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.