Latest Property News on 'Banking and Finance'

Panel for equal property rights among couples,Applicable To Live-In Partners Too

New Delhi: A high-level government panel has suggested that all movable and immovable assets acquired by a married couple or a couple living together be classified as joint property, to be divided equitably in case of separation or desertion.

The Planning Commission’s working group on Women’s Agency and Empowerment wants a comprehensive legislation — ‘Right to Marital Property Act’ — to be brought in, which would be applicable to all communities.

The panel, which wants a complete relook at family laws, argued that all assets acquired by a couple should be viewed as joint property, regardless of who bought it. It said the law must recognize a woman as an equal partner with the husband and her contribution to the household should be appreciated.

The panel noted that apart from some reforms in the 1950s in Hindu law and some struggles around maintenance for Muslim women, family law reform had been neglected. “There is thus an urgent need to consider… a standalone comprehensive legislation, which will ensure that all assets…acquired by the family are divided in an equitable manner,” it said.

EQUAL SHARE

All movable and immovable assets acquired by a couple married or living together to be classified as joint property irrespective of who bought it
Review of laws that link a woman’s conduct with grant of maintenance
Place onus on husband to prove his income and determine quantum of maintenance

Govt to be responsible for recovery of maintenance in case of default

Source: http://timesofindia.indiatimes.com/india/Panel-wants-a-couples-assets-to-be-treated-as-joint-property/articleshow/11773230.cms

NRI investments in property set to grow with better market conditions

An estimated 30 million NRIs, living in 130 countries, are sending remittances back home regularly. According to the World Bank, India continues to retain the top slot in remittances by expatriates from abroad. India will beat China in receiving the highest amount of remittances for five consecutive years.

For 2011, NRI remittances are likely to touch 4 58 billion against China’s 4 57 billion. In 2010, India received 4 54 billion in foreign exchange remittances , three percent of India’s GDP, beating China’s 4 53 billion.

The rupee depreciation and West Asian currencies linked to dollar which is appreciating against the rupee are major driving forces that resulted in a surge in remittances to India. The remittances are mainly used for family needs and investments in stocks, property and term deposits. Real estate here is preferred because of a desire to create a higher lifestyle for the family and the price appreciation in the long term.

Though there was an interim sluggishness in NRI investments, industry experts feel the trend is going to pick up in the coming months due to the uncertainty prevailing in the global economy and the attractive investment opportunities offered here. There are opportunities opening up for developers in new markets such as Mauritius. This is ample proof of the surge in NRI investments in real estate.

Property shows are held regularly now in various countries such as US, UK, and West Asia due to the concentration of a large number of expatriates in particular areas. The organisers focus on the many options available in various localities here.

Since liberalisation in the 1990s, investment norms have been simplified to enable NRIs and persons of Indian origin (PIO) to invest in real estate here. Realtors here have also set shop in some countries to interact directly with overseas Indians and extend effective after sales services. Moreover, housing finance companies and banks with their representative offices in various countries offer home loans to NRI investors.

An Indian citizen who resides outside India is permitted to acquire property in India other than agricultural, plantation property and farmhouse. NRIs get almost all the privileges that residents have while investing in real estate.

They can acquire, inherit, transfer and gift residential or commercial property. The purchase can be made through funds remitted to India through normal banking channels or funds held in certain types of accounts maintained in India. They can get home loans, mortgage loans and loans against future rental income.

While sale proceeds up to two residential properties can be repatriated after a lock-in period of three years, there is no restrictions on commercial property. Up to one million dollars per year from such a sale can be remitted outside India from a non-resident ordinary account. Rental income can be repatriated after payment of tax, wherever applicable.

A number of property management companies including MNCs have set up shop in major cities to extend property management services. This is a boon to NRIs and PIOs investing in India while living in other countries.

NRIs, while returning, can retain their foreign current assets acquired, held or owned while abroad, or inherited from a person who was a resident outside India even after return to India for permanent settlement. However, income earned from an overseas asset needs to be repatriated to India and credited to a resident foreign currency (RFC) account.

Source: http://economictimes.indiatimes.com/features/financial-times/nri-investments-in-property-set-to-grow-with-better-market-conditions/articleshow/11760883.cms

‘Banks overstate house values for loans’

Mumbai: Stating that banks have been found overstating value of houses they finance by adopting practices like including stamp duty and other charges in the cost, the RBI today directed lenders to refrain from such practices.
“It has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans.

“Some banks include stamp duty, registration and other documentation charges in the cost of the house property,” the Reserve Bank said in a circular.

It said this leads to overstating of the realisable value of the property as stamp duty, registration and other documentation charges are not realisable and consequently the margin stipulated gets diluted.

“Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of Loan to Value (LTV) norms is not diluted,” the apex bank said.

Concerned over excessive flow of banking funds to the real estate sector, the Reserve Bank of India (RBI) had in 2010 issued guidelines directing the lenders to provide loans only up to 80 per cent of the cost of property.

As per the rule, a home buyer will necessarily have to arrange at least 20 per cent of the property value on his own before seeking loan from a bank.

In order to check speculation in the real estate sector, the central bank had made it tougher for banks to provide high value loans for properties costing more than Rs 75 lakh, besides raising the provision requirement for loans provided at ‘teaser rates’.

However, in case of small value housing loans of up to Rs 20 lakh, banks can provide loans up to 90 per cent of the property value, the central bank said, adding such loans are part of priority sector advances.

In absence of any LTV norms, banks have been providing liberal loans for buying homes, going up to 90 per cent of the asset value.

Source: http://www.financialexpress.com/news/banks-overstate-house-values-for-loans/907515/0

HDFC to consolidate funds in Shapoorji Pallonji realty projects

Housing Development Finance Corp. Ltd’s (HDFC’s) private equity fund is withdrawing its investments in five projects of Shapoorji Pallonji and Co. Ltd, and instead diverting the money to significantly increase its stakes in two of the group’s residential projects.

The five projects are special economic zones (SEZs) and information technology (IT) parks, said two people familiar with the development.

No fresh investments will be made for the additional stakes in the residential projects.

HDFC India Real Estate Fund International Llc invested about $60 million (Rs.295 crore now) in 2008 in special purpose vehicles set up with Shapoorji Pallonji for developing SEZs, IT parks and the residential projects in Kolkata, Manesar, Nagpur, Baroda, Mysore and Pune.

It picked up 35% stakes in each of these, leaving the balance interest with Shapoorji Pallonji, the development partner.

“HDFC is in the process of unwinding its investment and consolidating it in only two of the seven projects, both in Pune,” said one of the two people familiar with the matter, asking not to be identified. “The fund will give up its stake in the other five projects, but its stake in the Pune projects will go up to 90% and the remaining 10% stake will be with Shapoorji Pallonji.”

The second person familiar with the development, a property analyst, said HDFC opted to consolidate its investments into the residential projects in Pune as these are progressing fast.

A spokesperson for Shapoorji Pallonji declined to comment in an email response. Real estate development is a relatively small business for Shapoorji Pallonji, primarily a construction group. The group is raising a PE fund of its own that will also invest in the realty sector.

Rajeev Bairathi, director of investment advisory, at DTZ International Property Advisers, said such a restructuring afford a PE fund easy exits from investments that are unlikely to bear returns quickly.

“Consolidation exercises like this enable a fund to renegotiate terms with a developer, where the former opts for an option where exit is visible in a few years’ time,” said Bairathi.

Real estate analysts say such restructuring of PE investments in real estate is not uncommon. A usual method adopted is swapping investments at the project level for entity-level ones, or vice-versa.

Gurgaon-based developer BPTP Ltd, for example, received Rs.322.5 crore of entity-level funding in 2007 from Apollo Global Management Llc and later Rs.399 crore into some projects. In 2011, Apollo Global exercised a swap option in the contract to restructure its investments.

HDFC India Real Estate Fund International recently invested about $90 million (Rs.442 crore today) in an IT park coming up near Bangalore airport. The $800-million fund will pick up a stake of about 40% in the 200-acre project being developed by Embassy Property Developments Ltd, a city-based builder.

The fund had previously invested Rs.209 crore in Manyata Tech Park in Bangalore and fetched Rs.544 crore on exiting. In the Embassy Golf Links project also in the city, it had acquired two buildings for Rs.53 crore and exited with a return of Rs.201 crore.

Having nearly deployed the entire $800 million fund, HDFC Property Fund is raising a $600-million offshore real estate fund.

Source: http://www.livemint.com/2012/02/02212438/HDFC-to-consolidate-funds-in-S.html?atype=tp

India’s SBI to sell UK home loans

SBI came under scrutiny for offering “teaser” home loan rates, which are initially low but then escalate, to domestic customers in 2011, leading the Indian regulator to fear the country might experience a repeat of the US subprime loan crisis.

The bank said that it planned to take a conservative approach to lending overseas.

After nearly 90 years in the UK, SBI increased it range of services last year, growing its branch network from seven to ten.

Rajnish Kumar, head of State Bank of India UK, said that the financial crisis and subsequent increase in banking sector regulation had provided an opportunity for smaller banks.

“The market has become more prudent,” he said. “And this fits in with our model and what we want to offer.”

But new entrants to the UK’s mortgage market have struggled to compete with the country’s largest lenders, and brokers said that SBI’s limited presence on the high street – it is targeted mainly at the Indian diaspora – could restrict its impact in a competitive industry.

Mortgage rates have risen in recent months as wholesale funding has become more expensive for banks to access. Three-month Libor, the rate used for lending between banks and pricing variable-rate loans, has increased from 0.83 per cent to 1.09 per cent since August 2011.

Metro Bank, which promised to revolutionise high street banking when it opened in 2011, managed to sell just 100 mortgages in its first 15 months.

SBI could be in a better position than its rivals if it can use retail deposits to fund its lending. The bank appears to have concentrated on boosting its share of the savings market last year by offering some of the best rates available, paying out up to 5.75 per cent on money held for five years. Its buy-to-let mortgage range, also launched last year, has remained competitively priced.

“Any bank that is not too dependent on the wholesale markets has a significant advantage over those banks that do, and can be more competitive as a result,” said Ray Boulger of mortgage broker John Charcol.

SBI’s success will depend on the competitiveness of its rates as well as its lending criteria.

Bank of China, one of the world’s largest banks, began offering mortgages in the UK in July 2009 to great fanfare, but has failed to gain significant ground due to restrictive criteria.

“Our experience so far with new entrants is that they are quite cautious and don’t have a big appetite to lend,” said Mr Boulger.

In a visit to the UK this week, Hemant Contractor, managing director of SBI, said the bank had not considered bidding for UK bank branches sold by government-backed banks, and favoured a conservative approach to expansion overseas.

Despite emerging from the global credit crisis in relatively good shape, India’s largely state-owned banking sector remains under pressure over fears that double digit inflation at home could lead to greater defaults on loans.

Source: http://www.ft.com/intl/cms/s/0/e20ac308-48df-11e1-974a-00144feabdc0.html

No change in EMIs; banks to have more funds

There is no immediate respite to home, auto and corporate loan borrowers in terms of their monthly equated instalments (EMIs) but with the RBI reducing the cash reserve ratio (CRR), banks will have more money to lend.

After the Reserve Bank unveiled the third quarterly review of the monetary policy, several bankers said that they may not go in for rate cut immediately.

However, a few like Oriental Bank of Commerce Executive Director S C Sinha said the CRR cut would “definitely lead to reduction in interest rates.”

Chairman of the Prime Minister’s Economic Advisory Council and former RBI Governor C Rangarajan said that as the primary injection of Rs 32,000 crore liquidity (through CRR cut to 5.5 per cent from 6 per cent) would have a multiplier effect, the interest rates would soften.

“The improvement in liquidity condition will automatically have effect on the interest rates. It would lead to softening of interest rates,” he said.

CRR is the percentage of bank deposit that lenders have to keep with the RBI. The new rate would be effective from January 28.

Since March 2010, the retail and corporate loans have become expensive for the borrowers but the fixed deposit holders had benefited from the 375 basis point hike in the short-term lending rate by the RBI.

Canara Bank Executive Director A K Gupta said banks would now get much-needed liquidity. This will also allay fears of further hike in base rate.

“Probably, interest rates may not come down immediately,” he said, adding, the banks will however will have more cash at their disposal.

Source: http://www.indianexpress.com/news/rbi-move-no-change-in-emis/903433/

Realtors Seek Nod For Loan Rollover

Realtors Seek Nod For Loan Rollover

Developers across the country have sought Reserve Bank of India’s permission for a rollover of real estate loans due for repayment by March 31, 2012. They have also appealed for a reduction in risk weightage for real estate loans to help reduce the cost of loans.

While none in the industry is being able to put a figure to the loan amount disbursed to the country’s real estate segment, RBI release dated November 2011 indicated about . 1,16,670 crore of gross bank credit was deployed to the commercial real estate sector as on November 18, 2011, against . 1,05,479 crore on November 19, 2010.

Loan disbursal to the sector grew by 4.3 % from . 1,11,836 crore as on March 25, 2011 to . 1,16,670 crore as on November 18, 2011, reflecting commercial banks aversion to real estate projects in 2011. More than one RBI official told ET: “We do not discuss individual proposals.”

Neither did the official disclose the total amount disbursed to the sector till date citing confidentiality reasons.

The move does not come as a surprise as talks of rollover has been doing the rounds for sometime now. Since the industry has not witnessed much growth for sometime now due to overall weak demand, higher construction costs and inventory, margins of real estate firms have come under pressure. Fitch Ratings’ outlook for 2012 for the Indian real estate sector, published recently, is negative and endorses the industry view.

Source: http://economictimes.indiatimes.com/markets/real-estate/realty-trends/realtors-seek-rbi-nod-for-loan-rollover/articleshow/11573936.cms

Financial Planning: No readymade solution

Pay just Rs 10,000 per month and get benefits worth Rs 8.5 crores. If Rs 10,000 can give Rs 8.5 crores, then automatically 20,000 would give Rs 17 crores and 30,000 would yield Rs 25.5 crores. This is mathematical possibility created by savvy financial planning so let us expand to explore.
Creating wealth

* Invest just 10,000 every month for 20 years and create a large sum of money i.e. a special fund.

* Earn an income stream every month for 25 years thereafter. Standard income stream begins at Rs 1 lakh a month or 12 lakh per annum.

* Each year this income rises by about 6 per cent over the previous year. So in year one you get Rs 12 lakh, in year two you get Rs 12.7 lakh, in year three you get Rs 13.5 lakh, so on and so forth for 25 years.

* You can choose to get higher than Rs 1 lakh per month or lower or any amount that you like (within reasonable limits). You can vary this income amount any time for any number of times.

* If you choose the standard income stream you also get a large single inflow of about Rs 1.5 crore at the end of the planning period of 20+25 = 45 years.

* Get tax benefits i.e. save taxes while making this investment, no tax on returns, no tax on income stream earned from this special fund.

* No entry load, no exit load, no upfront or backend charges, no other loading etc.

* Cost of doing this: zero – if you can do it yourself.

* Ask professionals to do this for you: Expect to pay about 1—2 per cent per annum of the market value of the fund you have on the table.

The only assumption for the above to materialise is that India continues to progress; sometimes slow and maybe sometimes fast. This we can safely expect.

The irony

Such a product does not exist. No one has it. No insurance company, no mutual fund, no institution has anything that comes anywhere closer to this. This product does not exist because it is not a product. This is a financial planning concept; a financial planning design.

Hence a concept or design cannot be manufactured for world at large; it is unique, it is a solution in the true sense and thus it can only be customised and designed for a family in question. The design would be different for each family because each family and their circumstances are different. The design would use available products simply as tools to achieve underlying objectives. Naturally tools may change over time but the basis of change is design and not personal preferences as is normally the case.

Readymade solutions are only good to an extent. For example, a pension plan or a bond or a deposit can give you a regular income per se but then the income is level i.e. the same each year and it is taxable. Even the income itself may not be adequate.

Another example is a traditional child policy or a ULIP child policy. While such policies give you life cover and payouts at designated time points what if you needed to change the quantum of payout i.e. get more or less or if you wanted to change your time frame or schedule of payouts.

A mutual fund investment target is based on probability and possibility of returns which will happen sure as far as the assumptions and expectations are fair but it may not happen at the exact time point at which you need this to happen. Hence at any point of time what we need is an overall design to go by which is inter-linked with what we have, what we need to have, what we have saved and what we can save in time to come.

We all have an idea that we need some solution like this. But due to lack of availability of such customised solutions, whenever some reputed institution launches a solution we tend to sign on the dotted line. Even if we have someone guiding us we still tend to believe that the institution is right. This as we know normally results in disgruntlement in years to come.

Find an advisor

The fact is clearly established; that planning is about creating a design so we need a financial designer or a concept creator or in simpler words an authentic and experienced financial planner.

Therefore, the first investment is to look out for this person who would be happy to create such customised solutions just for you.

Discuss what you need and there are ample options i.e. tools that the planner has to be able to create such unique cashflow solutions for each financial aspiration.

The next time you are making financial decisions remember that a skilled planner can do things with numbers that may be almost magical.

— Author is Director, Transcend Consulting

Source: http://www.financialexpress.com/news/financial-planning-no-readymade-solution/899982/0

A message from Tendulkar

What do you have to learn from the Master Blaster’s decision to go in for R100-crore home insurance?

W ho doesn’t idolise Sachin Tendulkar? The Master Blaster is a role model for millions for his cricketing skills, his penchant for breaking records left, right and centre, and for his professional behaviour on and off the field.
However, what made Tendulkar hit the headlines recently was not his cricketing score but an insurance policy. He opted for a whopping R100 crore cover for his home, that had his fans wondering if there was a need for one of India’s richest sporting personalities to secure the safety of his asset.

Tendulkar’s decision was a sound one. Home insurance should be given priority by anyone invested in property.

Take Suresh Sharma’s example. This 30-year-old marketing executive, two years ago, spent R30 lakh in a new project on the Noida Expressway.
“I took a loan of R24 lakh from the Bank of Baroda and got a free insurance cover for it. I feel secure in the knowledge that my wife and two kids will not have to grapple with the problem of repaying the remainder of the home loan amount if anything happens to me tomorrow.“

What is important is also to know the difference between an insured home and an insured home loan and find out what suits you.

Home loan insurance Banks and financial institutions which disburse home loans have tie-ups with specific life or general insurance companies to provide risk covers for borrowers’ life and property.

Says Karan Chopra, head retail business, HDFC, “Our Home Suraksha Plus covers borrowers against various misfortunes. In case of critical illness, accidental death and permanent total disability, we cover the loan amount.

For loss of employment, we cover three EMI payments.
This policy also provides fire and earthquake cover for loss or damage to a building and/or its contents. Homes and the contents of the building are also insured against theft, burglary and break-ins. The policy is of five years’ duration with a onetime payment. The one-time premium for Home Suraksha Plus for a 30-year-old professional with a home loan of R30 lakh for 20 years will be R83018.

Another private sector company, ICICI Lombard General Insurance, offers something similar in Secure Mind. Says Neelesh Garg, executive director, “Our policy not only secures the loan amount, it also provides a comprehensive cover for structure and contents against listed natural and man-made calamities. Not only that, people have the option to continue with the policy even after the loan term gets over.“

“Our home loan insurance premium would be approximately between 2% to 3% of the loan amount for a fiveyear period and then it can be renewed,“ Garg adds.

Some banks ­ the Bank of Baroda and the State Bank of India to name a few ­ provide free cover of the loan amount in case of accidental death or damage to the building due to natural and man-made calamities.

Says Bhaskar Niyogi, chief general manager, Real Estate, Habitat and Housing Development, State Bank of India, “We have in the past offered free life cover (SBI Special Home Loan Scheme) and free health insurance cover (SBI Triple H+ Loan) to customers during festival periods. The bank is also offering a free accident cover to home loan borrowers.“

Abhishek Sinha, who bought a house in a construction link plan in Shipra Sun City five years ago, says, “while some public sector banks are offering covers on accidental death or damage to the building free of cost, private sector banks have extended the cover to loss of employment and household items too. So the premium varies accordingly. A person needs to understand his/her requirement before getting an insurance cover. Also, one should do a comparative study and read the details of the risk cover very carefully.“ Sinha got an insurance cover from HDFC with the home loan.

Awareness of the benefits of insurance is spreading, many experts feel. Suresh Agarwal, executive vice president, distribution and strategic initiatives, Kotak Mahindra Old Mutual Life Insurance, says,“Most credit institutions are now aware of this risk mitigation mechanism and have tied up with life insurance companies for offering this home loan cover.

They make the borrower aware of this and enable the sale.“ Home insurance The term home insurance means a general cover for a building and its contents against possible damages resulting from unforeseen adverse future events like floods, earthquakes, fires, burglaries etc.

Besides various private sector companies, the four government-owned general insurers are Oriental Insurance Company, United India Insurance, New India Assurance and National Insurance Company.

“Under our policy, you can get every item in your house insured, no matter how small. Applicants have to produce an estimated cost of household contents under various heads such as electronics goods, kitchen contents etc. In case of burglary or accidental damage, we send our surveyor, who estimates the loss against the claim,“ says a senior officer from New India Assurance Company Limited.

Talking about people’s preference for insuring home contents, he says, “Normally people ask for an insurance cover for valuables like jewellery etc but these days they get bathroom equipment such as designer taps etc insured instead of the TVs and VCRs. Of late, we have witnessed huge claims for these items more than other household goods.“

About the premium on home insurance, a senior officer from the National Insurance Company informs, “Premium varies from area to area and product to product. If you are residing in an apartment with the latest fire safety equipment and security measures the premium will be less than that of a colony reporting regular thefts and burglaries.“

Unfortunately, awareness of home insurance is very low when compared to home loan insurance. Says Karan Chopra, “While awareness is definitely increasing, partly due to various calamities happening in different parts of the world, there still exists significant inertia towards purchasing home insurance from a consumer perspective.“

Source: http://epaper.hindustantimes.com/PUBLICATIONS/HT/HD/2012/01/14/ArticleHtmls/A-message-from-Tendulkar-14012012223008.shtml?Mode=1

NDMC budget: No increase in property tax of VVIP areas

The New Delhi Municipal Council’s (NDMC) budget unveiled today spared the VVIP areas of an increase in property tax, besides having no new major development initiatives.

The Rs 2,289.64 crore budget for the NDMC, which covers the Lutyens’ Delhi, proposes revamped power and water supply system, upgradation of markets, sprinkler irrigation system in Shanti Path, 35 new public toilets, CCTV survey of drainage for retrofitting and a flower show.

In her speech, NDMC chairperson Archna Arora said the budget for 2012-13 is aimed at asset creation which will be beneficial to NDMC both in terms of civic infrastructure and increasing receipts in the long term.

“The pace of infrastructure development was very high and creation of capital assets was large in numbers during the last three years. Now is the time to maintain these assets with increased levels of quality bench marks using latest technology as per international standards,” she said.

Outlining its revenue proposals, Arora said, the budget “propose no increase in property tax rates in the next year” and the civic body plans to collect Rs 259.98 crore as property tax in the next fiscal.

The civic body also plans to collect Rs 268.89 crore as licence fee, Rs 702.53 crore from power supply and Rs 113.60 crore from water supply.

Later, Arora told reporters that a detailed roadmap for revamp of electrical system has been prepared and that the NDMC has no plans to recommend hike in water or power tariffs.

The NDMC is also working towards ensuring uninterrupted water supply in the next 5-8 years, she said.

The budget also proposed retro-fitting and strengthening of drainage system after a comprehensive CCTV survey and de-silting in the next fiscal.

Arora said the redevelopment of Connaught Place will be completed in the next couple of years.

In its bid to provide better sanitation facilities, the NDMC will also build 35 new public toilets for which locations have been identified.

On the education front, the civic body will set up computer labs in all the 25 primary schools. A bio-metric based system for employees’ attendance is also proposed in the new fiscal.

The NDMC will also bring additional services under IT-enabled environment for citizen facilitation and convenience like approval for mutation, conversion and building plans, payments of utility bills and processing RTI among others.

For the upgradation and renovation plans of markets, the NDMC plans to take up work in eight more markets. It also proposes to provide space to install ATM facility in all its markets in the next fiscal.

To tackle fire incidents, the NDMC plans to convert the existing automatic fire alarm and detection system into addressable or semi-addressable microprocessor based fire alarm and detection system in all the high-rises as well as special buildings of the civic body.

In a move aimed at helping elderly, the NDMC also proposes to enhance old age pension from Rs 1,000 to Rs 1,500 for those who are above 70 years.

Source: Financial Express