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.