Tagged: EMI

NTH :: Home loan EMIs of under-construction houses, renting & land leasing to attract GST from July 1

GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services
PTI | Updated: March 28, 2017, 18:29 IST | ET Realty

NTH

Home loan EMIs of under-construction houses, renting & land leasing to attract GST from July 1. Come July 1 and leasing of land, renting of buildings as well as EMIs paid for purchase of under-construction houses will start attracting the Goods and Services Tax.

Sale of land and buildings will be however out of the purview of GST, the new indirect tax regime. Such transactions will continue to attract the stamp duty, according to the legislations Finance Minister Arun Jaitley introduced in the Lok Sabha yesterday for approval.

Electricity has also been kept out of the GST ambit.

GST, which the government intends to roll out from July 1, 2017, will subsume central excise, service tax and state VAT among other indirect levies on manufactured goods and services.

The Central GST (CGST) bill — one of the four legislations introduced, states that any lease, tenancy, easement, licence to occupy land will be considered as supply of service.

Also, any lease or letting out of the building, including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services as per the CGST bill.

The GST bills provide that sale of land and, sale of building except the sale of under construction building will nether be treated as a supply of goods not a supply of services. Thus GST can’t be levied in those supplies.

‘Goods’ in earlier drafts of the bills were defined as every kind of movable property other than money and securities but includes actionable claim. ‘Services’ were defined as anything other than goods. It was thought that GST may be levied on supply of immovable property such as Land or building apart from levy of stamp duty.

But the bills presented in Parliament have now clarified this position.

Tax experts said that currently service tax is levied on rents paid for commercial and industrial units, although it is exempt for residential units.

Deloitte Haskins Sells LLP Senior Director M S Mani said: “While service tax is applicable at present on sale of under construction apartments, it is levied on a lower value as abatement allowed. The abatement is ostensibly to take care of the value of the land involved in the construction of apartments”.

He said the GST Rules, which will come up for discussion in the Council meeting on March 31, would help ascertain whether a lower rate of GST is proposed for such transactions or whether a similar abatement procedure would be prescribed.

“This would also be dependent on the rate fixation committee which is expected to finalise its recommendations in April,” Mani said.

Experts said service tax is currently levied on payments made for under-construction residential houses after providing abatement, which brings down the effective rate from 18 per cent to around 6 per cent.

“The government is trying its best to make GST litigation free. The bills very clearly specify that GST would be charged on any lease of land or letting out of the building or construction of a complex, building, civil structure or a part thereof, where whole or any part of consideration has been received before issuance of completion certificate or its first occupation,” Nangia & Co Director Rajat Mohan said.

Experts said the GST subsumes central levies like excise and service tax and local levies like VAT, entertainment tax, luxury tax. However, it does not subsume Electricity Duty.

Since the GST Constitution Amendment Act does not provide for subsuming ‘electricity duty’ under GST, it will continue to be levied by the respective state governments.

Certain states like Delhi exempt residential properties from electricity duty but levy it on commercial and industrial units.

Source : https://goo.gl/0mRlKH

NTH :: Pink slips and housing finance

Nina Varghese for IndiaProperty.com | Moneycontrol.com

NTH

Will the 2016 retrenchments in the e-commerce space impact home finance? This is a question on many minds especially in a place like Bangalore where a large number of e-commerce companies are headquartered.

In recent times there has been disturbing news in the daily broadsheets about the pink slips in the e-commerce space. Of course, as many would say this was a bubble that was waiting to burst, mainly because of the proliferation of e-commerce companies offering a variety of services and yet there has been no corresponding rise in internet penetration; in other words, an increase in net users.

In addition to this, the other bad news from the Middle East, where a large number of Indians work, is that companies are retrenching staff to combat the declining oil prices and the squeezed profit margins.

It is likely that a majority of the people who have lost their jobs this year would be paying equated monthly installments (EMIs) on homes, cars and other household items, and EMIs will be impacted.

The impact on the home loan EMI may not be immediate but it is likely in the next two quarters. This seems to be a persistent worry for the real estate sector, especially as surveys show that home sales in major metros are improving and a number of new launches are going up.

So how do you service the home loan if you have lost your job? At this point you must be aware that banks have the provision to restructure loans and that there are a number of ways to do this; all depending on the type of loan that you have taken.

The first option would be to extend the tenure of the loan; wherein your EMI reduces and makes it easier to manage. The bank, however, has to be convinced that the reason for restructuring the loan is a genuine one. The second option is foreclosure; where the borrower can sell the house which is most likely the collateral, to settle.

However, in most cities in India, the housing market is tight and it might be difficult to sell at this point. If you show undue haste, it is likely you will not get the price you desire. It is very important that you talk to the bank in question and remember that running away and defaulting on this loan and other financial commitments is not a wise choice. Most bankers understand if there is a serious issue such as a loss of employment and it is imperative that you make yourself open to them.

Let’s take a look at which companies are doling out the pink slips this year. According to newspaper reports, Flipkart, the e-retailer laid off 1000 employees pan India, in July. In September, Twitter, the online social networking services sent 20 people home, in Bangalore while OLA the online cab service sent out 700 pink slips across India, in August. ASKME’s 4000 employees lost their jobs when the company shut shop, in July, after their investor exited. GROFERS, the online grocery delivery service, laid off 150 to 200 employees and revoked 65 job offers, in September.

In the first quarter of 2017, CISCO, the e-commerce shopping list firm, is likely to lay off 14,000 people worldwide with 7000 of them likely to be engineers in the company’s Research & Development centre, in India.

According to the Middle East news service MEED, Abu Dhabi National Gas Co (ADNOC) plans to cut 5000 jobs by the end of the year while 2000 layoffs have already been announced. Similarly, many companies in the oil and gas industry in the United Arab Emirates have cut flab in a bid to reduce operational costs. The job cuts have affected mainly engineers and those on contracts. These job cuts are likely to have a domino effect on the hospitality and retail industries too.

The banking sector in the UAE has also been impacted by the declining oil prices. The Emirates Islamic, the Sharia compliant lending arm of the Emirates NBD, sacked 100 people because of the diminished growth in the second half of this year. Those laid off were mainly from the sales force.

Newspaper reports from Qatar said that many large multinational oil companies were downsizing because they were suspending or cancelling projects.

So it’s the right time to sit tight and fasten the belts tighter.

Source: https://goo.gl/rZQSFI

ATM :: EMI-free loans: Best means to repay credit card debt

By Satyam Kumar – LoanTap | Sep 27, 2016, 04.34 PM | Source: Moneycontrol.com
Also known as credit card takeover loan, this can help you get rid of credit card debt.

ATM

One of the easiest ways we can choose to build a healthy financial future is to get a credit card and use it wisely and responsibly. Let’s say, for most people, a credit card offers their first opportunity to start building a credit history. While many credit card users pay off their credit bills in full every month, there are others who take the route of making minimum payments on their credit card bills and become too comfortable with the idea. But as easy as it may seem, it is just a delusion that making minimum payments is enough to prevent late fees and interest charges. Even banks and financial institutions are not likely to specify information on the damage minimum payments might cause in the long run. There are numerous consequences of failing to pay off your charges in full every month. The lack of awareness is causing credit card holders to lose money that they could easily save. Still not convinced? Here is your chance to learn more about minimum payments, how they might affect your financial health and the best possible solution available to you to undo the damage.

The minimum payment is a fraction of the total outstanding amount that is due. So, for instance, if the outstanding amount due on your credit card for a particular month is Rs 25,000, then the minimum payment would be Rs. 1,000. It is a common misconception among many people that banks will not charge interest on their credit card as long as they are making the minimum payment. Unfortunately this is not true. The only benefit that can be derived by making the minimum payment is that one will not have to pay late fees. Also, this will keep credit score in good shape but there would still be no respite from paying steep interest.

Relying on making minimum payments for an extended period can result in a huge debt that may even exceed one’s credit limit. This is because the higher the pending amount, the higher will be the interest amount. This might pose to be a challenging financial problem. This is when a credit card takeover (CCT) loan comes to the rescue. Many consumers aren’t aware of the benefits of a CCT loan and how it might help them in saving and maintaining their credit score.

Here are a few ways it can take care of a huge credit card debt:
1. A CCT loan offers low interest rates compared to credit card interest rates. The annual rate of interest is usually 18% lower than any credit card interest rate. This dramatically reduces your interest burden.
2. It is convenient for those who are financially not ready to pay the full outstanding amount that they have run up on their credit cards. One can only pay the interest amount initially and wait until they are in a better financial position to pay off the principal on quarterly or annually, which is easily affordable.
3. A CCT Loan can help in protecting your credit score. How? We all know that delayed credit card payments can have a negative impact on one’s credit score, which eventually lowers any chances of loan approvals later in life. In such cases, taking an EMI-free loan is the best way to save the CIBIL score.
4. A CCT loan can provide the opportunity to avoid late fees and penalties as the loan can be sanctioned within a small span of time. This eventually helps in saving up a lot of money in the long run.

People nowadays opt for flexibility in everything, whether it is their job or education. Loans like CCT or EMI Free is helping those sections of people by offering flexible options to repay credit card debt. Although one can use it for numerous purposes like buying a house, paying for education fees, or even for financing one’s marriage, its low interest rate makes it a viable option to pay off outstanding credit card debt that may be creeping up on your savings without your realizing its deleterious impact.

Source: https://goo.gl/iuG5Ax

ATM :: Seven reasons why you should buy a home while you’re young

Buying a home early in life helps home buyers.
Kishor Pate CMD, Amit Enterprises | Retrived on 12 July 2016 | Moneycontrol.com

ATM

There are lots of arguments for and against buying a home early in life, but the rationale for doing so is, in fact, the strongest and most convincing.

1. In the first place, the longer the tenure of a home loan, the lower the EMIs are. EMIs are calculated on the basis of the loan amount and how long the borrower can logically repay the home loan. In India, the retirement age is 60, and banks will consider this as the age by which the borrower must under any case close the home loan if he or she has not done so already. The longer one defers the decision to avail of a home loan to buy a property, the bigger the EMIs become.

Also, it is easiest to get approved for a home loan when one is young. Lenders are eager to provide home loans to young people because they are at the beginning of their careers, and will doubtlessly grow in them over the ensuing years. Their financial viability – and therefore their future ability to service a home loan – is therefore at its highest point.

2. In fact, the eligibility for a home loan is even higher for young married couples taking out a joint home loan. This is by far the most desirable lending scenario for banks. They are assured that two instead of only one income stream will back the home loan proposal, and the fact that two instead of one borrower are involved decreases their risk. Taking a joint home loan also helps a couple to close down the financial commitment of a home loan much faster, allowing them to focus on other investments earlier in life.

3. Another advantage of purchasing a home early in life is that it becomes easier to pay off the outstanding amount on a home loan with accumulated savings later in life. This opens up the opportunity to upgrade to a bigger, better-located home is the future – which is what most Indians aspire to do at some point.

4. Today, many newly-married couples are deferring their plans to have children until they have had a chance to enjoy some unfettered years together. Such a decision also works very well for such couples from the point of view of home purchase. It means that they can make a big down payment on their home before children and their education become an additional financial responsibility. A bigger down payment reduces the EMI burden, meaning that they can close their home loans faster.

5. It is also important to note that the earlier one buys a home, the longer it has to appreciate in value. Given that the annual appreciation of a well-located residential property can be to the tune of 15-20%. This results in a huge incremental increase of the investment value of such an asset.

6. It also makes much more sense to invest one’s hard-earned money in an appreciating asset rather than pay monthly rentals for which there are no returns at all. Repayment of a home loan also brings with it the financial advantage of income tax breaks. These are an added benefit which the Indian Government has provided with the express purpose of encouraging young citizens to invest in self-owned homes and thereby safeguard their and their children’s future.

7. Finally, it makes much more sense to pay monthly EMIs on a home loan, into an investment-grade asset, rather than pay monthly rent which is nothing but an expense with absolutely no returns on investment.

The above reasons should present a convincing argument for making the important decision of buying a home early in life. The New Age ‘logic’ that it is better to live on rent simply does not hold water if one considers the multi-faceted advantages of investing in a self-owned home while one is young. It is true that it requires financial discipline to service a home loan, but this very desirable quality can never come too early.

Source : http://goo.gl/iGEZw9

ATM :: Should young earners take their parents’ advice while investing?

By Jayant Pai | Jun 20, 2016, 07.00 AM IST | Economic Times

ATM

Every parent fondly looks forward to the day when children will begin earning a steady income. However, for Indian parents, it is difficult to sever the metaphorical umbilical cord even after their child secures financial independence.

There are various reasons parents do not shy away from advising their children on money matters. One, they feel that their naive children will be parted from their money if left to their own devices. Hence, right from the first payday, they will tell you about the virtues of saving and warn against reckless spending. Two, they do not want their children to make the same mistakes they made, be it a failed investment or a loan to a friend which was never returned. Three, errors of commission committed by close family members also play a part in conditioning parents’ thought process.

Why such advice may be less effective today: The previous generation was brought up on the belief that the collective wisdom of elders was indispensable. Today’s generation is a bundle of contradictions. On the one hand, they are avowedly individualistic. On the other, they are swear by the opinions of peers in social media on every topic, be it fashion, electronics or money. Hence, parental influence is waning.

While every generation thinks it knows best when it comes to finance and investments, today’s youngsters have more educational and decision-making tools at their disposal. These may be in the form of blogs, apps, portals and even robo-advisers/algorithms. In fact, they face a glut, rather than a drought, of information. Hence, parents may often be behind the curve.

Today, wealth managers are increasingly viewing such youngsters as an economically viable segment. Hand-holding newbies, with the hope of growing with them as they uptrade, is a strategic choice.

Should children listen to their parents? In most cases, the advice received from parents is well-meaning. That may not necessarily be true in case of advice from outsiders. However, good intentions alone are not sufficient to render it suitable. While certain home truths like avoiding borrowing for consumption or maintaining a high savings rate are worth heeding, others are better ignored.

For instance, many parents dissuade their children from investing in stocks and suggest they opt for fixed deposits or gold. This may stem either from their own poor experience in the stock market or a belief that stocks are risky and another form of gambling. However, by blindly heeding such advice, youngsters may do themselves a great disservice since they forego the power of compounding that equities offer.

Similarly, parents may consider real estate as a great investment option even if they have to avail of a heavy mortgage. Children should follow such advice only after considering the repercussions of paying EMIs for long tenures of 25-30 years. Also, some parents are averse to their children purchasing insurance policies, fearing that this is an invitation to disaster. Such superstitions should not stand in the way of protecting life, limb and health. In a nutshell, when it comes to parental advice, trust them, but verify the advice.

(By Jayant Pai, CFP & Head, Marketing at PPFAS Mutual Fund)

Source : http://goo.gl/iECSwU

ATM :: Home loans: Facing a cash crunch? Here’s what borrowers should do

However, if the borrower can manage his EMI from the very beginning, he should not opt for moratorium even if the offers sound tempting
By: Adhil Shetty | Published: June 14, 2016 6:05 AM | Financial Express

ATM

Recently, a major public sector bank launched a home loan scheme with a moratorium for three to five years. In it, customers have the option of paying just their interest during the moratorium, after which their EMIs are gradually stepped up in the following years. This is meant to make things a tad bit easier for customers—young professionals especially—to repay their debts. It now remains to be seen other banks start offering loans with similar features.

Moratorium on loans is not a new concept. Education loan providers have been offering this benefit to students to allow them some time to find a job in order to start repaying their debts.

The real estate sector has gone through a rough phase in the past few years. The industry awaits a revival though there have been intermittent spurts in the economy at large. Therefore a home loan with an EMI moratorium would benefit potential home buyers who have been waiting for an increase in income or a turnaround in the economy.

What is a moratorium?
A moratorium is suspension or delay of an activity. In case of bank loans, a moratorium may mean not having to pay EMIs in part or full.

In the first type, no payment is made during the moratorium. In the second, which is more common, the borrower pays only the interest during the moratorium. After the moratorium, the borrower must start repaying his loan in full, as per his agreement with the lender.

Pros and cons
Let us analyse the advantages of a moratorium, especially of the first kind where absolutely no payments are required. This is preferred by borrowers facing short-term problems in paying their EMIs but expect their financial situation to improve in the near future.

For example, the borrower may have had an emergency expenditure or a loss of job, leaving him incapable of repaying his loan for a short period.

A moratorium on his loan would help him immensely.

It also provides borrowers the breathing space to manage and plan their finances for the next few years during the tenure of the loan. Moreover, the interest paid during the moratorium is lower than the actual interest rate at which the loan was procured. The difference can be as high as 1%.

Additionally, borrowers may be eligible for higher amounts as home loan under this scheme than they would in a standard loan. It allows potential home owners to dream of a bigger home-buying budget without having to worry about the downside of paying a bigger EMI straightaway, thanks to the moratorium and the gradual stepping up of EMIs which pairs very well with a gradual increase in the home owner’s income as well.

But there are some pitfalls of the scheme as well.

First, in most cases, the lending institution agrees to provide moratorium only on the principal amount. The borrower has to pay the interest right from the disbursement of the loan. At the start of your repayment tenure, the interest component of your EMI is much larger in comparison to the principal. Hence there is effectively not much to save for the borrower.

For example, for a 20-year loan for R30 lakh taken at a rate of 10%, your EMI works out to be R28,951, or R202,655 annually. After one year of repayment, you would have repaid only R28,356 of your principal whereas most of 86% of your repayments—R174,299—would have contributed to interest. Hence your absolute savings in terms of principal repayments would be small.

Additionally, the EMI amount will be higher after the moratorium period is over. This is despite low savings in the initial few years of interest payment. For example, suppose a borrower has taken Rs 25 lakh as home loan for 20 years with a moratorium periodof two years. In these two years, the borrower is supposed to pay the interest only. After the moratorium, the borrower has to repay the EMI in the remaining 18 years. Naturally, the EMI will be much higher since the repayment tenure got smaller.

What borrowers should do
If you are facing a cash crunch and expect it to resolve in a few quarters or years, a home loan with a moratorium is a good option. Just like an education loan, a moratorium is required because all borrowers may not be able to repay immediately after borrowing. However, if you are purely looking at temporary savings and relief, this is not the right choice.

At the same time, if the borrower can manage EMI from the very beginning, they should not go for moratorium even if the offers sound tempting. Keeping loans unpaid for longer increases the outflow because of interest being continuously added to the principal.

Finally, if you are really keen on taking the advantage of a home loan with moratorium, take a decision based on three criteria—the moratorium period, interest rate in the moratorium period, and the EMI that you are expected to pay after the moratorium period is over.

The writer is CEO, BankBazaar.com

Source : http://goo.gl/qFVDAh

ATM :: Beware of these hidden charges on your home loan

HARSH ROONGTA | Tue, 29 Mar 2016-09:22am | dna
Shrinking interest rate margins have made several lenders to insert hidden charges to increase their margins by stealth.

ATM

The home loan industry has come a long way from the time when the only charges that you had to watch out for were the processing charges taken under various heads and pre-payment charges. Regulation has ensured that there are no pre-payment charges and competition has ensured that there is a greater degree of transparency around the processing fee, legal fee, valuation fee or technical charges. Competition has also ensured that there is hardly any difference in the interest rates charged by various home loan lenders. Unfortunately, the shrinking interest rate margins have made several lenders to insert hidden charges to increase this margin by stealth.

Here is a list of these charges:

Charge interest on the loan which is disbursed late – This is a common practice. The lender prepares a cheque, but it is not to be handed over till certain documents are received from the borrower and/or the seller. These documents normally may take a few days to a few weeks, and meanwhile, the interest meter is ticking for the borrower. This is not as small as it looks. On a loan of Rs 1 crore, the interest @9.50% works out to Rs 2,600 daily.

The cost of a 10-day delay in handing over the cheque (which is pretty common) means an additional cost of Rs 26,000 or 0.26% of the loan amount. You should negotiate with the lender that you will only pay interest from the day the cheque is actually handed over to the seller and not from the date mentioned on the cheque.

Advancing the EMI payment date – The EMI amount is calculated assuming that the payment will be made at the end of 30 days from the date of disbursement. If this EMI is paid earlier than 30 days, the cost becomes much higher than the stated cost. An example will illustrate this. If the disbursement is made on February 15, 2016, and the EMI is payable on the first of every month then typically you should pay interest equivalent to 15 days’ interest (from February 15, 2016, to March 1, 2016) and the EMI should start from April 1, 2016, only. However, most lenders will start off the EMI from March 1, 201, and still charge you for a full month’s interest. Again, the difference is not as small as it sounds. 15 days’ extra interest for a Rs 1 crore loan @9.50% works out to Rs 39,000 or 0.39% of the loan amount. Again, you can negotiate with the lender to make sure that this additional hidden interest is not charged to you. Unlike the first point which is easily understood, this point is technical and the lender can run loops through the borrower while explaining how the EMI is calculated.

Forcing borrowers to buy expensive insurance products – Lenders have tied up with life and general insurance companies to provide life, disability and property insurance to borrowers and they force you to take these policies. The lenders earn fat commissions on the sale of these insurance policies and even though officially not permitted, they force the borrowers to sign up for these policies. It is a good practise to have such type of insurance policies when you take a loan, but the problem is that the policies being hawked by the lenders are hugely overpriced, reflecting the captive base of borrowers and the fat commissions for the lender inbuilt in such policies. To avoid having to pay for these overpriced policies, you can negotiate with the lender that you will buy these policies on your own. In all probability, you will get the exact same policy from the same insurance provider as what the lender is pushing at a fraction of the cost that the lender will charge.

Forcing borrowers to take a credit card or some other add-on products – In most cases this is offered for free while not stating that it is free only for the first year and would have an annual fee every year after that. You can easily negotiate your way out of this one.

Whilst these are the “extra” charges that lenders take from borrowers, there is a charge that they are unfairly accused of taking. For example, in Maharashtra, you have to pay a stamp duty of 0.20% of the loan amount on the document creating the security in favour of the lender. It is obvious that this charge will be recovered from the borrower (it is also mentioned in the loan agreement as recoverable from the borrower), but I have heard many borrowers complain that this is a hidden charge sprung upon them. This document is in favour of the borrower as it is conclusive proof that documents have been handed over to the lender. This is extremely useful when the loan period ends because there have been increasing the number of cases where the lenders have misplaced the title deeds and claim that these were never deposited with them in the first place. A stamped and registered document will prevent the lender from making any such claims.

In this new age, the lenders depend on the borrowers lack of attention to slip in the extra charges. It makes eminent sense for the borrowers to take the help of professionals to help them navigate through this process. The fee payable to such professionals will be more than made up by the savings in these “extra” charges.

Source : http://goo.gl/ImwYEb