Nauzer Bharucha | TNN | Updated: Jul 2, 2018, 11:09 IST | Times of India
MUMBAI: Prospective flat buyers are indulging in innovative ways to circumvent paying the 12% GST levied on under-construction flats. GST on such projects is one of the main reasons that have kept purchasers away, said builders.
Some builders have found a way out for the prospective buyers. They show the booking amount as a ‘loan’ given by the buyer to its subsidiary company and once the building is ready with the mandatory occupation certificate from the BMC, the builder returns the amount to the purchaser with interest. ”
Nil GST on completed projects offers loophole
While GST on under-construction flats is a dampener on sales, some builders have found a way out. They show the booking amount as a ‘loan’ given by the buyer to its subsidiary company and once the building is ready and occupation certificate (OC) obtained, the builder returns the amount to the purchaser with interest. “The client then pays back the entire money to the construction firm,” said a builder with projects in the eastern suburbs. This does the trick because GST is not levied on completed projects with OC whereas GST rate is 12% on under-construction projects, and buyers in the affordable housing segment (homes of up to 60 sqm carpet area) pay 8% GST.
Property expert Pranay Vakil agreed that, “Some developers take funds from buyers in a different account/company and transfer it against the sale of a flat when occupation certificate is received,” but he sounded a cautionary note saying “This has a built-in danger in case the developer reneges on his commitment if the project is delayed.”
“GST is supposed to be a tax-neutral proposition, with input tax credit benefits to be passed on to homebuyers. However, lack of clarity on the amount and timelines of passing on this benefit have led to a predictable phenomenon—the quest for ways and means to avoid GST,” said Anuj Puri, chairman of Anarock Property Consultants. “In one variable, a homebuyer enters into a deal with the developer and subsequently, after receipt of the occupation certificate, the deal is cancelled and a fresh agreement is signed between the two parties. While reputed developers are steering clear of such deals because of the obvious potential legal pitfalls, a few smaller players are engaging in such practices to avoid GST and attract buyers,” said Puri.
He cautioned that many homebuyers had burnt their fingers dealing with such unethical players. “The RERA regime is strict and has penal actions, so these practices are not exactly a widespread phenomenon. Nonetheless, the governing authority has to collar such players to maintain sanity in a market that is just beginning to show the green shoots of recovery.”
Lamenting the 50% drop in sales in his under-construction luxury projects, a developer said: “Prospective buyers say they will sign a letter of intent (LoI) to block the flat so that they don’t have to pay GST They tell us they will pay after the building is complete. However, this LoI has no legal sanctity and the buyer can back out of the project without any consequences.”
But another developer with luxury tower projects in central Mumbai claimed his firm hasn’t come across this practice yet. “Our under-construction sales continue to remain strong and customers have no issue paying GST since they also get the benefit of the input credit in the pricing,” he said.
Builder Nayan Shah said customers want the builder to bear part of the 12% GST burden. “In our under-construction projects, we have started offering a box price, which is all inclusive. We bear part of the GST, about 7%, of the liability,” he said.
A homebuyer told TOI that developers were not passing on tax benefits to their customers of under-construction projects and are even delaying or denying the same despite being asked multiple times. “In our project, none of the customers have been given a taxation pass through benefit,” he said.
Sources said most purchasers are not even aware of the GST tax discount. “This is unfair for them. Most developers get away due to this lack of knowledge. This is, of course, a problem with a few developers and not all,” they said.
Source : https://bit.ly/2tXbfy5
Don’t see property prices going up for now: Renu Sud Karnad, Managing Director, HDFC
ANIL URS | Published on March 14, 2018 | The Hindu Business Line
BENGALURU, MARCH 14
Renu Sud Karnad, Managing Director, HDFC, in an interview with BusinessLine, explains how the realty and home-loan sectors are shaping up as the new regulatory regime sets in. Excerpts:
How is the property market doing pan-India?
Apart from New Delhi and Chennai, where we see slow offtake, the market is good in other major cities. By good I mean, we are doing good business.
How do you see property prices moving?
As I see it now, I don’t see any increase in property rates happening.
What about interest rates, especially in the wake of rising bond rates?
Yes. Interest rates are rising a little bit. But let me put it this way. I don’t think the rates are going to come down. I think next year we will see a quarter to 1 per cent increase in rates.
Is this rise in rates low, or how do we understand it?
A quarter to half a per cent is nothing when compared to the high interest rate days, when home loans were going at 13-14 per cent. Now they are at 8.3-8.4 per cent. So they may go up to 8.9-9 per cent.
How is HDFC’s home loan growth?
At 23 per cent, our home loan growth is excellent. We have seen good growth coming from Mumbai, Bengaluru, and Pune. In the National Capital Region (NCR) it is a little slow. Otherwise, home loan growth normally is about 15-18 per cent.
Are any banks on your radar for acquisitions?
We are always on the look out whenever an opportunity arises.
How far are you in picking up CanFin Homes?
Actually, you should ask them, because five to six people are talking to them. I don’t know what pressure of time they have and don’t know when they need to announce it. Yes, we are also talking to them.
Have you firmed up your business plan for the next fiscal (2018-19)?
We are in the process. But I can tell you we are looking at 15-18 per cent growth.
How is the borrowing by property developers?
They, I think, are now looking at new avenues. PE funds are giving them money. Banks have also started to explore. Once the sector gets used to new regulatory framework, we could see good amount of lending.
Definitely the last one year had been challenging from them. But I think in the next six months, things should settle down.
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.
From the past few quarters, the real estate markets in India have been going through a phase of massive change.
Kanika Gupta Shori | Retrived on 1st Dec 2017 | Moneycontrol.com
How do you time your entry in any investment channel — whether it is equities or real estate? Is it the juncture when the markets are booming and everyone is joining the fray? Does that make for a sound investment decision? Probably, not!
Most retail investors and homebuyers make this mistake. They buy when the prices are peaking. Naturally the returns are not as expected. Am I right?
Well, I am citing the basic principle of investing here. If you are on board, I would further explain why 2018 should be the year you should enter the real estate market.
From the past few quarters, the real estate market in India has been going through a phase of massive change. The regulatory reforms implemented through frameworks defined under the Real Estate Regulatory Act (RERA), and Goods & Services Tax (GST) to an extent, have led the sector in a certain direction.
It is mandatory for all the real estate projects to be in compliance with the provisions of RERA, which attempts to make sure that projects are delivered in time and the money paid by buyers for certain projects is not squandered for other purposes.
In short, RERA protects consumers’ interests. It will be impossible for fly-by-night operators to be in the market and only the most-committed players will be able to navigate the roadmap. This will benefit both buyers and sellers, in the long term.
It is a buyers’ market
The combination of excess supply, high prices and low consumption has translated into huge inventories across the country. The consumption side has also been impacted by demonetization. Clearly, it is a buyers’ market for now – and for the next few quarters. But not for long!
With RERA in place, developers are now focusing on completing their existing projects. The new home launches, across top eight cities in India, have gone down by more than 75 percent in the third quarter of the current fiscal, as per industry research reports. The overall number of project launches has gone down by more than 40 percent in the first nine months of the current calendar year. These trends imply that the supply side will gradually find some equilibrium with demand, and prices will subsequently start picking up pace.
However, in the present environment, there is a situation of excess supply and property buyers are in a better position to negotiate, and grab a great deal.
As per industry reports, the National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) have around 2 lakh and 1.8 lakh unsold units respectively.
Home loan interest rates are at all-time low
The excess liquidity in the banking system have led the RBI rejig the key lending rates. Resultantly, the home loan interest rates that were recorded at around 9.5 percent a year in 2016 have now been floating in the range between 8.3-8.4 percent.
That makes for considerable savings in the EMI costs; enabling people to avail of low-cost home finance, and become a home owner. It is expected that the home loan rates will remain low for the next several quarters and may even come down further.
Considering the average annual rental yields at 5-6 percent, there is not much difference between the costs of rent and owning a home.
Steady revival of interest from global investor fraternity
The implementation of overarching regulatory mechanisms has instilled a much higher level of confidence in the global investor fraternity. The real estate sector is projected to receive Private Equity (PE) investments to the tune of US$4 billion during this fiscal year, as per industry reports.
Not just the PE funds from the US, Canada and Singapore are interested in infusing capital in the sector, but countries such as Japan, China, Qatar, Hong Kong and the Netherlands are also poised to invest in the sector.
At the same time, global sovereign wealth funds—that are otherwise known for their risk-averse, conservative approach—have been increasing their exposure to the market and it proves that the sector is headed in the right direction.
As for property buyers, it is a sign of revival on the cards.
In overall, the current environment presents an opportunity to buy property and make the best out of the coming year.
(The author is COO of Square Yards)
By ZeeBiz WebTeam | Mumbai | Updated: Tue, Nov 14, 2017 04:48 pm
If you are willing to get a home loan in the future, it is extremely important to understand the impact of the Goods and Services Tax (GST) that came into effect on 1 July 2017 in India. GST is a unified indirect tax levied on the consumption, sale and fabrication of all types of goods and services at the domestic level. It is the India’s largest tax reform since independence.
The GST Council has been formed to administer the system. The four tax brackets have been fixed at 5%, 12%, 18% and 28% for various types of commodities and services. The new tax system has a direct impact on home loan seekers and the entire real estate industry in India. Let’s discuss.
Real estate before GST
Property builders and house buyers had to remit multiple central and state levies such as stamp duty, Value-added Tax (VAT), registration tax and service tax. The imposition of these taxes was based on the locality and construction phase of properties. For instance, the buyers of under-construction properties were required to pay the whole gamut of levies. Conversely, registration charges and stamp duty were imposed on the sale of ready-to-move-in properties. Paying several types of taxes was the biggest challenge faced by the stakeholders of the real estate industry. The complicated tax system has led to the disparity in property rates across the nation.
Real estate after GST
The Indian real estate sector comes under the purview of GST, which excludes ready-to-move-in properties and residential schemes sponsored under the Pradhan Mantri Awas Yojana (PMAY). Under-construction properties are taxed at 18% that will be applicable only to 2/3 of the value of the property. The remaining cost of the property is considered the value of the land. Excluding stamp duty and registration charges, the actual tax rate will be 12%. Realtors or property developers can benefit from input tax credits, which ought to be transmitted to customers.
GST impact on home loans
When a home loan is obtained, interest is paid on the principal amount. The interest remitted on the principal amount is considered the cost of the loan. Besides, the loan borrower pays property valuation charges, advocate charges and processing fee. The home loan service was taxed at 15% under the previous tax regime. Currently, it is taxed at 18% and thus, the loan will be expensive by 3%. GST is not applicable to prepayment fee for an MCLR-linked mortgage, but prepayment fee for a fixed rate mortgage is taxed 18% instead of 15%. The borrower is taxed at 18% on any charges recouped by lenders.
The Indian real estate segment has been experiencing significant transformations recently. The new Real Estate Regulation Act (RERA) has addressed the problem of non-transparency. In India, as far as the residential segment is concerned, the implementation of GST is undeniably an affirmative sentiment booster among potential customers. The system may not be helpful in diminishing the prices of properties in the short-term. The simplicity of the system will benefit all the industry stakeholders including property developers and buyers.
GST advantages for property developers
GST has turned out to be a better option from the stance of property developers who had to pay multiple taxes under the previous tax regime. Currently, they are taxed under the unified tax system. As far as building materials are concerned, the new tax system brings no major changes. Let’s consider a few building materials. Under the previous tax system, pillars and iron rods were taxed at 20% that has been reduced to 18% currently. Cement is currently taxed at the highest rate of 28%, which is more than the previous rate. The tax rate on fly ash bricks and sand-lime bricks has been reduced to 5% from 6%. These marginal variations can make a big difference.
Affordable housing schemes have been kept outside the purview of GST. Needless to say, the unified tax system has been a much-needed reform. Industry experts and tax practitioners in the country have accepted the system that impacts the real estate industry as well. Home loans will be marginally expensive as discussed earlier. The current tax regime has brought transparency and simplicity in the housing loan services and real estate sectors. It is likely to be a boon for all industry participants.
(This article was authoured by Bank Bazaar.)
Deepak Singh | Magicbricks | Updated: Oct 17, 2017, 15:25 IST
If you have been protracting your decision to buy a house then this festive season is the right time to loosen your purse strings. Although the festive season is considered an auspicious time to buy new things, including real estate, here’s a list of five reasons why prospective home buyers should buy a property now.
Post the real estate slowdown, most developers had been waiting for the re-emergence of positivity back into the market. Buyers’ renewed enthusiasm in the real estate has brought cheers for developers who are now trying to liquidate their existing inventory and recover costs. To make the most of this development, builders are offering a number of discounts and freebies to attract end-users.
Low property prices
Property prices have decreased in the last couple of years. Although prices have remained stagnant for a while now, this is the ideal time to indulge in a hard bargain with the seller to extract the best deal for yourself.
Discounts and freebies galore
Developers are trying to encash the market sentiment and attract buyers by offering them freebies to make the deal look attractive. Munish Mishra, Sales Head, Wave City, says, “There is no better time than the festive season to avail attractive offers. We have tied-up with LG to offer various products such as AC, refrigerator, LED TV, washing machine, oven, etc. to our customers.” But a word of caution, don’t fall for the freebies instantly. Judicially analyse the freebies and try to monetise them as well. You may ask your builder to give you the value of the freebies as discount on the property and if the offered price is reasonable then go ahead and accept the offer. If festive offers from developers include important amenities such as free car parking, then go for them but make sure to bargain hard on the final property price.
Lower home loan rates
Lowering of repo rate by the Reserve Bank of India has led to a decline in the home loan interest rates. In September 2017, banks were providing home loans at an interest rate of 8.35% which is attracting home buyers. Renu S Karnad, Managing Director, HDFC, says “low interest rates help buyers in reducing their borrowed costs. Interest rate is one of the important factors that a home buyer looks at while buying a home. Lower interest rates not only helps in reducing the borrowing costs but also improves their loan eligibility.” She further added, “CLSS under PMAY for interest subsidy of 6.5% for EWS and LIG categories and the extension of the scheme for MIG category (interest subsidy of 4% on Rs 9 lakh loan and 3% on Rs 12 lakh loan) by another 15 months till March 2019 is in itself much more than a festive offer.”
A RERA-compliant project means that the developer can’t take you for a ride anymore. Policies like RERA and GST have instilled a sense of compliance in developers and thus, they are most likely to fulfil their promises now. Sanjay Shenoy, Joint Managing Director, Legacy Global Projects, also expects such policies to bring cheer to the market. He says, “We expect a marked upswing as buyers are now more confident that their interests are being taken care of, with a strong policy in place.” Adding that there are attractive options for buyers this festive season, he explains, “There is a plethora of attractive options for a home buyer today. Differed payment schemes, EMI free investment options and other flexible payment options which reduce the cash flow burden of clients continue to be a big hit.”
A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”.
Renu Yadav | New Delhi, June 15, 2017 | Business Today
Rent is generally one of the biggest component of the monthly expenditure that you make. Now, you can not only pay your rent through credit card but can also earn reward points on the amount paid. A London based fintech company, RedGirraffe, is offering a facility to pay rent through credit card using its online platform “RentPay”. For this, it has tied up with various banks including State Bank of India, ICICI Bank, HDFC Bank, IndusInd Bank, Axis Bank and Kotak Mahindra Bank. So, if you have a credit card from one of the banks that have collaborated with RedGirraffe, you can use it to pay rent.
How you can do it
To enroll for this facility you have to visit the website http://www.redgirraffe.com and create a RG Property ID by filling up the details of the rental property and attaching the rental agreement. The tenant will mention the bank account details of the landlord in the form. After submitting the form, a mail will be sent to the tenant’s mail id for giving standing instructions to the bank. After this one time registration, your monthly rent will be deducted automatically on a predetermined date.
“Bank and RedGirraffe.com have strong processes of inbuilt compliance and other tenant verification/reference checks. All the bank accounts remain automatically linked to Aadhaar and PAN details. In cases where the accounts are not linked, such customers are not allowed to transact via RentPay anyway. Apart from this level 1 verification mode, there are another 17 point checks (carried out between the bank and RedGirraffe.com) during each tenant onboarding. The verification happens over a period of 50 working days,” said Manoj Nair, Founder and CEO, RedGirafffe.com.
Why it is beneficial
The advantages of using this platform is you get 45-60 days of credit as your rent remains in your savings bank account and you earn returns on the amount. Also, if you use credit card, you can avail reward points depending on the offer that your bank is giving. “Since rent payments are typically large transactions, such spends enable customers to earn significant reward points. These points can be redeemed against the banks catalogue of over 200 options including products, gift vouchers, e-vouchers and air miles. Cardholders can even redeem points to pay their outstanding on the card,” adds Vijay Jasuja, CEO, SBI Cards. Apart from this it will also help the tenant build a good CIBIL score which can help him or her get loans at relatively better rates compared to a person with no or bad CIBIL score.
What are the charges?
A transaction fees of 0.39 per cent with a minimum of Rs 39 per transaction will be charged from the credit card holders of ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and IndusInd Bank. Apart from this a service tax will be levied on it. So, for every Rs 10,000 rent paid the gross transaction fees including service tax comes to around Rs 45. However, in case of SBI Cards, an additional banking transaction charge of 1.75 per cent plus taxes shall be charged extra by the bank.
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.
Posted On: Apr 30, 2012 | CommonFloor.com
A property transfer to your family member or to a near and dear one is not as easy as you might think. If you own a property in India and wish to transfer it to another person’s name you might as well think that your family member belongs to a similar group. Indeed, it is always safe that you seek legal help when it comes to property transfer. There are various circumstances in which one can transfer property to another person’s name. In case of death, selling your property or gifting it can be are options that can be considered. Properties can vary from a unit to apartments, houses, flats, holiday houses, vacant blocks of land, rental properties and hobby farms.
Once you have decided to transfer the property to another person, you need to know the basic and important formalities required in the process of a property transfer.
Know the valuation or the market price: It is very important that you get the precise valuation of your property before transferring it. Doing this will give you a clear idea about the fluctuations of the capital gains tax event (CGT event).
Hire an attorney: It is always better that you hire an attorney if you’re either gifting or selling the property. An attorney will help you fill out and file the quit claim deed precisely. It is also possible that you can fill out the forms by yourself but you might get a little confused and might require a lot of time. You can also acquire a quit claim deed online as well.
Quit claim deed: This deed is signed in order to transfer any ownership interest of the owner without making any promises regarding the properties interest. They are basically used in order to clear up the title problems or to transfer the property amongst couples after separation or any informal decisions. It is very important to write the precise and complete names of the transferor and the transferee.
Get a warranty deed: It is very important that you get a warranty deed in order to transfer the property to another person’s name. It is also known as the “Grant Deed”.This transfers ownership of the property and promises transfer of property of the owner to the transferee.
Legal description of the property: Mentioning a precise legal description of your property at the time of transferring is very important. Details like your address, landmark, few specifications and dimensions are the details which are needed to be mentioned.
Exclusions: The idea of exclusions is to clearly mention that while transferring the property between people, both the receiving and the giving parties are exempted from being taxed. This can be applied in case of a parent, child, in-laws, step children, and so on.
Gift deed/Will deed: Transferring a property can either be as a gift or as per mentioned in a will. If a person is transferring the property in order to escape the liabilities, he/she will not be exempted from paying the liabilities. The transfer of property as a gift deed will require a stamp duty, whose value and purpose rate will be fixed by the government. It also has to be registered. In case of a Will deed, the stamp duty is implied and the Will will take effect only after the death of the person. There is an option of the Will deed being either registered or not registered.
Country name: It is mandatory that you write the name of the country where the property is situated. The form has to be filled with precise information.
Purchase price:In case you’re selling the property, you will have to enter the purchase price. If you’re gifting the property, you will have to enter the nominal monetary amount in the form.
Notarizing the deed: While you’re notarizing or transferring your property, it is important that you find a suitable notary public in order to notarize the deed.
Points to be remembered:
- Other than a relationship breakdown, the stamp duty is payable for other reasons while transferring.
- The market valuation of the property has to be given to the Office of fair trading in order to calculate the stamp duty.
- If the property has a mortgage amount, you will have to discuss this issue with the person who is receiving the property.
- There are a certain amount of costs which will be involved while transferring property.
Just like its predecessor, 2017 promises to be a rollercoaster ride. A curtain-raiser on how to navigate the investing landscape
BY SAMAR SRIVASTAVA | Forbes India | PUBLISHED: Feb 20, 2017
2016 held an important lesson for investors—that surviving volatility is as important as making the right investment.
It was no ordinary year. The sharp market swings following Brexit, the election of Donald Trump as America’s president and Prime Minister Narendra Modi’s surprise demonetisation announcement singed investors. What is significant is that those who stayed put were none the worse off. Each time, each jolt later, the markets recovered.
This much is certain: 2017 promises to be no different. Brace for volatility, make it your friend, stay the course and profit from it.
It is against this uncertain investing backdrop that large Indian companies are looking attractive once again. Over the last three years, their smaller counterparts have delivered superlative returns. Could it be their turn now? Our story (page 58) points to an informed yes as a faster global growth forecast, rising commodity prices and lower relative valuations mean this is likely to be the year of large-caps.
Large-caps have propelled Birla Sun Life Frontline Equity Fund to the top of the fund size table. The story of how fund manager Mahesh Patil went back to the drawing board after the 2008 financial crisis and overhauled its investing process is a compelling one.
Rapid growth companies, such as those the Birla fund has invested in, are facing a peculiar problem—identifying investible opportunities with the cash they’ve generated. What should companies ideally do with this cash and how should an investor view the cash on the books of a company? There’s no one answer with different investors offering various suggestions.
While equity markets have outperformed other asset classes, real estate remains a sound bet for those wanting to buy a house to live in. “Just as you can’t time the top of the cycle, you can never time the bottom of the cycle,” says Srini Sriniwasan of Kotak Investment Advisors. We also ask him why he believes residential demand could come back faster than expected.
Commodities have been on a tear this past year. Those who took a contrarian call in 2015 were rewarded handsomely in 2016. While the first leg of the commodity rally has played out, investors are now waiting to see whether the new US president follows up on his promise of infrastructure spending. This could provide a further fillip to prices of iron-ore, zinc and copper. Any hint of fiscal expansion will be greeted cheerfully by commodity markets.
Gold, a safe haven asset, had a good year in 2016 as investors took shelter from political shocks like Brexit. The approach tends to be to not invest in gold to beat the markets as over long periods, it tends to underperform. But in 2017, gold should do well if the US dollar remains weak and investor demand climbs up during times of volatility.
The more cautious investor, who typically invests in fixed income, had a happy 2016 as bond yields fell rapidly. Their returns outpaced a large-cap index fund. For most, this was a pleasant surprise. At the same time, nothing lasts for too long and investors wanting to do better in bonds would be better off shifting to shorter maturity bonds. They’ll also have to keep a close eye on India’s credit rating as a cut could see yields spike.
To round off this special package, we bring you two interesting trends. One, on bottom-of-the-pyramid businesses where returns have been steady: Equity funds who invested in them have done well as a column by Viswanatha Prasad, CEO, Caspian Advisors, an impact investing fund, points out.
And two, on HNI investors, with a greater appetite for risk, who are investing in startups as a new asset class, seeing themselves as partners in their progress.
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.
A second home loan may seem daunting, but if implemented correctly, can lead to a great deal of savings on income tax
By: Harshil Mehta | Updated: December 26, 2016 7:27 AM | The Financial Express
An individual who has taken loan for the second house is eligible to claim deduction, under Section 24 for the interest he has paid towards the loan amount.
Many people in India buy a second home for various reasons. It can be as an investment for capital appreciation, for use as a holiday home, to get a regular stream of income by way of rentals or to diversify their investment portfolio. The return on real estate as an investment is second only to equity and this makes investment in real estate a must-have in the portfolio of an investor.
In India, a bulk of the home loan is taken by customers to buy their first home to live in and everyone knows that getting a home loan entails several income tax benefits, but the benefits which follow a second home loan are not talked about as much. So primarily, due to little awareness around the tax implications of the second home, and lack of knowledge of the benefits, most people don’t even consider it. A second home loan may seem like a daunting task, but if implemented correctly, can lead to a great deal of savings on income tax.
Second home self-occupied
You can avail deduction on interest paid towards home loan. An individual who has taken loan for the second house is eligible to claim deduction, under Section 24 for the interest he has paid towards the loan amount. There is also no maximum limit for the exemption on interest paid on the second home loan. However, an individual in this case will not be eligible to claim any exemption under Section 80 C as the second home will not be considered as self occupied property. For example, if an individual has taken a second home loan and he has paid R1 lakh as interest and R50,000 as principal amount for a year, he can then claim income tax benefit on R1 lakh.
You can avail deduction on interest during the pre-construction period. An individual who has a second home loan for an under-construction property can claim tax deduction on 20% of total interest paid during the pre-construction period. The maximum time limit to avail this tax benefit is five years. For example, if a second home loan tax benefit for interest during under construction or pre-construction period is R1.5 lakh, an individual can claim R30,000 per year for five years and not beyond.
Claim taxes paid to local bodies
An individual can also claim tax deduction on the taxes paid to the local authorities in the financial year in which they are paid. These include municipal or property taxes. It can be claimed on accrual basis and not payment basis.
Repair, maintenance charges
One can also claim tax benefits on repair and maintenance of the property. It is a fixed rebate that an individual can claim irrespective of the expenditures one has actually incurred. It is flat 30% and is allowed after the deduction of property tax for the fair rental value of the property.
A second home loan can bring definitive advantages to individual borrowers. Home loans have enabled dreams of home ownership within the reach of the common man. Various tax benefits have made it one of the most preferred options to fund home buying.
The writer is CEO, DHFL
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.
By Anuj Puri | Updated: Nov 11, 2016, 10.59 AM IST | Economic Times
There is currently a lot of debate happening on how the government’s demonetisation move will impact the real estate sector. The Nifty Realty Index fell almost 12% on Wednesday, purely on sentiment. While the bellwether indices are hinting at dark days ahead, these fears can at best be called unfounded when it comes to the Indian real estate business.
Let’s look at how the major real estate segments will fare:
Residential real estate: The primary sales segment is largely influenced by home finance players, and these deals tend to be facilitated in a transparent manner. This segment will, therefore, see at best a limited impact in the large cities, though some tier II and tier III cities, where cash components have been a factor even in primary sales, will see a business crunch. The secondary or resale market will, however, certainly get impacted, given the fact that this segment does see the involvement of cash component.
Commercial real estate: There will be a minimum impact on office/industrial leasing and transactions business, given that cash components do not play a significant role in such transactions.
Real estate investment markets: Projects could get stretched as informal sources of capital may not be available. This, in fact, spells more opportunities for institutional capital. FDI, private equity and debt players will suddenly find the market even more transparent and attractive. Moreover, banks could start funding land transactions, thereby decelerating land prices.
Retail real estate: Retailers could see some impact on their business in the short-to-medium term due to reduced cash transactions. The luxury segment is likely to be hit because of the historically high incidence of black money acceptance in this segment. However, credit/debit cards and e-Wallets should come to the rescue. Overall, the domestic consumption story remains intact, with no threat to the overall strength and growth of the Indian retail industry.
Land sales and leasing: Where land transactions have been happening in the realm of joint ventures, joint development or facilitating corporate divestments, will see very little impact of the demonetization move. This is because JVs, JDs and corporate divestments are all quite institutionalized, with little or no cash involvement. However, those carrying out direct land deals will doubtlessly suffer – especially when it comes to agricultural land transactions, which tend to involve significant cash involvement.
Developers: There will be minimal impact on large institutionalised players with a solid brand and governance framework. Sales largely driven by the salaried class or investors with limited cash involvement would not suffer. Smaller developers are understandably very concerned right now because many of them have depended on cash transactions. We are very likely to see a clean-up of non-serious players due to this ‘surgical strike’ on the parallel economy. The impact of RERA will further discipline the industry, which will be good for its health in the long term.
Hotels and hospitality-related real estate in the organised sector will see a very negligible impact by the demonetization.
Impact of Trump’s Triumph
It is a bit early to make any accurate predictions on the full impact of Trump’s victory in the US presidential election on Indian real estate. Megan Walters, Head of JLL’s Asia Pacific Research, says we may see some volatility in currencies within the APAC region as the news is digested and risks are assessed.
For real estate investors, currency gains might be sufficient enough to prompt global investors to execute exit strategies on cross-border investments. In fact, large institutional investors would be well-advised to implement investment strategies now, before the market picks up again. Asia Pacific, and to some extent India, could stand to gain if investments pick up.
On the larger front, the overall sentiment implied by statements that Trump has made so far with regard to India can have some positive political implications. That said, there are definitely concerns in terms of how Trump’s win can affect outsourcing to countries like India. The country’s real estate sector does depend a lot on the commercial real estate demand generated by this sector. Likewise, the entire IT/ITeS sector has had a direct correlation to residential demand in the country.
What can be said with any degree of certainty is that there are some very interesting times ahead.
(Anuj Puri is Chairman & Country Head of JLL India. Views expressed in this writeup are his own and do not represent those of ETMarkets.com)
HT Estates Correspondent | Updated: Nov 12, 2016 14:03 IST | Hindustan Times
Developer bodies and homebuyers have welcomed the government’s decision to ban Rs 500 and Rs 1000 notes, with the former hoping that interest rates will further come down and make it affordable for homebuyers to purchase a house.
Parveen Jai, president, Naredco has said that it is a “positive move and will help keep a check on the illegal black money movement. As for affordable and mid-housing segment, these will not be affected since these transactions are primarily routed through bank borrowings.”
The organised part of real estate sector will not be impacted. “It is only the unorganised fly-by-night players who will be affected. This move will help the sector fight more effectively for removal of section 43CA of the IT act as now there is no reason to charge tax on so-called deemed income on both buyers and sellers post this move,” says Getamber Anand, president, Credai.
The body also expects that in the coming months repo rates will go down by at least 2% and that home loan rates will come down to at least 7%.
“We expect that the RBI would definitely in the coming months, reduce repo rates by at least 2% so that a home loan can be brought down to at least 7%. The home loan rates coming down to such levels of sub 7% in the next year or so, the atmosphere will become more like the west where home loans are available at 5% and below. Unlike western countries, India has a documented shortage of housing and homes, an aggressive domestic demand for real estate. This essentially means that in presence of a lower home loan interest regime, a larger pool of home buyers will be able to avail loans to buy the home they always wanted. This could be made possible in as soon as the next six to twelve months. Housing industry will start to grow at a rapid pace while concurrently being in compliance with transparency and fair practices like RERA,” says Anand.
Homebuyers too have welcomed the move. “It will help weed out ‘the ratio’ between black and white component which is used to make payment for properties. The impact on real estate prices is obvious. The move will make prices more affordable and do away with unrealistic pricing that dominates the market today,” says Abhay Upadhyay, national convenor, Fight For RERA.
Property valuers, however, are of the opinion that the move will lead to prices going up in the long term. “With time, it will not be surprising to see prices go up as sellers come to terms with the fact that capital gains tax has to be paid on monies. Sellers are likely to factor that liability into the sale price,” says Sachin Sandhir, global managing director – emerging business, RICS.
The land purchase process earlier had the owner entering into an agreement with a builder where part of the payment was unaccounted. Now, since the owner can no longer do that – he would either sit out on the land, stalling the entire development project, or charge a premium to maintain the same cash margins after tax. This may increase the input cost for developers impacting realty prices.
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.
George Mathew | Mumbai | Published:October 31, 2016 12:22 am | Indian Express
Are home prices on the rise after remaining depressed in the last two years? If data from the Reserve Bank of India (RBI) is any indication, home prices have gone up during the first quarter ended June 2016 when compared to the same period of last year. Analysts and bankers are attributing the rise to the fall in interest rates and the retail push by lenders.
The RBI’s all-India home price index (base 2010-11=100) has sequentially increased by 5.5 per cent to 231.1 in Q1 of 2016-17 from 219.1 in Q4 of 2015-16. All major cities in the country witnessed an increase in HPI in the first quarter of 2016-17. The All-India HPI recorded annual increase of 7.3 per cent in the first quarter of 2016-17 after moderation over four consecutive quarters from 17.5 per cent in the fourth quarter of 2014-15 to 3.3 per cent in Q4 of 2015-16.
According to the RBI, on an annual basis, Chennai witnessed the maximum increase of 23.9 in the first quarter whereas Jaipur witnessed maximum contraction (-4.4 per cent). On a sequential basis (first quarter of 2016-17 over fourth quarter of 2015-16), Kochi recorded highest home price index increase of 17.6 per cent whereas Jaipur recorded the lowest increase of 0.6 per cent.
“The rise was fairly broad-based. Of the 10 cities tracked by the HPI, nine reported faster year-on-year growth, and prices rebounded faster in non-metro cities than in metro cities. Additionally, the southern cities of Bangalore, Chennai and Kochi saw the highest quarterly momentum of an average increase of 14.4 per cent in quarter-on-quarter as against 4.8 per cent in the other cities,” Nomura said.
“In our view, two factors may be supporting this rebound. First, the 80-85 bps reduction in bank lending rates in this easing cycle. Second, the aggressive retail lending push by banks. Housing loans rose 16.7 per cent y-o-y in August even as industrial credit continues to languish at negative 0.2 per cent,” it said. “Affordability concerns still remain, especially in the top-tier cities, due to elevated property prices relative to income and slow job creation. This casts doubts over the sustainability of this uptrend. The next few quarters should confirm if this is one-off or a change in trend,” Nomura said.
According to the RBI data, housing loans have shot up to Rs 786,900 crore as of August 2016 as against Rs 674,500 crore in August 2015, a rise of 16.7 per cent. Public sector banks have started focussing on home loans in a big way as the sector has witnessed very low level of non-performing assets.
A senior State Bank of India official said, “people in over 92 per cent of our portfolio live in houses for which they have taken loans. They are genuine borrowers and we take care of their capability to pay EMI. We don’t compromise on that. Our loan to value ratio is less than 60 per cent. In the last four years, home prices haven’t gone up. There’s no bubble. In any lending, risk is very much there. You have to take sufficient care on what the risks are. We have a very diversified portfolio. Our concentration is more on the salaried class. We can determine their income very accurately.”
However, rating agencies said delinquencies in India’s loan against property (LAP) portfolio, which have been modest till the last year, could significantly increase in the next four quarters. In the last 2-3 years, there has been considerable concerns on the quality of LAP loans in the system. Amongst the fastest growing segment, there are some concerns about the robustness and resilience of this segment to an economic downturn, especially in real estate. A combination of stagnant property prices especially in metros and large cities, which are the primary markets for medium and large ticket LAP, and squeeze on refinancing due to risk aversion building up in some financiers is bringing the stress to the fore, it said.
Adhil Shetty CEO, BankBazaar.com | Sep 26, 2016, 06.49 PM | Source: Moneycontrol.com
When you apply for a loan, the lender lodges an inquiry with the credit bureau to pull a copy of your credit report. This way, your credit score comes down by a few points.
Right now is a good time to dip your toes in the world of real estate. Home loan interest rates are the lowest they have been in a long time and expected to lower further in the near future. Demand in the real estate sector has been low, and developers have had to come up with incentives to attract buyers for their vast unsold inventories. Not just that, various legislations are coming in force to protect the rights of property buyers.
Assuming you’ve decided to buy property, and you’re happy with its paperwork and legality, chances are that you’ll seek a home loan to finance your purchase. If you’re buying a home loan offline, you may have to provide tonnes of documents pertaining to your income and taxes. It can be an overwhelming process for first timers.
While searching for the right loan, loan seekers wonder which lender they should go to. There are plenty of lenders providing home loans at attractive rates. How do they know which lenders would approve their application? In the process, loan seekers may apply to several lenders. Applying to multiple lenders for a home loan can, no doubt, multiply your available options should some lenders reject your application. But beware—doing this can adversely impact you.
Let us get acquainted with one of the most basic facets of applying for a housing loan, which is the ideal number of applications you should be making for a single housing requirement.
Affects credit score
When you apply for a loan, the lender lodges an inquiry with the credit bureau to pull a copy of your credit report. This way, your credit score comes down by a few points. The weightage of such inquiries in your CIBIL score is 10%. The higher the number of inquiries, the more credit-hungry you’ll appear to a lender inquiring about you. A large number of inquiries would reduce your credit score. If you’re on the borderline of the score of 750 which lenders find desirable, a small deduction could push you below that threshold, leaving you ineligible for many loan products.
Unwanted logistical hassles
Applying for a home loan offline involves complex paperwork. Replicating the same documents with multiple institutions can lead to unwanted logistical hassles of running around to gather documents and to submit them. Since most of the processes are time-sensitive, it makes sense to keep the number of applications minimal.
Home loan applications may not be free. You will be required to pay a processing fee up front for the handling of your paperwork during the application process. This fee is non-refundable in most cases. Therefore the more the number of your applications, the more you will pay in non-refundable costs.
What you should do
• Studying and understanding the loan product will do the trick for you. You can educate yourself by reading the product brochure available through multiple sources such as the internet or loan marketplaces.
• Go online to compare loan offers from various lenders, and short-list those loans that come closest to your requirements in terms of eligibility, costs, and tenure.
• To aid the above, use readily available online tools such as loan calculators to ascertain your loan eligibility, the maximum EMI you can pay, and how long a term is ideal for your requirements. A search online will reveal these calculators and help you process these numbers yourself so that when you go to a lender, you have a much better idea of how much loan you’re eligible for.
• Retrieve a copy of your credit report from a credit bureau like CIBIL and understand it thoroughly. Reports are instantly available online for a nominal fee.
• Now that you’re equipped with first-hand information, go ahead and do a dry run to check your eligibility. Speak to the representatives of a lending institution to ascertain if you will qualify for a loan and also inquire about the quantum you’re eligible for.
• If rejected or offered terms not as per your expectations, take feedback from the institution and make amends accordingly in subsequent applications.
• Applying for a loan at one or two lenders at a time helps you concentrate thoroughly on the intent to secure a loan with terms of your choice.
The bottom line
Apply for housing finance with not more than one or two banks at a time. Based on the outcome of those applications, you can decide to apply further. Using basic tools and resources such as checklists, calculators, and product brochures will aid your objective to snag the best loan deal. This way, you save yourself from unsolicited monetary and logistical hassles.
Amit Anand Choudhary | TNN | Sep 7, 2016, 05.11 AM IST | Times of India
NEW DELHI: The Supreme Court said on Tuesday that people who have invested their hard-earned money for booking flats could not be allowed to suffer because of the bad financial condition of a builder and directed realtor Supertech to refund money to homebuyers who invested in its Emerald Towers project in Noida .
“We are not concerned whether you sink or die. You will have to pay back the money to homebuyers. We are least bothered about your financial status,” a bench of Justices Dipak Mishra and A K Goel told Supertech, directing it to refund the money within four weeks to 17 homebuyers, as assured by the company earlier.
It also asked the company to furnish a chart of payments made to the 17 buyers at the next date of hearing.
Justices Misra and Goel held that the company could not take the excuse of being in bad financial condition to deny the rights of flatbuyers who wanted their money back after the project got into controversy for allegedly violating the law.
The court also asked the National Buildings Construction Corporation (NBCC) to inspect the site and find out whether the buildings had been built in the green zone in violation of norms.
Supertech is the third real estate giant in recent weeks to have come under judicial scrutiny for not refunding money to the buyers. Earlier, Unitech and Parsvnath had ex pressed their inability to refund money due to financial problems, only to see the apex court rejecting the plea and directing them to take steps to pay back the money to buyers.
The Allahabad HC had in 2014 ordered demolition of the two 40-storey residential twin towers – Apex and Ceyane – in Noida and directed Supertech to reimburse the flat buyers with 14% interest in three months. The twin towers have 857 apartments, of which about 600 flats had been sold.
The apex court, while staying the demolition of the towers, had last year directed the company to refund those flat buyers who wanted their money back. It also asked the company to consider providing alternative flats to them.
Appearing for Supertech, senior advocate Rajeev Dhawan told the court that the money had been invested by the company in construction of the building and that only a few of the buyers want to get back their money. He said of the over 600 people who approached the company after the HC order, 274 had sought alternative arrangements. He said the company was also returning money to those who approached it in time for refund.
Arvind Rao | Aug 27, 2016 09:56 PM IST | Business Standard
Flexible payment schemes offered for under-construction property can lead to tax issues when the owner sells it. It’s not clear in the Income-Tax Act whether the seller should take the indexation benefit from the date of getting possession of the house or if it can be calculated based on each instalment paid after registration.
The flexible payment started with 80:20 scheme, where a buyer pays 80 per cent of the home value upfront either from his own funds or through a loan. The remaining is paid on possession. At present, there are many complicated variants of it such as 5:10:30:25:20:10 to help buyers to pay for a house without taking a home loan. In most cases, the agreement for the flat is registered on payment of one or two instalments that establishes the buyer as a legitimate owner and prevents the developer from selling the house to another buyer when the rates go up.
But when the owner sells the property bought through the flexible payment scheme, calculation of capital gains tax can get complicated if a person holds the property for more than three years, which makes it a long-term capital asset.
The Income Tax Act says that in case of computation of long-term capital gains, the tax payer can index the cost of acquisition of the property since the date of acquisition to the date on which it has been sold.
Indexation is done with the help of a Cost Inflation Index, which is notified every year by the tax authorities. The first year when such an index was notified was in 1981-82 at a base value of 100 and the index notified for 2016-17 is 1,125. If an individual purchases a house for Rs 20 lakh and sells it at Rs 50 lakh, he is liable to pay capital gains tax on the profit made, which is Rs 30 lakh in the example. But the buyer can reduce this liability by using Cost Inflation Index. The longer one holds the property; the lower would be the tax outgo.
The correct method of calculating capital gains came up before the Mumbai Income Tax Tribunal, which was pronounced in July 2016. The taxpayer had declared long term capital gains on sale of property at Rs 29,02,270 after considering the indexation benefit of Rs 19,93,232.
The tax payer had become a member of a housing society in 1993 and was later allotted a flat in 1994. The housing society constructed and allotted flats to all the members. The taxpayer claimed that he had been paying proportionate cost of construction on various occasions from 1994 to 2006, as and when called upon by the society. While calculating the indexed cost of acquisition, the tax payer adopted the cost inflation index, corresponding to each year of payment.
The tax officer however held a different view. He argued that the property tax assessment bill issued by the municipal corporation showed that the said flat was assessed to property tax from January 1, 2007 and therefore the date of acquisition of the property was to be taken as January 1, 2007.
Accordingly, the tax officer’s cost indexation calculation was determined by adopting the said date, thereby increasing the tax burden on the seller. The officer calculated the taxpayer’s additional liability at Rs 4,71,074. The officer added this amount to the tax payer’s income. At the first level of appeal, the appellate authority confirmed the tax officer’s view and decided the case against the taxpayer.
Tribunal favours the taxpayer
At the Tribunal, the tax payer put forth his case that the benefit of indexation of cost should be granted to him right from 1994 when he started making payments and not from January 1, 2007 when the house was first subjected to property assessment.
The tax officer argued that a property can be said to be acquired only after its possession is handed over to the buyer, and therefore adoption of date as the one he considered is justified.
On considering the merits of the case, the tribunal observed that the society in question was allotted land by Maharashtra Housing and Development Authority or Mhada and the conveyance deed was made in favour of the society in 1994. Being a member of the society, the tax payer was allotted a flat and was issued the share certificate in 1994. It was also observed that an allotment letter for the specific flat was also issued to the tax payer in 1995.
The Tribunal was of the opinion that it is not necessary that the taxpayer must become an owner by way of conveyance deed for the purpose of computing capital gains. As the tax payer had acquired the right to obtain a specific flat in the society in 1994 itself, the indexation of the cost of acquisition of the flat has to be granted with respect to the initial date of 1994, subject to the fact that the indexation be applied to each instalment as and when the same was paid. The case, therefore, was decided in the favour of the tax payer.
The case provides an extremely useful tax planning measure for those who plan to purchase an under-construction house. They must register the property as soon as possible and become the legal owners. If they sell the property after holding it for more than three years after completion, they will get the indexation benefit even for the instalments paid.
A registered agreement provides definitive details of the property such as flat number, floor, size of the flat, etc. On the contrary, merely having allotment letter, which do not define the flat, will not be helpful. In the past taxpayers with allotment letters did not get any relief in similar cases.
The case in question had stronger facts: A society already existed and the taxpayer held share certificates. These principles should equally apply to buyers in under-construction projects who would become society members post completion.
- TAX RELIEF
Calculating capital gains on property bought in flexible payments scheme can be complicated when the owner sells it
- Income-Tax Act lacks clarity on whether the seller can calculate capital gains from the date of property registration or from the date of possession
- Mumbai I-T Tribunal has ruled that date of possession is not necessary
- Buyers should therefore register property as early as possible, which establishes them as legal owners
- Buyers with allotment letters, which do not define the flat, have failed to get relief from tax authorities in the past
The writer is a chartered accountant and financial planner
By Saloni Shukla | ET Bureau | Aug 22, 2016, 09.35 AM IST
Mumbai: Prospective home and car buyers who were holding their breath might as well exhale as interest rates are unlikely to fall anytime soon.
Designated RBI Governor Urjit Patel is seen by many as much as an inflation hawk as outgoing Governor Raghuram Rajan and is likely to continue with his predecessor’s hawkish stance.
It was the committee headed by Deputy Governor Urjit Patel that recommended the 2 per cent to 6 per cent inflation target range and also suggested that interest rate decisions should be taken by a group of members rather than left to the sole discretion of the RBI governor. “It will be a fine balance for him (Urjit Patel),” a banker, who did not wish to be identified, said.”While he is the first RBI governor nominated by the Modi government, he is also cut out of the same cloth as Rajan is.”
But it also signals continuity of RBI’s policies as Patel’s views on inflation targeting and fiscal policy are same as that of the incumbent governor Raghuram Rajan.
“A negative near-term impact on the rates market is likely, as Patel is considered equally hawkish as his predecessor Rajan, if not more so. Thus, expectations of significant policy easing are likely to fade,” Standard Chartered said in a note. The RBI policy rate which currently is 6.5 per cent has been cut by 150 basis points since the start of 2015. The benchmark lending rate of State Bank of IndiaBSE -0.14 %, India’s largest bank, has dropped just 90 bps. SBI recently reduced its one year marginal cost of lending rate to 9.1 per cent. SBI offers home loans at 20 bps above MCLR to women and 25 bps over MCLR to other borrowers. Effectively, the home loan rate for SBI currently is 9.3 per cent for women and 9.35 per cent for others.
Patel’s appointment also comes as a time when the governor’s power in deciding monetary policy has been diluted significantly.Outgoing governor Rajan will be the last to enjoy absolute power in deciding interest rates. “If you are looking at interest rates, we are going to go on the basis of monetary policy committee now,” Madan Sabnavis of CARE Ratings said.
“The MPC is already put a target rate of 4 per cent with a band of 2 per cent so whether or not the governor of RBI is an inflation hawk, the power to change interest rates will lie with the committee. To top it all, we have said that the RBI governor will also not have the overriding power unless it is a tie.” When Patel takes over from Rajan in September, he along with five other members, will decide on rates. In June, the government formally notified the monetary policy committee, which shift the responsibility of setting interest rates to a sixmember committee, including the governor, with the governor getting a casting vote in case of a tie. Three members of the committee will be from the RBI while others will be appointed by the government. Those appointments are yet to be made.
Latest inflation numbers indicate that retail inflation rose to a 23month high of 6 per cent in July, mainly due to higher food prices.
Source : http://goo.gl/FpqaGi
MUMBAI | BUREAU | Published on July 5, 2016 | Hindu Business Line
If a builder delays delivering on the housing project or does not deliver at all, then the home loan becomes an albatross around the home buyers’ neck. Says if much of the loan is released upfront, builders may use the funds to repay old high-cost loans and for other projects
Fearing diversion of funds by builders under ‘innovative’ financing schemes — ‘10:80:10’ and ‘5:90:5’ — offered to home buyers, the National Housing Bank has warned housing finance companies against making upfront loan disbursals without linking the same to the stages of construction of housing projects or else they could attract penal provisions.
National Housing Bank (NHB), the regulator of housing finance companies (HFCs), said it has come to its notice that some HFCs are making such upfront disbursals.
Some HFCs have also approved certain projects for the advance disbursement facility.
What has caught the regulator’s eye is that some builders are actually taking advantage of these schemes to source funds at low interest rates at the expense of the home buyer. The fear is that these funds could either be used to repay old high-cost loans or get diverted to other projects.
Now, if a builder delays delivering on the housing project or does not deliver at all, then the home loan becomes an albatross around the home buyers’ neck.
How the scheme works
Once a builder gets a housing project and financing scheme approved by an HFC, the home buyer is lured with sales pitch that he needs to only come up with 5 or 10 per cent of the value of the house as his own equity.
The buyer gets a loan for 90 or 80 per cent of the value of the house from the HFC. And the balance 5 or 10 per cent own equity can be brought in by the buyer on completion of the project.
The builder promises to service the equated monthly instalment on the loan that is disbursed upfront by the HFC till the buyer gets possession of his house. Now, for the builder this arrangement is beneficial as he gets funds at home loan rates, of 9.40 per cent to 11.75 per cent.
In sharp contrast, if the builder were to approach a bank or an HFC for a loan for a residential project, he would be charged 15-16 per cent. If he taps the informal sources, the interest rate would be double what is charged by banks and HFCs.
NHB is worried that if the builder diverts the funds into other projects/repays old loans and delays the existing project, then the home loan borrower could get into trouble and this could have repercussions for HFCs.
The housing finance regulator, in a circular to HFCs, emphasised that disbursal of housing loans should be strictly linked to the stages of construction and no upfront disbursal should be made in case of incomplete/un-constructed projects.
NHB said the prevalent (financing) scheme(s) of HFCs, if any, need to be reviewed in order to remove inappropriateness of funding exposure with concomitant risk of diversion of funds.
The regulator warned that any non-compliance in this regard will be viewed seriously and may attract penal provisions.
Source : http://goo.gl/PTZrPB
Vivina Vishwanathan | First Published: Mon, Jul 11 2016. 04 03 AM IST | Live MInt
Actor Sunny Leone’s current business interests include perfumes and online gaming. Personal investments, too, are made with a long-term intent
Sunny Leone is not an ordinary Bollywood star. The 35-year-old has been the most searched person on the Internet in India for four years in a row. The adult movie star-turned-actress was always fascinated with business and was a control freak when it came to finances. But that was before she met husband, Daniel Weber.
“I was 8 or 10 years old when I used to go to the street with my brother and a neighbour in Canada, and shovel snow in the driveways and earn a dollar a piece. But the snow was two-feet high and we thought we should charge more because it was double the work,” says Leone, who was born in Canada and lived there as a child. In fact, as a child, she routinely put up lemonade stands during summers and shovelled snow in the winters to earn money. “I was the girl who sold things for my basketball team and soccer team. That was before I even went to high school.”
Her interest in business continued in high school. “When I went to high school in California, I joined a club called Future Business Leaders of America. That is when I started learning a lot of things about marketing, and supply and demand. I took different classes around business and economics. We would go to young entrepreneurial conferences in that area and that’s kind of where everything started.”
Even at a young age, Leone wanted to start her own venture. “When I became an adult, I realised that (adult content) was a business. But more than that, I wanted to own a website and run my own company.” She used to handle everything. “If I have to be in this industry, I want to make all the money—every dollar. After all, it is my body, my image and my brand.”
So, she learnt to manage her website, learning HTML, video editing, photography, and how to build thumb gallery posts (TGP). “I would do everything from start to finish. That was when I learnt about website traffic. In a digital world, traffic is the best thing you can have. I learnt where to send this traffic and how to capitalise all of it.”
Leone says a business should be grown slowly and steadily. “Believe me, it takes at least a year to three years for a business to turn profitable. I don’t believe in any business that is fast paced. If it is moving very fast, it doesn’t seem right to me. I like the idea of growing slowly and steadily and making the roots of the company strong.”
Move to India
Moving to India was a calculated risk for Leone. When she got an offer to participate in the prime time reality show Bigg Boss in India, Leone initially declined. “I thought it was absolutely insane because I’d got so many hate mails from the Indian community. Because I had got so much hatred, I said I don’t want to go through it again.” But then her husband, Weber, went to her with a PowerPoint presentation and armed with statistics. “We had the viewership and the reach details. We started doing further research. I think at that time Bigg Boss was watched by 25 million people in 10 different countries or something. It was huge. By the time I finished researching, we both came to the conclusion that if we didn’t take this chance, it might be one of the biggest regrets we would ever have.”
She was taking a chance, and she was scared. “There was a lot of negativity and backlash for Viacom, Bigg Boss, and Colors for bringing me here because it was the first time someone from that (adult content) industry was coming to mainstream television. Meanwhile, I thought if I work for a couple of weeks, make money and then come home, I could put a down payment on a house and go back to living in my bubble. I didn’t think anything was going to come from it.”
But when she started working in Bigg Boss, she realised she was breaking into a market that she has been trying to enter for years. “Our research showed that majority of the traffic that came to my website or different social media sites was from India. We were not capitalising the traffic. Nobody made it to the ‘join’ page or purchased anything. Bigg Boss was my chance to break into a market that I had never been able to tap into.” She says people knew her and were at her website but were not spending. “There is definitely a disconnect that happens when you are someone from abroad. Living here is being a part of the Indian culture and there is a connect that happens. Hence, moving to India was very calculated.”
Taking plans further
After Bigg Boss, Leone bagged some Bollywood movies and debuted with Jism-2. She has also done a song for Shah Rukh Khan-starrer Raees, which is expected to hit the screens next year.
While Leone may be getting more and more films now, she knows that her role in the entertainment industry will not last forever. “It can end like tomorrow,” she says. Therefore, she is always thinking of branching out. “Once we got a handle of how it works in India, after signing a bunch of movies and doing different brand endorsements, we have tried to think of ways to branch out.” She considers movies as only a small piece of the puzzle. Among her other ventures are TV shows. Apart from movies, she does a show every year. At present, she co-hosts MTV Splitsvilla.
As part of the expansion plan, she has launched a perfume line—The Lust. “It is manufactured by me. Taking the Kardashian model, and some of the other artists out there in the US, the goal is to keep growing. When the movies or something else ends, I know that we have created something here above, beyond, and bigger than us.”
After perfumes, Leone plans to venture into women’s cosmetics. “I plan to create products for women such as nail polish, skin care, lipsticks…. I’m not sure about clothing right now but it is something we keep talking about,” says Leone. “We have invested a lot of time and money in it. I personally would like to invest more money in merchandising and branding because it is something that can continue forever.”
Recently, Leone wrote a collection of short-stories for the mobile-first digital publishing house Juggernaut. Titled Sweet Dreams, the stories, as defined by Juggernaut, are “fictional stories of power… emotions… desires”. “It was a little bit more difficult than I anticipated. It takes a lot of work to be a good writer.” She is also into online gaming with Teen Patti with Sunny Leone.
The next step, says Leone, may be producing movies in India. “But I am in no rush because there is a shift happening in the entertainment industry and if you don’t have great content and dialogues, usually it doesn’t work.”
Leone has stopped working in the adult content industry. Her focus now is on building her brand. “I stopped working in that industry long time ago. But we have a lot of traffic and we don’t know what to do with it. Now we have a reach of around 100 million people. Hence, let’s say, there is a company that wants me to tweet about something or put it on Facebook, I use this traffic to monetise now.” The same strategy works when she wants to raise money for charity. “We also found that the traffic is now monetised because those people are donating or spreading the word. We are able to do so many things now, which we were just not able to do earlier.”
Leone has over 1.5 million followers on Twitter; a reach she uses for promotions and branding. “Every day, we use social media to get across something that we want to say. A brand will call and say we want you to tweet about our brand once, which we do.” But she says she doesn’t like spamming. “For instance, we do movie promotions. There have been some directors who come and say ‘I want you to keep tweeting every 20 minutes the same thing over and over’. I say it is not going to happen because you are not going to get traction with this. It is not going to work. You are not even letting it get absorbed before having me tweet again. We don’t want to block them (the followers) or get them to unfollow.”
Like her business ventures, in investments, too, Leone has only what she understands. Her investment portfolio has a mix of stocks, mutual funds, real estate, and retirement funds. “In the US, we have invested some of our money in very stable stocks and some mutual funds. We also have some IRAs (Individual Retirement Accounts).” An IRA offers various tax breaks. It’s a basket in which you keep stocks, bonds, mutual funds, and other assets. “We have bought our home there. We have invested a lot of our money in real estate. We do love the idea of getting into real estate a bit more. We are also interested in investment homes. And we obviously save a lot of money.”
When it comes to stocks too, she remains updated. “When this whole Brexit happened, we lost some money, which was not fun. But I do believe that it will steadily go back up and back to normal. This is just a shock to everybody. I didn’t think that this would affect us, but it did.”
The Indian stock market, however, is not part of her portfolio yet. “It is difficult for Overseas Citizens of India and people from outside of India to invest in India. You have to follow the whole process, which is crazy.”
The Indian real estate market, too, is not in her view. “It is really difficult to invest in Indian realty. When there are so many people involved, money just goes away. And then trying to sell the house and transfer the money into our bank account out of India is another huge issue. I think buying stocks and mutual funds is probably little easier with the right people in India, than buying real estate.”
She is not interested in start-ups due to the way their valuations work. “I have been hearing a lot of information about start-ups and how they are getting evaluated. Personally, I think it is a very interesting business model that I don’t think is going to last very long. My husband might think completely opposite. I think it is great if it is a start-up that stays true to what it is, instead of getting evaluated and getting into selling some big dream to somebody else.”
Leone doesn’t look at gold as an investment choice. “I know that there are a lot of families in India that buy gold. I like wearing them—gold, diamond, jewels—rather than looking at them as an investment option.”
Daniel: the financial guru
Before Leone was married, she took care of all her finances. “As far as finances were concerned, I used to put a lot of my money back into my company. But at some point I did have to branch out. You can’t micro manage everything. Before I met Daniel (her husband), I was in control of everything.” Initially she had doubts about doing business with her husband. “When we started doing business together, it was really difficult mentally to bring someone into my inner financial and business circle. But he has a great business mind as well. So when we started discussing all these different things, it was very natural for us to come together and form a company together.” Now she thinks it is the best thing that has ever happened to her. “His business background and mine are totally different. And he just completely streamlined everything and helped me organise things because I was growing faster than I could manage. You need help at that point. You can’t think of doing everything. You will stop growing, since you don’t have the time in a day to do everything.” She says her husband manages everything, ensuring that she and her staff work every day and their money is allocated in the right places in multiple countries. However, financial decisions are always taken after weighing the pros and cons.
Being financially independent
Leone always wanted to be independent. “I wanted to be on my own ever since I was really little. Also my parents would tell me over and over again that you have to be independent. That stuck with me.” Besides financial independence, her parents always tried to tell her to save money. “I grew up in a lower middle-class family, so we didn’t have a lot of money. As I got older, I realised I should save money. She doesn’t have any money regrets. “I am pretty calculated. If I am not 100% convinced that this is going to be financially viable, I won’t take the risk. If I know that it is a risk and if it doesn’t work, I am okay with what is lost too. I think I am realistic when it comes to investments.”
Source : http://goo.gl/u5y8sE
By Jayant Pai | Jun 20, 2016, 07.00 AM IST | Economic Times
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
By Ravi Teja Sharma , Kailash Babar | ET Bureau |10 May, 2016, 11.02AM IST | Economic Times
MUMBAI | NEW DELHI: A sharp decline in property price appreciation in top Indian cities has pushed investors out of the housing market in India , which has turned into an end users’ paradise, thanks to stagnating prices and, in some cases, deeply discounted distress sales.
Investors say they are unable to exit multiple investments made over the last few years even at a loss, accentuating the pain for them. In Mumbai, for instance, the average residential property prices in the city and its suburbs witnessed an appreciation of only 3.3% in 2015 as against an average of 7% in 2014, showed a study by property consultancy JLL India. Similar was the case with the Delhi-National Capital Region, which is a big investor market, and Bengaluru and Chennai . All of these markets have seen prices appreciating around 2% in the last quarter of 2015.
“A sign of any residential market’s increasing maturity is evidenced by gentler price appreciation — a process which has been very much in evidence in the country’s financial capital. Fourth quarter price performance in Delhi-NCR, Bengaluru and Chennai is also representation of what happened through the year,” said Ramesh Nair, chief operating officer, business and international director at JLL India.
“The forecasted increase in Mumbai residential property prices in 2016 is expected to be 6%. While a price rise of 6-7% (yo-y) was predicted for 2015, the actual increase should come as a pleasant surprise to home buyers.”
Unlike the pre-global financial crisis (GFC) times — when prices saw double-digit growth (y-o-y) across the city and suburbs — the market has seen a rather subdued growth in prices over the last couple of years, showed the JLL India study. The subdued rise indicates the maturing residential market, which should be a good news for end users who wish to buy homes, but a turn off for several investors who are used to making super-normal profits.
For instance, Subhash Sarin, who supplies raw materials to the beer industry, has been investing in property for over a decade but of-late he has decided to stay away. “Even if you are getting a property 30% cheaper today, there is still no confidence to buy. We don’t know how much lower it can get. There is negative appreciation today, so it’s not prudent to invest in property now,” said Sarin.
He points out another reason why many investors are not putting in money into property. “It is very difficult to exit today from investment made earlier, even at a loss,” Sarin said.
Instead, he is now parking his money into the safety of fixed deposits and also lowrisk mutual funds as even gold has lost its sheen.
For investors, rental yields act as an additional return apart from the sale price of the apartment until the deal gets concluded. However, these yields are also not so attractive to make up for the shortfall in profits.
“Current market does not offer any incentive to investors, even our usual set of investors are not showing any interest in picking up properties. If annual appreciation is less than 5% and lease rental yield is around 1.5% per annum, then why would they be keen to invest?,” asked Yashwant Dalal, president, Estate Agents Association of India.
While there are select markets like Pune , Hyderabad and Kolkata that have still seen relatively better appreciation in home prices at 5-10%, most of this is attributed to demand from end users than investors.
Back in Mumbai, at sub-market level, south-central Mumbai and the eastern suburbs saw the maximum appreciation at 4.3% and 4% respectively, followed by north Mumbai and western suburbs at 3.9% and 3.5% respectively. Outside the city and suburbs, Thane saw a 3% appreciation in capital values, while the figure for Navi Mumbai stood at 6%. However, Navi Mumbai also has a lot of unsold inventory in many of its pockets and only few precincts are witnessing good demand.
Source : http://goo.gl/O0Vvnr
By Munir Kulavoor | 20th Apr 2016 | Integrafinserve.in
In the past year or two, sales of real estate companies have either declined or remained flat. Lenders have also remained cautious and have reduced exposure considerably, leaving only one option for the developer and that is to raise funds from the consumer either through Pre-Launch of new projects or offering discounts or offering to pay PREMI / Interest till possession. Those with land bank were able to improve liquidity under the guise of the Pre-Launch. The ones who were desperate reduced the price for limited number of units at different points in time. And others at higher stage of construction sought to raise money through customer home loan disbursements, took the interest subvention route.
Let us look at the working of PREMI subvention schemes. Ideally if the deadlines are met this scheme works out to be a win-win-win situation for the Bank, Borrower & Builder/Developer. Banks are able to acquire bulk business; Developer is able to quickly raise funds at Home Loan rates (~10%) compared to commercial rates (~17%); Client gets to book a property without having to block liquidity plus interest holiday till possession.
Bank approaches a developer, usually category A/reputed only, to offer subvention scheme for an under construction project (generally >30% stage). The important factors to determine the scheme are:
Subvention Period: This usually is between 12 to 24 months & in rare cases may even be stretched to 36 months. It normally ends at the date of possession or fit-out. During this period the developer undertakes to bear the interest cost (obviously passed on to customer).
Interest Rate in Subvention Period: This is usually fixed (at prevailing home loan rate) for the tenor for ease of calculation and to enable the the Bank recover the interest amount at Net Present Value (NPV) from the disbursement or demand due amount. Some lenders have differentiated rates for Salaried & Self Employed individuals.
Discounted Rate: To arrive at the NPV a discounted rate is agreed between the developer & Bank. The discount rate allows for the time value of money and uncertainty of future cash flows; the greater the uncertainty of future cash flows, the higher the discount rate.
Table For Illustration:
|Project||Unit Type||Exposure Limit under Subvention||Subvention Period||ROI fixed for Subvention period*||Discounted Rate||
Min Customer contribution.
Max Funding by BANK
Exposure: 100 Cr.
|Till 31st Mar 2018 (24M)||
For Salaried – 9.45%
For SENP – minimum 9.65% and above depending on profile of the customer
|8.0%||25%||75% of COP as per underwriting team of BANK|
Proportion of Funding: According to the example given below for loan of Rs.100 lacs, say the stage of construction is 81% (demand due), the customer has to pay 10% & Bank shall disburse 71% immediately. Before possession the customer pays the remaining 15% as per the payment schedule and at possession the Bank shall disburse the balance 4%.
Subvention payment schedule (Cost of property)
|Banks Contribution||Customers Contribution|
|Remaining Own Contribution (OCR) of Customer||15%|
Documentation: The Developer and Bank enter into a Memorandum of Understanding (MOU) where they agree on the modus operandi and the above mentioned terms. A Tripartite Agreement (TPA) is signed by each Customer, Banker & Developer again agreeing on the above terms, legally binding each party.
Subvention is therefore a well meant innovation in providing solution to the funding scenario prevailing in the market. The same principles are used to create different variations (like 20:80 scheme, 10:70:15:5 scheme,etc.) in the product offering to attract the consumer.
The risks associated with this offering from the consumers’ perspective is a topic of discussion better kept for another day.
I encourage readers to post their experiences or bankers who may have different ideas or solutions on this problem of funding in real estate industry.
Buying a home is not just a matter of instinct. It requires planning and foresight
By Kishor Pate, Chairman & Managing Director of Amit Enterprises Housing Ltd | New Delhi | March 8, 2016 12:33 PM | Financial Express
Many Indian women today are well educated, have good jobs with excellent career prospects, and even hold important government or corporate leadership posts. They certainly have the ability and confidence to craft their own lives, and are very much able to fulfill their dream of owning a home regardless of whether they are married or not. A self-owned home is rightly seen as the top security anchor and the best foundation on which to make long-term life decisions.
In fact, even married Indian women today are more often than not active financial partners in their families. Apart from being earning members, they also have a complete grasp of the family’s current and future financial abilities. Developers are very aware that the woman plays a leading role in a family’s home purchase decisions.
Buying a home is not just a matter of instinct. It requires planning and foresight. For women who are looking for suitable properties, here are some points to consider:
Prepare For The Initial Costs: First-time home buyers have to set aside considerable amount for down payment (or your contribution towards home loan). However, keep in mind that property purchase involves several other initial expenses such as stamp duty and registration costs, utilities connection charges and insurance and taxes. Apart from your down payment you need to have additional funds of at least 6-7% of the base cost of the property. If a broker’s services are used, even a negotiated fee may be a significant amount.
Not having the required capital to cover all initial costs can prove to be a dampener on home purchase plans. It is not necessary to have the entire corpus in one’s savings account, since personal loans are always an option. However, women who are just starting out in their careers should not allow themselves to fall too deep into a credit trap. If they avail of personal loan to cover the initial home cost, it should be to the minimum possible extent so that repayment does not become an issue on top of servicing the home loan. It is always best to use free and clear capital as far as possible.
Be Confident About Monthly Outgoings: Anyone eyeing a property purchase should first figure out the monthly mortgage and whether they will be able to afford it. Online mortgage calculators can be helpful, but they will only tell you the value of the principal and associated interests. There are other monthly expenses involved in home ownership, and these include insurances, taxes, maintenance charges and utilities charges.
For working single women, it is important that all these amounts put together do not exceed 35-40% of their net income. Do not neglect your overall cost of living before deciding on how big a home loan you can safely service, and keep in mind that property is not the only investment you should make towards your ongoing financial security. You should also put at least 10% of your monthly income into a retirement plan.
Often, the full implications of having over-committed on a home loan do not dawn on the borrower until the home loan has been serviced for a few months. By then, it is too late to modify the financial plan. When it comes to home purchase, every financial angle must be examined well in advance. It is advisable to use the services of an experienced financial planner or someone informed on such matters. The process of buying a dream home should not turn into an unexpected nightmare at any point.
Be Realistic And Maintain Forward Focus: Your first home is not necessarily the only home you will buy. Remember that you can always upgrade in future if required or desired, so there is absolutely no need to buy the biggest possible flat now. Never compromise your current financial viability by buying a needlessly expensive home.
When it comes to real estate, it is always good to upgrade as financial ability improves, but this process should be planned out over the entire course of one’s working life. To plan to upgrade to a bigger and better home, it is very advisable to invest (and stay invested) in good mutual funds which deliver more returns than savings accounts. Direct stock market speculation into single company stocks and bonds as a potential source of real estate funding should be avoided, as such investments are not sufficiently diversified to offer safety.
Shop Around Extensively For Home Loans: When it comes to choosing the right lender, do not go by the recommendations of friends or relatives alone. Do extensive research on the several different lending institutions available to you. Remember that as an Indian woman, you are entitled to ask for a lower rate of interest on a home loan – be sure to insist on this benefit.
The home loan market is very competitive, and banks are falling over themselves to attract customers. This must be taken advantage of. A woman who is shopping around for a home loan should make specific inquiries about special interest rates and other incentives that a bank is offering to women borrowers. Asking the right questions will establish you as an informed borrower and encourage the bank to offer you the best possible structuring.
Never take the first thing that is offered to you. Most banks have considerable margin of flexibility to accommodate borrowers who know what they want and are determined to get it. If you are married, the ideal scenario is to take a joint loan with your spouse. This is also the arrangement that banks prefer most, since it reduces their risk.
Be Sure Of The Developer’s Credibility: Every day brings new stories about buyers who have been hoodwinked by unreliable developers. Either the project has been unreasonably delayed, has never even taken off or the delivered property (or amenities and facilities) are grossly different from what was initially promised. Do not fall into such a trap. Make sure the developer has a strong reputation by doing multiple checks with reliable agents, the home loan company and also on the Internet. It is advisable to patronise only established developers with a readily verifiable track record for timely completions and 100% adherence to the agreements they make with their customers.
Source : http://goo.gl/GdkDLV
By Rishi Mehra | Feb 24, 2016, 08.49 AM IST | Economic Times
Buying a house is a big decision and you need to be financially and emotionally ready before you take the plunge. Here are some key things that will help you determine if you are ready to buy a house.
Down payment and Savings – In case you are buying a house without any loan, the foremost and perhaps the only thing one should determine is if you have enough savings to buy the house you want. If you are taking a loan, banks and financial institutions do not provide the entire amount of loan. It ranges from bank to bank, but in no cases does the loan exceed 90 % of the value of the house. In this case you will need about 10 % of the value of the house as savings to make a down payment.
Financial health in order – The foremost criteria to fulfill to even think of buying a house is to have good financial health. Banks have their own criteria to measure how much loan you are eligible for, but that should not be the factor to base your decision on. You should be able to calculate and figure out what the added pressure of a loan would do to your monthly expenses.
It is important to maintain a healthy debt-to-income ratio to ensure you do not default on your loans, which in turn will affect your credit score. A debt load of around 35% is considered ideal for a person, but a home loan can push it up to about 45 -50%. This can be a problem, but if you have additional sources of income, for example your spouse, the ratio can be higher.
Are you buying to sell – A house can be purchased to either live in it or as another investment instrument. It is often said real estate is a good investment vehicle – one that gives handsome profits. If you are buying to for your personal use, a home loan in most cases will stretch to about 20 years. This means about half your working age will go in servicing the loan.
It is important for you to gauge if you can handle a loan that has such a long tenure. In case you are looking at the house merely as an investment opportunity, you would need to give it about five years to show any significant return. Have a long hard look to figure out if you can afford the investment for at least about five years and the associated risks that go with such investment.
Tax benefits – A house purchased with a loan also has certain tax benefits, which tries to lessen the burden. These exemptions are not permanent in nature and can change when the Budget is tabled, but current regulations state that when the house purchased with a home loan is occupied by you, your family or is vacant, up to Rs. 2 lakh can be claimed as deduction in the interest amount paid. Similarly principal repaid up to a limit of Rs. 1.5 lakh can be claimed as a deduction under Section 80C. There are some additional criteria that you as a borrower will have to satisfy to enjoy these deductions, but do calculate and factor these in while making a decision to buy a house.
Employment condition – If you are salaried, ensure you have a steady job when taking a loan. If the home loan is of a long tenure, ensure that you do not retire before you finish servicing your loan. It is of little use if you keep this uncertainty on your head. In all cases you should look to prepay your loan much before its tenure gets over.
Extra expenses – There are always extra costs associated with buying a house. These may include stamp duty, payment for parking, society registration charges among others. In some cases you may need to do the interiors of the house, build kitchen, storage units among others. Factors these expenses in your budgeting and ensure you do not stretch yourself too thin.
Market condition – Lastly, have a look at the market condition, especially if you are buying a house as an instrument of investment. The real estate market is fickle and is often the first to be impacted in the case of an economic downturn. Have a careful look at the prevailing real estate market conditions and also the area you want to buy a house in.
(The author is co-founder of deal4loans.com)
Source : http://goo.gl/oIs5GW
SONAL SACHDEV | Updated: February 12, 2016 18:16 IST | Hindu Business Line
There was a time, when finding a house without the help of a broker was next to impossible. Times have changed. Today, home owners frequently advertise their own properties for sale in print and on online real estate portals with a clear message to those from the fraternity: ‘Brokers Excuse’.
It isn’t helping that developers are pulling out all stops to directly market new properties. At times, you might get a better deal negotiating directly with a builder rather than through a broker. What’s more, everyone saves on the brokerage fee.
But do we understand all the nuances of a realty transaction? Isn’t a seasoned broker of great service there? Yes, of course. But so is your neighbourhood home loan financier. All you need to do is to walk into a well-respected home loan provider’s office to get a thorough diligence done of your prospective home. They’ll start with the developer and the specific property/project (approved or not). Next comes the essential paperwork required for them to process a loan.
In this exercise, a lot of the issues regarding your prospective home will be uncovered and revealed, which will help you decide. In case you are buying a property on the secondary market, the previous owner’s loan details and an NOC from her/his lender will be required. This is to ensure the property is free of any other charge. Only then will a lender offer a fresh loan against the property.
In essence, much of what the traditional broker assisted you with earlier, is now being taken care of by the home loan provider. And whether you like it or not, the loan provider will charge a fee/interest for services. Since this is a non-negotiable cost and an available service, buyers and sellers are increasingly opting for transacting directly.
The sale of properties online via large shopping portals is also gathering pace. With so many options to choose from online and shared messages on community platforms on offers for sale of homes, it makes sense for thrifty buyers to exhaust these avenues before approaching a real estate agent.
It’s time to get smart on your home search!
Source : http://goo.gl/qNl8E2