Tagged: Home Buyer

ATM :: Impact of GST on homebuyers

GST may reduce the cost of houses if it is at a rate below the current applicable taxes that are levied by the central and state governments
Ashwini Kumar Sharma | First Published: Mon, Apr 24 2017. 05 31 PM IST | LiveMint.com

ATM

The biggest reform in the indirect tax regime is set to get implemented very soon. Instead of different types of taxes—central, state, local and so on—soon there will be only one tax: the Goods and Services Tax (GST). Like any other sector, real estate will also come under the ambit of GST. However, as of now, there is lack of clarity on various aspects such as whether the rate of GST will remain at par with current applicable taxes and whether affordable or low-cost housing will remain out of the GST’s ambit. Read on to know what impact GST will have on the real estate sector in India.

Service Tax
When you buy an under-construction house, service tax is levied on a certain percentage of the total value of the property, which is considered the cost of construction. Cost of land is excluded from service tax. To do this, income tax provisions allow abatement to the tune of 75% on under-construction properties costing less than Rs1 crore; hence, service tax is calculated on 25% of the gross value. And, 70% abatement is allowed for properties costing more than Rs1 crore: service tax is levied on 30% of the value.

Given that service tax of 15% is charged only on the construction cost, the effective rate on the entire value of a property costing below Rs1 crore is 3.75% (i.e., 15% * 25% of the property value), and for a property above Rs1 crore, the effective rate is 4.5% (15% * 30% of the property value). Thus, if you buy a property at Rs80 lakh, you will have to pay Rs3 lakh (3.75% of Rs80 lakh) as service tax. And, if the property was Rs1.6 crore, service tax would be Rs7.2 lakh (4.5% of Rs1.6 crore). Once GST gets implemented, “Payment of service tax on the properties under construction does not arise. It will be replaced with GST,” said Kunal Wadhwa, partner-indirect taxes, PwC. Besides that, “Existing abatements under the service tax laws are also to be done away with post implementation of GST,” added Wadhwa. So, it is likely that tax will be charged on the actual construction value.

However, the concern is whether the GST rate would be higher than the prevailing service tax rate or lower. “It is expected to remain around 12% or lower than 15% (the current applicable service tax rate). It will not be on the higher side at around 18%,” said Abhishek Rastogi, partner, Khaitan & Co. If the GST rate remains on the lower side, it will bring down the overall cost of houses.

Value added Tax
Some states like Haryana and Delhi also charge value added tax (VAT) on under-construction properties, which is again borne by a homebuyer. However, once GST gets implemented “the current composition schemes for developers under VAT laws of respective states would come to an end,” said Naveen Wadhwa, deputy general manager, Taxmann.com. VAT is a state subject and varies between 1% and 5% of the property value. However, “There is a lot of litigation going forward on this account,” said Nangia. There are many contentious issues for both developers and homebuyers regarding VAT. Some cases have also reached the apex court. Once GST gets implemented “it will simplify tax structure and reduce the scope for litigation, however this may increase the cost of real estate in states that never had VAT,” said Nangia.

Stamp Duty
A homebuyer has to pay stamp duty to get the property registered. Even after GST, “Stamp duty will continue, as GST will not subsume stamp duty levied by government,” said Wadhwa.

Stamp duty is calculated as a percentage of the agreed value of the property, or the circle rate (the minimum price on which a property can be transacted, which is decided by the government), whichever is greater. In addition to stamp duty, typically 1% of the value of a property is charged as registration fee for registration of property documents (sale deed). In some states, if a property is bought in the name of a woman, the stamp duty levied is lower. For instance, in Delhi, properties registered in the name of women attract 4% stamp duty, compared to 6% otherwise. However, in case of joint ownership, where the property is bought jointly in the name of a man and a woman, buyers have to pay stamp duty of 5%, in case of Delhi.

In some states, stamp duty also depends on the region in which a sale deed is executed. For instance, in Haryana a man is required to pay 8% stamp duty in urban areas and 6% in rural areas, while women have to pay 6% in urban areas and 4% in rural areas.

“The Task Force on Goods and Services Tax recommended in the Thirteenth Finance Commission that real estate sector should be integrated into the GST framework by subsuming the stamp duty on immovable properties levied by the states, to facilitate input credit and eliminate the cascading effect,” said Nangia.

But “due to political and economic considerations, stamp duty—which is a good contributor of revenue to state government—is not subsumed in the GST framework for the time being,” added Nangia.

As of now, taxes and duties can increase the cost of property by 15-18% for homebuyers. After GST gets implemented, whether the cost of houses will come down or increase, will depend on the rate at which GST is charged and whether there will be any abatement or not.

Source: https://goo.gl/mhvBpB

ATM :: Planning to invest in home? Here is how you can raise your down payment

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

ATM

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

ATM :: How to withdraw 90% of your provident fund to buy a house

May 12, 2017 | 11:39 IST | SOURCE : Economic Times | Retrieved from Timesnow.tv

ATM

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.

annexure1

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.

annexure2

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.

annexure3

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.

Conclusion

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.

Source: https://goo.gl/egUXjH

ATM :: Now is the time to book your dream home as property prices are set to head north

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

ATM

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.

Source: https://goo.gl/eB9J31

NTH :: Pradhan Mantri Awas Yojana: How To Apply For Home Loan Interest Subsidy

This home loan interest subsidy scheme is part of the government’s ‘Housing for All’ initiative. The scheme will be implemented initially for a period of one year.
Written by Surajit Dasgupta | Last Updated: March 27, 2017 11:18 (IST) | NDTV Profit

NTH

The government last week announced guidelines on interest rate subsidy scheme under Pradhan Mantri Awas Yojana (Urban) for middle-income groups. The scheme has been named as Credit Linked Subsidy Scheme for Middle Income Groups – CLSS (MIG). Under the Pradhan Mantri Awas Yojana (Urban) scheme, middle income groups (MIG) with annual incomes of above Rs. 6 lakh and up to Rs. 18 lakh per year are eligible for interest subsidy on buying their first home. The scheme was earlier announced by Prime Minister Narendra Modi in his New Year’s Eve address to the nation.

Prime Minister Narendra Modi had announced interest subsidy of 4 per cent on housing loans of up to Rs. 9 lakh for those with an income of Rs12 lakh per year and of 3 per cent subsidy on housing loans of up to Rs.12 lakh for those earning Rs. 18 lakh per year. This home loan interest subsidy scheme is part of the government’s ‘Housing for All’ initiative. The scheme will be implemented initially for a period of one year. Additional loans beyond the specified limit, if any, will be at non-subsidised rate.

Here are 10 highlights of the interest rate subsidy scheme under Pradhan Mantri Awas Yojana (Urban):

1) Beneficiaries eligible for interest subsidy under the CLSS scheme have to apply to their lenders for availing the subsidy benefit.

2) Home loans sanctioned or applications are under consideration since January 1, 2017, are eligible for interest subsidy under the Credit Linked Subsidy Scheme for Middle Income Groups. The beneficiary earlier should not have own a house in his/her name.

3) The total interest subsidy accruing on these loan amounts will be paid to the beneficiaries up front in one go, thus reducing the burden of Equated Monthly Instalment (EMI).

4) Besides commercial banks, housing finance companies, regional rural banks, state and urban cooperative banks, other financial institutions like small finance banks and non-banking finance company-micro finance institutions can also lend under this scheme.

5) National Housing Bank (NHB) and Housing and Urban Development Corporation (HUDCO) will reimburse interest subsidy to the lenders. No extra processing fee will be charged by the lenders from borrowers.

6) Interest subsidy will be provided on loans for construction/acquisition of house with carpet area of up to 90 sq metres for those with income of up to Rs. 12 lakh per year and of up to 110 square metres for those earning between Rs. 12 lakh and Rs. 18.00 lakh per year.

7) Under the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower.

8) Sriram Kalyanaraman, MD and CEO of National Housing Bank, said that interest subsidy of 4 per cent will bring down EMIs of beneficiaries by Rs. 2,062 per month on a housing loan of Rs. 9 lakh and interest subsidy of 3 per cent will bring down EMIs by Rs.2,019 on a loan of Rs.12 lakh, taking normal housing loan interest rate as 8.65 per cent.

9) The total interest subsidy for middle-income people over 20 years on Rs. 9 lakh loan and Rs. 12 lakh loan comes to around Rs. 2.30 lakh per beneficiary (the present value of interest subsidy provided to beneficiaries over the tenure of 20 year loan at a discounting rate of 9 per cent.

10) Kotak Institutional Equities in a note said that the scheme will give a boost to the housing sector provided real estate players offer compact products at lower ticket sizes. This scheme will help bring down overall interest cost for home loan borrowers, the brokerage added.

Source: https://goo.gl/0ZCtM5

NTH :: Reduce Home Loan EMIs Under Pradhan Mantri Awas Yojana. How It Works

National Housing Bank or NHB has come up with operational guidelines for availing subsidy under Pradhan Mantri Awas Yojana (Urban) for middle-income groups.
Written by Surajit Dasgupta | Last Updated: March 29, 2017 12:09 (IST) | NDTV Profit

NTH

National Housing Bank or NHB has come up with operational guidelines for availing subsidy under Pradhan Mantri Awas Yojana (Urban) for middle-income groups. Under the Pradhan Mantri Awas Yojana (Urban) for middle-income groups, home loan borrowers buying their first home are eligible for subsidy on interest repayments. The scheme was earlier announced by Prime Minister Narendra Modi in his New Year’s Eve address to the nation. Sriram Kalyanaraman, managing director and CEO of National Housing Bank, termed the government’s decision to give subsidy to middle-income groups as “historic”. “This is historic as the middle income group has never been covered by the subsidy,” he told NDTV Profit.

As part of the government’s “Housing For All” initiative, Prime Minister Narendra Modi had announced interest subsidy of 4 per cent on housing loans of up to Rs. 9 lakh for those with an income of Rs12 lakh per year and of 3 per cent subsidy on housing loans of up to Rs.12 lakh for those earning Rs. 18 lakh per year. The scheme has been named as Credit Linked Subsidy Scheme for Middle Income Groups – CLSS (MIG). The scheme will be implemented initially for a period of one year.

Here are 10 highlights of the interest rate subsidy scheme under Pradhan Mantri Awas Yojana (Urban):

1) Home loans sanctioned or applications are under consideration since January 1, 2017, are eligible for interest subsidy under the Credit Linked Subsidy Scheme for Middle Income Groups. The beneficiary earlier should not have own a house in his/her name.

2) Beneficiaries eligible for interest subsidy under the CLSS scheme have to apply to their lenders for availing the subsidy benefit. National Housing Bank will pay the subsidy upfront to the lender.

3) Mr Kalyanaraman said National Housing Bank will most likely pay the lender within one week. “We would just reduce your (borrower) principal as soon as the bank claims with us. Principal effectively stands reduced to that extent,” he said. To avail the scheme banks have to get an undertaking from the customers that this is the only house they have. No extra processing fee will be charged by the lenders from borrowers.

4) The home loan borrower can then opt for lower EMIs or repay loan faster with original EMI, he added.

5) EMIs under the scheme could get reduced by Rs. 2,000 to Rs. 2,800 per month, depending on the loan amount and tenure, and the effective interest on loan could fall by up to 75 basis points, Mr Kalyanaraman added. Additional loans beyond the specified limit, if any, will be at non-subsidised rate.

6) The total interest subsidy for middle-income people over 20 years on Rs. 9 lakh loan and Rs. 12 lakh loan comes to around Rs. 2.30 lakh per beneficiary (the present value of interest subsidy provided to beneficiaries over the tenure of 20 year loan at a discounting rate of 9 per cent.)

7) Interest subsidy will be provided on loans for construction/acquisition of house with carpet area of up to 90 sq metres for those with income of up to Rs. 12 lakh per year and of up to 110 square metres for those earning between Rs. 12 lakh and Rs. 18.00 lakh per year.

8) Besides commercial banks, housing finance companies, regional rural banks, state and urban cooperative banks, other financial institutions like small finance banks and non-banking finance company-micro finance institutions can also lend under this scheme. National Housing Bank has already tied up with many big lenders and is in the process of signing agreement with many others.

9) Under the scheme, the tenure of loan has been stipulated to be 20 years or that preferred by the beneficiary, whichever is lower.

10) Kotak Institutional Equities in a note said that the scheme will give a boost to the housing sector provided real estate players offer compact products at lower ticket sizes. This scheme will help bring down overall interest cost for home loan borrowers, the brokerage added.

Source : https://goo.gl/UGaMte

NTH :: EMIs for house in an urban area to shrink if bought under PM Awas Yojna

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

NTH

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