsidiary of Tata Capital, provides loans for purchase and construction of residential unit, land purchase, home improvement, home extension and project finance to developers.
Tata Capital is into consumer finance, advisory services, commercial and infrastructure finance, securities, investment banking, private equity advisory, credit cards and travel & forex services.
Indian Housing Finance Companies (HFCs) need to work on underwriting standards for affordable home loans to control credit risks, according to Moody’s
Abhijit Lele | Mumbai | July 26, 2016 Last Updated at 00:21 IST | Business Standard
Indian Housing Finance Companies (HFCs) need to work on underwriting standards for affordable home loans to control credit risks, according to Moody’s. The observation becomes crucial, at a time when the government is pushing for an increase in home ownership among underprivileged groups.
Affordable housing loans — which are mortgages for low-income earners — are typically opted for by first-time home buyers, usually self-employed in small unregistered enterprises or working for small companies. Key credit considerations for HFCs while giving such loans include income assessments.
Some HFCs prefer to extend loans to the specific building projects of construction firms that they have pre-approved, Moody’s said.
The affordable housing loan market is forecast to grow to Rs 8 lakh crore by 2022 from Rs 59,300 crore in March 2015, bolstered by government measures. Affordable housing loans accounted for 14 per cent of the total home loan books of HFCs as on 31 March 2015. “This segment presents unique credit risks for lenders, and when securitised, for residential mortgage-backed securities because of the nature of the borrowers,” said Georgina Lee, assistant vice-president at Moody’s.
Many borrowers do not have previous banking transaction records and, for the self-employed, they do not disclose their incomes or file tax returns.
As such, the formal documentation or records needed to verify income and the ability to service loans is absent, similar in some ways to “low-doc” mortgage loans in other jurisdictions.
Source : http://goo.gl/kknWaV
by Dinesh Unnikrishnan | Jan 4, 2016 08:51 IST | First Post
Real estate developers are known for various marketing tricks to attract buyers. Some offer free cars with luxury apartments, some air-conditioners, gold coins, while a few offer discounts to market rates.
But, one recent advertisement by the Pune-based DSK Group, for their select projects in Pune and Mumbai, instantly caught the attention of both prospective home buyers and competition. The DSK scheme, announced in a tie up with Tata Capital, offered flats for customers with a loan facility from the financier at almost zero rate of interest.
Under the scheme, the buyer of a one bedroom flat can finish the repayment of his Rs 50.7 lakh loan flat in eight years. He needs to just pay the initial contribution of Rs 10.04 lakh (20 percent of property cost) and repay the rest in equated monthly installments (EMIs) of Rs 40,160, while DSK has promised to pay the interest component to Tata Capital on behalf of the customer. In other words, the customer needs to pay only the principal value of the property to own his flat.
For a home loan aspirant, the scheme should be appealing. If the same loan is taken for 20 years under a regular plan, say at an interest rate of 9.5 percent at an EMI of Rs 37,710 for 20 years, the customer ends up paying almost the double value of property taking into account the interest burden on him. In the DSK offer, the customer is practically paying only the flat cost, with almost same EMI amount.
The question here is does this mark the beginning of a trend-setting, innovative housing offer in the Indian home loan market or is it just a gimmick?
According to a section of real estate analysts, the whole idea behind the DSK scheme is to avail quick, cheaper liquidity to develop their projects. Typically developers get loans from commercial banks at a higher rate of 13-14 percent, while individual buyers get loans at about 9-10 percent.
“It’s a win-win situation for the developer and the buyer. For the developer, it is an easy way to mobilize cheaper funds. For the buyer too, the scheme makes sense since he doesn’t need to bear the interest cost,” said the analyst with a Mumbai-based brokerage, who didn’t want to be named.
But not all share this opinion. Senior banking industry officials are critical of the scheme saying there is an unseen risk involved in this scheme for the customer. “In case the builder defaults on the interest payment at any stage, the customer will have to bear an unexpected financial burden. This is a risk for the consumer,” said Pratip Chaudhury, former chairman of State Bank of India.
Replying to an email query, DSK officials said the company will compensate Tata Capital on the interest component. “We can’t put every detail in advertisements… each and every detail is explained to the buyer at the time of booking openly and transparently. DSK developers will compensate Tata Capital with respect to the interest component ,” the email response said.
Tata Capital, in an email response said: “To help cater to the needs of discerning home buyers, Tata Capital Housing Finance Limited (TCHFL) works closely with developers to offer innovative financing options to its customers across various home buying segments,” the company said in an emailed statement. “TCHLF’s products are in full compliance with the necessary guidelines,” the company said.
Under the DSK scheme, the customer who pays his initial contribution (say Rs 10 lakh or 20 percent of the total value of Rs 50.7 lakh), will have to immediately start paying the EMI (about Rs 40,000). The possession of the flats will be given in 2019.
Poor demand hurting the sector
The Indian real estate market is passing through a phase of slowdown hit by poor demand, mainly due to high real estate prices and overall economic slowdown in the economy. Builders often find it difficult to sell flats, leading to inventory pile up and cash-flow issues.
Deepak Parekh, Chairman of India’s largest mortgage lender, Housing Development Finance Corporation Ltd, said the zero-interest schemes like DSK’s are smart marketing tools developers use to find buyers in a lackluster market.
“This is one marketing tool developers are using to attract the buyer by offering to pay interest on behalf of the customer. The customer in such cases, where full interest is being paid by the developer, will not get tax benefit on interest payment on such loans since the customer is not paying any interest and hence the tax benefit will be limited to the principal repayment,” Parekh said.
But, DSK officials said the customer will get full home loan tax benefit, including that on the interest component on the loan.
Real estate experts and bankers say there is a possibility of developers inflating the property prices in such schemes. “In such schemes, partly interest component is built into the property price and partly because financier is offering subsidy,” said Pranay Vakil, founder and former co-chairman of global property research and brokerage firm Knight Frank India.
For instance, DSK is offering flats at around Rs 6,000 per square feet in the DSK Vishwa project, located in Dhayari area of Pune. According to a few Pune-based real estate agents Firstpost spoke to, the current property rates in the Dhayari area is in the range of Rs 4,500-Rs 5,000. None of them wanted to be identified.
“The prices in the area, where this scheme (DSK) is offered are much less. Almost the entire interest component for the eight year period or even more than that amount is built into the prices. Since the possession will be given after 3-4 years, this money can come handy for the builder to build a corpus,” said a Pune-based real estate agent.
(Data support from Kishor Kadam)
Dipak Kumar Dash | TNN | Dec 10, 2015, 02.58 AM IST | Times of India
Cabinet clears 20 major amendments to real estate bill
NEW DELHI: The government on Wednesday approved 20 changes in the Real Estate (Regulation and Development) Bill including a proposal for insurance of land title to protect buyers and developers from the risk of land fraud, a move which is seen to be pro-consumer.
The legislation comes after a wait of nearly three years and is expected to help regulate the unorganized sector, plug loopholes and protect buyers by setting up regulators in each state.
It has proposed a jail term up to three years or penalty or both in case of builders, one year for real estate agents and buyers for violating the orders of appellate tribunals. Another major change which is expected to benefit consumers is the condition of keeping 70% of the sale proceeds for a particular project in a separate account to meet the construction cost of that project, including the land cost. This has been done to minimize diversion of funds and ensure timely completion of projects.
Moreover, the regulatory authorities can grade projects along with grading of promoters to help buyers make the choice while booking a property.
In order to make states comply with the norms, the bill says states will have to make the rules within six months of notification of the proposed Act. Each state will establish the real estate regulator and the appellate tribunal as per the rules. The tribunal will be the final arbiter in case of disputes between a buyer and builders or promoters. Either party can approach the tribunal if the dispute is not settled by the real estate regulator.
“The provision for arranging insurance of land title will bring greater confidence in buyers and builders as well since they will get back their entire investment from the insurance company in case the title is held invalid. Such instances have happened in some cases recently,” said a housing ministry official. The bill aims to protect interest of at least 10 lakh buyers annually and promoting investments in the real estate sector.
The Cabinet approved the bill after government held rounds of meetings with all stakeholders and incorporated recommendations of the parliamentary panels. It is keen to table the bill in Parliament during the ongoing session since there is little protection for consumers in the present framework.
It also provisions that the consumer has the option to approach consumer forums at district level instead of only the regulatory authorities proposed to be set up under the bill for redressal of grievances.
Moreover, to ensure that the regulatory authorities don’t delay the cases, the bill has a provision for disposing off complaints in 60 days while no such time limit was indicated in the earlier bill. Similarly, the appellate tribunals need to adjudicate cases in 60 days as against 90 days as proposed earlier.
Some of the other key provisions of the revised bill include mandatory registration of projects of 500 sq metre area or eight flats with regulator instead of 1,000 sq metre or 12 flats as proposed earlier.
The bill has also incorporated the mandatory provision for formation of allottees associations such as RWAs within three months of allotment of majority of units so that buyers get to manage community facilities like common hall, club house and reading room.
According to the changes, the liability of promoters for structural defects has also been increased to five years from the earlier provision of two years.
Moreover, to fast-track the projects, the proposed bill has included the section for promoting single window system of clearances for real estate projects by the regulatory authorities. It also says that the allottees shall take possession of houses in two months of issuance of occupancy certificate.
The bill is also need to include quality check to avoid early dilapidation and collapse of the building causing life risk.
In order to ensure that chairmen and members of regulatory authorities and appellate tribunals do an honest job, the bill proposes barring them from taking up post-retirement jobs except in government and statutory bodies.
According to estimates 10 lakh consumers buy houses every year with an investment of about Rs 3.50 lakh crore in residential segment. About 3,200 to 4,000 new projects are launched every year. At present about 17,000 real estate projects are in progress in 26 major urban agglomerations in the country, which also will come under the ambit of the proposed bill.
Source : http://goo.gl/9HCfCx
The state government had earlier planned to increase the ready reckoner rates by 15 to 20 per cent from January 1, 2016.
Written by Shubhangi Khapre | Nagpur | Updated: December 8, 2015 3:28 am | Indian Express
The Maharashtra government has decided not to hike the ready reckoner (RR) rates next year.
The decision comes in the wake of the state government’s plan to stabilise the steep increase in housing prices in all metros, and two- and three-tier cities. An unchanged RR aims to boost the real estate sector, which is reeling under a slowdown.
“In the past, former chief minister Vilasrao Deshmukh too had taken a similar decision ahead of evolving housing policies in 2006 and 2008,” said an official in the Ministry of Urban Development and Housing.
The state government had earlier planned to increase the ready reckoner rates by 15 to 20 per cent from January 1, 2016. However, after considering all aspects related to housing and related industry, it decided not to go ahead with any increase next year.
The decision, said the official, would also help the state realise Prime Minister Narendra Modi’s pet project ‘Housing for All by 2022’.
According to the official, during a preliminary spadework for the housing-for-all project, it became apparent to the government that a steep hike in RR rates would be detrimental in sustaining housing projects.
“The preliminary report indicated that sale and purchase in the housing sector across the state have slumped by almost 30 per cent,” he said.
A senior Cabinet minister said, “Housing-for-all remains high on our agenda. While the state government, along with the Centre, has set aside its own phase-wise projects to reach out to the weaker and backward sections, the role of private players in providing the stocks affordable to people cannot be overlooked. Moreover, the housing industry cannot be seen in isolation. Along with the housing sector, other related sectors too would benefit.”
Earlier, several associations related to the housing sector and developers’ associations had requested the government not to slap a steep RR rate. “A hike in RR triggers a chain reaction as it leads to an increase in stamp duty costs, premium paid on Floor Space Index (FSI) and property tax,” said a developer, adding that it further increased the cost of houses.
Buyers pay stamp duty equivalent to 5 per cent of the RR value or the actual property value mentioned in the agreement, whichever is higher.
The reason for not hiking RR also aims to curb the transfer of black money in the real estate sector. Developers often encourage a sizeable component of black money or cash transfer to provide relief on actual property prices.
It is argued that a rise in RR could also translate into rise in charges for development agreement on a new plot purchase, premium paid to municipal corporations for fungible FSI, staircase premium, open space deficiency and car parking as they are equated and defined on the basis of RR rates.
“It is a fact that any move to hike RR rates will lead to developers passing the increased cost to buyers. At a time when the Centre and state have declared affordable housing for all, it will have to initiate policy measures to make the housing sector more robust and keep the prices stable,” a senior official said.
Source : http://goo.gl/15XBJP
By Shilpy Sinha, ET Bureau | 26 Oct, 2015, 07.17AM IST | Economic Times
MUMBAI: The National Housing Bank is considering allowing lenders to levy pre-payment penalty on housing loan customers who transfer the outstanding amount to another lender in the first two years of the loan tenure, a dampener for borrowers wanting to make the most of falling interest rates.
Sriram Kalyanaraman, chairman of National Housing Bank, the regulator for housing finance companies (HFCs), believes that home loan ‘shopping’ could lead to risks building up in the system as banks and HFCs are vying for the same customers to expand their market share.
“I think there should be some form of lock-in for the customers in the initial days, say 18 to 24 months, before they are allowed to transfer loans,” said Kalyanaraman. “Companies/HFCs/banks are trying to woo customers with lower interest rates, which is good for customers, but there could be a bubble due to everyone concentrating on the same segment and also topping up loans when they do balance transfer.”
In October 2011, NHB had waived off prepayment penalty on money borrowed from housing finance companies on floating rate. So, borrowers could prepay the loan by borrowing from a bank or a nonbanking finance company while moving to lower interest rates.
The following year, the Reserve Bank of India barred banks from levying foreclosure charges, or pre-payment penalties, on home loans with floating interest rates. In 2014, the RBI asked banks not to levy pre-payment penalties or foreclosure charges on all floating rate term loans sanctioned to individual borrowers.
Other than housing, floating loan products include corporate, vehicle and personal loans. Earlier, banks were charging pre-payment penalty of up to 2 per cent of the outstanding loan amount.
Banks, HFCs and non-banking finance companies try to woo customers with lower interest rates. As loan demand from corporates is yet to pick up, lenders are focusing on their retail portfolio, especially home loans, which is more secured lending.
The housing loan market continues to be dominated by the five large groups — SBI Group, HDFC Group, LIC Housing Finance, ICICI Group and Axis Bank. Together they accounted for 60 per cent of the total housing credit in India on December 31, 2014. Since then, a number of new HFCs have emerged in niche segments like affordable housing and self-employed customer segments, growing at more than 50 per cent and slowly gaining market share, according to recent report by rating company Icra.
With competition intensifying, lenders have dropped rates after the recent policy action by the RBI. SBI had recently cut its base rate by 40 bps but raised spreads on home loans so borrowers can look for loans at 9.55 per cent. HDFC, which prices home loans over a retail prime lending rate, had reduced rates by 25 basis points to 9.65 per cent.
The RBI has cut the repo rate by 125 basis points since January this year, while banks have reduced base lending rates by 50 basis points.
The Icra report said the government’s focus on affordable housing and favourable regulations could push overall housing credit growth to 20-22 per cent from financial year 2015-16.
Source : http://goo.gl/4p5R96
In addition to your income multiple factors such as loan to value ratio, your retirement age, your employer’s profile and your co-borrower’s profile determine the amount of money to be lent to you.
VINEET JAIN CEO, Loanstreet.in | Moneycontrol.com
Traditionally Dussehra is the beginning of the harvest season and many associate beginning of non-farm activities with this auspicious occasion, also known as Vijayadashami. Beginning construction of a new house was one of the important non-farm activities for most of our ancestors. And many still follow it. Of course, barring a few, most of us buy our dream homes from developers and Dussehra is a good day to begin your home buying process.
Buying the first dream home is a big moment for all of us and involves a lot of planning and euphoria. Yet, it can be taxing as a lot of steps are involved even after identifying our dream house, especially as it involves dependence on a home loan as well. After all, it is the lender who is going to decide how much loan amount you can borrow and therefore, it is advisable to get a pre-approved home loan in hand and then finalise the property.
Buying a home is an expensive yet a rewarding affair as getting a home loan sanctioned can be a daunting task. A borrower cannot simply walk in and request a loan amount and obtain it unless he/she has made sure that he is making enough money to borrow that amount from the lender. The capability to get the right loan amount at the right price is crucial to buying a home and how much loan amount one can borrow can be analyzed before one even begins to consider talking to a lender. There are many factors that lenders consider to determine the amount an applicant is capable of borrowing. Unfortunately, it is not based on how well a borrower thinks he/she can handle the funds. Instead, it all depends on factors regarding the borrower’s financial situation. So before making a decision to acquire a property and diving into the process of getting a home loan, it’s important to consider some of the factors that have a direct impact on the amount of home loan you are eligible for:
1.Take home salary: Home loans outline a major chunk of debt for a person and it becomes very important to understand the factors which decide how much home loan you can get. Your monthly salary is perhaps the most important factor that determines your home loan eligibility because the higher your income, the higher will be your chances of paying the liability back to the lender. The lenders generally give a multiplier of 50-60 % on the take home salary to determine the repayment capacity of the borrower.
2.Loan to Value (LTV) ratio: Though your salary may support a big home loan, loan to value ratio may pull down the actual loan the lender is willing to offer you. Loan-to-value is used to calculate the maximum borrowable loan amount for any loan applicant based on the value of the property in question. While the borrower’s income plays a key role in determining the loan approval or rejection, LTV also plays a crucial role in the disbursement stage of loan processing. The value of the property will be assessed by the lender, based on the market value of properties in that area.
3.Existing loans or monthly outflows of borrowers: Once a borrower’s eligibility for the home loan is determined on the basis of one’s monthly salary, lenders will further securitize his/her bank statements and savings account that will reveal the monthly expenses and any other outflow towards any loans or other regular outflows. The same is deducted from the repayment capacity of the borrower to determine the net payment capacity of the customer. Usually, the expenses and other loan payments or outflows should not exceed 55-60% of the monthly income. If this is higher, the eligibility goes down.
4.Retirement age of the borrower: Age is an important consideration for a home loan application and the quantum of the loan. Since 60 is the age of retirement at most companies, it is also the age limit for repayment of a home loan. Lenders determine the loan amount on the basis of the tenure of repayment. Keeping in mind the other monthly payments of a borrower, lenders offer high loan amount considering whether the borrower has the longest possible tenure to be able to pay the home loan EMI comfortably.
5.Co-borrower profile: A joint home loan also allows the loan amount eligibility to go up substantially, which might even help in buying a bigger or better house. The lenders will be ready to offer higher loan amounts by considering the income of all the applicants if one opts for a joint home loan. The reason for it is that the borrowers’ repayment capacity increases and there is more than one person to repay this loan. How much loan eligibility increases depends on the income of the co-applicant. Hence, the lenders would need the profile of the co-borrower the profile wherein documents like the Permanent Account Number (PAN) card copy, address proof, income proof, bank statements and credentials relating to the property must be submitted for getting the loan processed. It is to be noted that many lenders scrutinize the relationships between co-borrowers to determine the bond between them. They may not accept co-borrowers who are brothers, recently-married couples, etc. If it’s a joint home loan account one is opting for, it is advisable to add a younger co-borrower for the home loan. For example, spouse, son, daughter etc, who has visible earnings.
6.Employer’s Profile: The employer also carries a strong weight as lenders have special schemes at times for employees of certain premier organizations. This is as per the policy of the lender but better rates and fees are available for certain employers so checking with the prospective lender will be a good thing to do.
Being hammered back for a home loan can be extremely discouraging but fortunately getting on top of your debt and paying off any owed balances will help you get back on track and closer to your dream of home ownership. Meanwhile, there is no hard and fast rule on how much you should borrow, but you must simply follow a general theory wherein your home loan repayments must not exceed 50% of your gross income.
Source : http://goo.gl/fPWxNy
The Cabinet had on Tuesday approved a proposal for the increase in stamp duty on property transactions to fund major transportation projects such as the Metro and Monorail corridors.
Written by Sandeep Ashar | Mumbai | Published:October 9, 2015 2:01 am | Indian Express
The Maharashtra government has decided to allow a 1 per cent increase in stamp duty on property transactions, which will increase overall costs for home buyers in Mumbai, the country’s most expensive real estate market.
The Cabinet had on Tuesday approved a proposal for the increase in stamp duty on property transactions to fund major transportation projects such as the Metro and Monorail corridors. With this, the stamp duty in Mumbai will go up to 6 per cent although senior officials in the revenue department admitted that the Centre had issued guidelines urging states to cap stamp duty on property transactions at 5 per cent. The new rate will come into effect once the government issues a notification.
Senior officials also confirmed that the state government was actively considering a move to levy cess on Transferrable Development Rights (TDR) certificates as means to raise additional revenue. With increased revenue expenditure and revenue collection below par worsening the state’s overall financial position, the finance department is pushing for the move, sources confirmed.
In fact, the plan was discussed in detail at a meeting convened by Finance Minister Sudhir Mungantiwar for mobilising additional revenue, sources said. Sources also confirmed that the Urban Development and Housing departments have opposed this move for now, claiming that it would come in the way of the government’s plan of making housing more affordable in Mumbai.
The TDR or floating floor space index (FSI) is an important component for builders redeveloping suburban properties because it allow additional construction rights over and above the usual FSI permitted on the plot.
Source : http://goo.gl/Bm078P
“The move to levy cess on TDR, if approved, will hike construction cost for projects, impacting property prices in turn,” a senior official admitted.
Allows 90% loan to value ratio on home loans up to Rs 30 lakh
Friday, 9 October 2015 – 7:10am IST | Place: Mumbai | Agency: dna | From the print edition
Giving a boost to low-cost and affordable housing, the Reserve Bank of India (RBI) on Thursday said banks can provide home loans up to 90% for properties that cost up to Rs 30 lakh.
In a circular, the central bank said that in the case of ”individual housing loans” falling under the loan category of up to Rs 30 lakh, the loan-to-value (LTV) ratio is now up to 90%. Earlier, the facility was available only for properties that cost up to Rs 20 lakh.
This will definitely benefit home buyers who seek to buy properties in the range of Rs 20-30 lakh.
For properties above Rs 30 lakh and up to Rs 75 lakh, the LTV is up to 80% and those above Rs 75 lakh, the ratio is 75%.
The RBI has also modified the provisioning or risk-weights norms for home loans. Reducing the risk weights for individual housing loans to promote low-cost and affordable housing combines well with the government’s declared policy of ‘Housing for All’ by 2022. Banks can now push more housing loans given the lower risk perception of the regulator on the affordable housing segment.
The move by RBI comes in the wake of banks reducing interest rate on home loans following a 0.5% cut in repo rate last week by the central bank.
The move now is the last in a series of measures the RBI has initiated to boost the affordable housing sector. In July 2014, RBI had made home loans up to Rs 50 lakh in metros and Rs 40 lakh in non-metros, given by banks from the proceeds of long-term bonds (of minimum seven years maturity) qualified as affordable housing loans.
The RBI had also promised that it would periodically review the definition of affordable housing, on account of inflation.
Industry officials have pointed out that slashing risk weights attached to home loans and increasing loan amount are definitely going to help home buyers. Many believe that the step by the central bank would also improve customer confidence and provide a trigger to improve the overall sentiment.
However, in markets like Mumbai, where the real estate prices have moved up much above Rs 50 lakh even for affordable houses, this may not bring in any significant change, say the officials.
In its policy review last month, the RBI had proposed to lower the minimum risk weight on housing loans from the current 50%.
“With a view to improve affordability of low-cost housing for economically weaker sections and low income groups and giving a fillip to Housing for All, while being cognizant of prudential concerns, it is proposed to reduce the risk weights applicable to lower value but well collateralised individual housing loans,” it had said.
Lowering of minimum risk weight means that banks will have to set aside less capital for affordable housing loans leading to availability of more funds for the segment.
Source : http://goo.gl/VSwCgt
Sudhir Suryawanshi | Thursday, 3 September 2015 – 6:40am IST | Place: Mumbai | Agency: dna | From the print edition
The Maharashtra government has decided to extend all possible help to those looking for a roof above their head. This will be part of Narendra Modi-led Central government’s plans to ensure ‘affordable housing for all by 2020’ by way of reducing interest rate on home loans. The interest rate, according to a senior state government official, will be between 5.6% to 6% on certain portion of the total loan amount.
According to the official, the state government is working with the Central government on the plan. “Many find it difficult paying high-interest EMI and rent as well. Therefore, we are working out a model where we will either provide the home buyers loan or ask the bank to provide the loan at lower interest rate. We may create a separate corpus or may ask the banks to provide loans and the subsidised amount will be paid to them. We have to also seek permission from the central bank to disburse loan at lower interest rate. The proposal is still at the nascent stage,” he said requesting anonymity.
Arundhati Bhattacharya, chairman, State Bank of India (SBI) welcomed the government move. She said it will be difficult for government to work like banks. “I think they will give subsidy and the loan will be disbursed by the banks. Let all the details come out, then only I will able to really comment on it,” Bhattacharya added.
Government official said the interest subsidy will be on some percentage of the loan. “It will not be for the entire loan amount. We want to help those who want to own a house. It will be basically for the lower income group people and affordable housing segment. Once the proposal is prepared, we will submit it to the state cabinet,” he said requesting anonymity.
Sunil Mantri, president, NAREDCO welcomed the government move. “It will boost the affordable housing segment. People will able to buy the houses. Actually, this segment is large. In India, six crore people are in demand of houses in rural areas and two crore in metro cities. It is timely decision,” Mantri said.
Pankaj Kapoor, managing director, Liases Foras real estate research firm said it will be a big boost to property market. “Property market is going through turbulent situation and most of the developers are not getting the capital to start or complete the projects. In Greater Mumbai, there is need of two million houses. Besides, developers will also get cheaper capital for their upcoming projects,” Kapoor said.
Kapoor suggested that this low interest benefit should be given to the first home buyers only. “This is very good scheme and it should be properly implemented. Otherwise, the genuine home buyers will get deprived and other people who already have home will avail the benefits. There should be proper mechanism to check the malpractice. In Singapore also, the government provides home loan at minimal interest rate. Developed countries too keep interest rate of housing loan at less than 3%. We need to follow such models so as to bring to reality ‘house for all by 2020’ slogan,” Kapoor said.
The scheme would, however, be available only for low-cost housing and subscribers whose monthly salary is less than Rs 15,000. These workers constitute about 70 per cent of the EPFO’s five crore subscribers.
Written by Surabhi | New Delhi | Published:July 31, 2015 3:56 am | Indian Express
The scheme would, however, be available only for low-cost housing and subscribers whose monthly salary is less than Rs 15,000. These workers constitute about 70 per cent of the EPFO’s five crore subscribers.
The Government is considering a proposal to allow subscribers of the Employees’ Provident Fund Organisation (EPFO) to pledge their “future stream of provident fund (PF) contributions” to pay off a housing loan.
The option has been recommended by an expert committee set up by the retirement fund body to facilitate housing for its subscribers as part of the government’s mission to ensure housing for all by 2022.
Under the proposal, when a subscriber purchases a house with a loan from a bank or a housing finance company, he can take an advance from his PF accumulation and also sign a tripartite agreement with the bank and the EPFO for pledging his future PF contributions as equated monthly installment (EMI) payment.
The scheme would, however, be available only for low-cost housing and subscribers whose monthly salary is less than Rs 15,000. These workers constitute about 70 per cent of the EPFO’s five crore subscribers.
“The committee was of the view that the majority of the members of the EPFO belong to vulnerable sections, and given their monthly earnings, the amount of loan required and availed by them would be less… the monthly PF contribution stream would cover a major portion of the loan EMI,” said the report which was submitted to the government recently.
The eligible subscribers could also be permitted to avail a benefit or subsidy by the Ministry of Housing and Urban Poverty Alleviation through its schemes for purchase of housing for economically weaker section (EWS) to supplement the EMI.
The report is expected to be taken up for discussion within the Ministry of Labour and Employment and then presented to the EPFO’s Central Board of Trustees (CBT) over the coming months.
The expert committee, which was set up in February this year following a recommendation by the CBT, unanimously backed the proposal but recommended that the retirement fund body would not provide standing guarantee for payment in case of default by the subscriber.
“Under the proposed tripartite agreement, the only obligation on part of the EPFO is to make available or pledge to the bank the future stream of PF contributions that are received by a member till such time that the loan is completed,” said the report.
So in case a subscriber gets laid off, the EPFO will not be responsible for re-paying the loan. In such cases, banks can take action against the person. The committee has pointed out that the option would also improve the credit worthiness of the subscribers and not impact their monthly take home salary.
At present, 12 per cent of a worker’s basic salary — up to Rs 15,000 per month — and a matching contribution of 12 per cent by the employer is deducted as PF contribution every month; 8.33 per cent of the employer’s contribution is then diverted into the Employees Pension Scheme (EPS). Subscribers are also allowed to make premature withdrawal from their retirement fund for building a house.
The committee had considered other options such as purchase of low-cost dwellings by the EPFO from agencies like HUDCO and NBCC; creating subsidiary to purchase plots for construction or houses; releasing the full PF accumulation to subscribers purchasing a house as well as providing a subsidised loan through the EPFO for the purpose.
Source : http://goo.gl/CLwCyn
PTI | Jul 10, 2015, 06.49PM IST | Times of India
NEW DELHI: Retirement fund body EPFO is considering a scheme for its subscribers so that they are able to own a house by retirement, labour minister Bandaru Dattatreya said on Friday.
“We have to see that by retirement every EPFO subscriber has his own house … We are considering this,” he said while unveiling ‘Nidhi Aapke Nikat’ or ‘PF Near You’, a public outreach initiative for its 6 crore members.
While he did not provide details of the scheme, sources said the ministry intends to collaborate with PSU banks, housing finance companies, state-owned construction firms like NBCC and authorities like DDA, PUDA, HUDA to build houses at prices to be fixed by the government.
EPFO’s central provident fund commissioner K K Jalan later told PTI that a committee comprising of EPFO trustees and senior labour ministry officials is working the proposal. The panel is expected to submit its report soon.
He also said EPFO has proposed to increase the maximum sum assured under the employees’ deposit linked insurance scheme 1976 to Rs 4.5 lakh, from Rs 3.6 lakh.
At present, there are over 70 per cent EPFO subscribers whose basic wages are less than Rs 15,000 per month who could benefit from the scheme.
EPFO’s plan comes against the backdrop of the Centre’s recently launched mission – ‘Housing for All by 2022’.
Dattatreya also said the EPFO would soon launch a service to provide details of subscribers account on their mobile phones.
Jalan said the EPFO is in the process of launching a mobile application for availing services like passbook details. The app will be launched by year-end, he added.
The ‘Nidhi Aapke Nikat’ initiative is aimed at increasing the interaction between the various stakeholders of EPFO.
The ‘PF Near You’ would replace Bhavishyanidhi Adalat and would be held on 10th of every month starting from July, 2015.
The programme was observed at all the 122 offices of the EPFO in the country.
Source : http://goo.gl/DOxFCG
TNN | Jun 18, 2015, 12.47AM IST | Times of India
NEW DELHI: Owning a house by people from economically weaker section (EWS) including slum dwellers and low income group (LIG) in cities and towns will be easier as the government on Wednesday approved a steep hike in interest subsidy for beneficiaries of these categories – from 5% to 6.5% – under the flagship “Housing for All” scheme.
This means the overall interest rate payable by the beneficiaries would be around 4%, Union minister Ravi Shankar Prasad said. TOI on Wednesday had reported this proposal of government, which had emerged after an inter-ministerial consultation.
It also widened the criteria to bring more beneficiaries under this scheme by increasing the income limit. Moreover, to ensure that the marginalized sections of society get the benefit of this scheme, transgenders, widows, women, SCs, STs and disabled will get priority under this programme. The Cabinet also expanded the lending base by allowing cooperative banks, urban cooperative banks and micro-financial institutions to finance affordable housing besides the public sector banks and housing finance corporations.
Moreover, to provide greater comfort to lenders, the government has also decided that the loan subsidy amount will be given up front against the earlier practice of releasing it on quarterly basis.
The government is likely to formally launch the “Housing for All by 2022” scheme by next week.
Sources said the higher interest subsidy decision would benefit urban poor by an amount of Rs 2.30 lakh each and as a result of this the monthly EMI would come down by Rs 2,582 per month. According to housing ministry official, at present, with the interest rate of 10.50%, current EMI on admissible loan component of Rs 6 lakh, over 15-year loan duration works out to be Rs 6,632 per month. With Cabinet deciding to increase credit-linked subsidy, EMI comes down to Rs 4,050 per month thereby benefiting the urban poor by Rs 2,582 per month, he said.
On the whole, central assistance in the range of Rs 1 lakh to Rs 2.30 lakh per beneficiary would be provided under different components of the National Urban Housing Mission in urban areas to build two crore new houses to meet the housing shortage over the next 7 years.
The Cabinet had earlier approved four components to the mission. Under the redevelopment plan of slums with participation of private developers using land as a resource component, a central grant of Rs 1 lakh on average per beneficiary would be provided. States/ Union Territories are at liberty to use this grant for any slum redevelopment schemes to be taken up to make such projects viable, if required.
In the second category, is the affordable housing through credit-linked subsidy scheme.
Under third component of affordable housing in partnership with private and public sectors, central assistance of Rs 1.50 lakh to each beneficiary would be provided to promote housing stock for urban poor with the involvement of private and public sectors, provided 35% of dwelling units of the projects proposed are earmarked for EWS category.
Individual beneficiary-led construction or enhancement of houses falls in the fourth category where a central assistance of Rs 1.50 lakh would be provided to those eligible to enable him to build his own house or undertake improvements to existing houses.
Beena Parmar | Mumbai | January 30, 2015 | Hindu Business Line
Buyers waiting for affordable homes, more cuts in interest rate
Aman, a 32-year old in suburban Mumbai, is not particularly excited about the interest rate cut by the RBI earlier this month.
“I want to buy a house at a place which is less than an hour’s commute from my work place. However, there is nothing available in my budget. A cut in the interest rate will barely save a few thousand on my EMIs. I don’t think it is a good enough reason for me to buy a home,” said Aman, who earns a salary of ₹10 lakh annually.
This trend is the general sentiment in metros with real estate prices at high levels and no sign of “affordable housing”. Clearly, a rate cut is unlikely to lure consumers to take home loans.
Most banks have seen some consolidation in the housing loan portfolio and retail growth was primarily driven by vehicle loans, consumer durables and unsecured loans.
“Housing is not growing as much and though the interest rate cut will give a push to this demand, I do not expect the growth to pick up any time soon..,” said Jairam Sridharan, President, Consumer Banking at Axis Bank.
The pace of growth of home loans declined to 16.4 per cent in November 2014, from 18.1 per cent in the year-ago period, according to Reserve Bank of India data.
On the other hand, growth in consumer durables and other personal loans improved to 46.8 per cent (32.8 per cent in the year-ago period) and 16.2 per cent (13.3 per cent), respectively.
A 0.25 per cent reduction in base rate on a ₹50-lakh home loan, with tenure of 20 years (average ticket size for metro cities), will lower the EMI by about ₹830 per month if the bank’s interest rate gets lowered from 10.15 to 9.9 per cent.
This translates into a savings of only ₹9,960 annually. With consumers finding it difficult to buy high-priced homes, the reduced EMIs are hardly a solace.
According to analysts, the repo rate (the minimum lending rate of banks) is likely to come down by a full percentage point (100 bps) over the next 12 months, which means the amount of saving on EMIs could be in the range of ₹3,000-4,000 a month.
Bankers suggest the repo rate cut of 25 basis points (25 bps) is not enough, though the downward cycle of interest rates has started.
A larger cut in the days to come will lead to banks cutting base rates and therefore a significant drop of about 100 basis points will trigger some momentum in the home loan segment.
However, the real estate market has witnessed a re-orientation and developers are now largely focusing on affordable homes. This will go a long way, though definitely not all the way, in bridging the existing wide gap between demand and supply of affordable homes, according to a report by real estate consultant Jones Lang LaSalle (JLL) India.
Anuj Puri, Chairman & Country Head, JLL India, said, “In 2015, developers will become more earnest about right-sizing and right-pricing their offerings. Smaller, yet better-designed and more efficient homes will define the residential real estate market in 2015, and selective corrections in some of the over-priced cities will help bring about faster sales for stagnated supply of larger configurations. Townships will become more prevalent, and the supply of luxury homes will moderate to align with the slow demand dynamics for these offerings.”
Source : http://goo.gl/HNhXFQ
PTI | January 23, 2015, 09.01 am IST | Deccan Chronicle
New Delhi: In order to boost real estate development, the government is planning to extend priority sector lending benefits to the housing sector and work on bringing down the interest rates to 7-8 per cent.
“We are for the entire housing sector to come under priority sector lending and working towards it. I have met the Prime Minister on this and the PM is going to have a meeting of banking and housing secretaries to discuss the proposal,” urban development and housing and poverty alleviation minister M. Venkaiah Naidu on Thursday said here while releasing a report on the Smart City project organised by PHDCCI.
The NDA government is currently working to create 100 Smart cities across the country which will be equipped with 24-hour water and power supply, quality education, clean air, efficient urban transport system among other services.
Mr Naidu said the interest rates should also be brought down to 7-8 per cent to boost the housing sector. At present, the interest rates are generally in double digits. He will also be holding a two-day meeting with all state governments.
Source : http://goo.gl/R7lH0o