Latest Property News on 'Home Loans'

Reserve Bank puts new clamp on home loans -Industry fears order to lenders to exclude stamp duty and other registration charges may hit market further

Reserve Bank puts new clamp on home loans -Industry fears order to lenders to exclude stamp duty and other registration charges may hit market further

The Reserve Bank of India’s latest notification to banks, to exclude stamp duty, registration and like charges while calculating the value of a property they intend to finance could lead to a further decline in home sales in the lower and medium segments, say developers and consultants.

The notification effectively means home buyers would have to arrange for more funds on their own, as banks will not lend for these charges any more. “Home loan borrowers are already stretched…Property prices are high, interest rates have peaked , stamp duty and registrations are high in many states and job markets are also not that great. I think buyers of homes in the Rs 20-70 lakh bracket will get hit further and sales in this segment could fall by a further five to 10 per cent,” said Sanjay Dutt, chief executive, Jones Lang LaSalle, a property consultant.

In December 2010, to check what is believed was excessive lending to real estate, RBI said commercial banks could not lend more than 80 per cent of the value of a property for loans above Rs 20 lakh and not for more than 90 per cent for loans below Rs 20 lakh. On Friday, it observed that some banks include loans, stamp duty and registration and documentation charges in the cost of a house property. “This overstates the realisable value of the property, as stamp duty, registration and other documentation charges are not realisable. Consequently, the margin stipulated gets diluted,” RBI said. Hence, banks should not include these charges in the cost of the housing property they finance, it said.

“RBI wants to curb speculation from real estate and want only genuine buyers in the property market,” said Dutt of JLL. In Maharashtra, stamp duty, registration and like levies constitute 10 per cent of the cost of a property. While stamp duty is five per cent of the value, registration charges are one per cent, value added tax another one per cent and service tax another 2.6 per cent.

“If home buyers have to pay more, there will be an impact on home sales,” said Paras Gundecha, president of the Maharashtra Chamber of Housing Industry. Already, property sales in most cities are on a decline due to stagnating incomes, high property prices and rising interest rates.

According to PropEquity, a real estate research and analytics company, absorption of homes in the National Capital Region came down from 55,372 units in 2010 to 25,623 units in 2011, a decline of 53 per cent. In the Mumbai Metropolitan Region, the aborption came down by 57 per cent in 2011, compared with 2010 figures, it said.

Developers are worried that the new regulations could create more negative sentiment in the market. “Too much of regulations always create negative sentiment among banks and borrowers,” said Lalit Kumar Jain, president, Confederation of Real Estate Developers Associa-tions of India.

However, Deepak Parekh, chairman of HDFC, the country’s biggest mortgage lender, does not think the new notification will have any impact on home sales. “So far, individuals used to put in 20 per cent of own money. Now they have to bear the stamp duty and registration from own pockets. I think borrowers can do that without much issue,” he said.

Source: http://business-standard.com/india/news/reserve-bank-puts-new-clamphome-loans/463845/

For plots, you get lower amount of loan at a higher rate compared with apartments

For plots, you get lower amount of loan at a higher rate compared with apartments

It is usually easier to sell an apartment compared with plots. Lenders, therefore, look at plots as an illiquid asset

you are planning to buy a plot instead of an apartment, you will get a smaller percentage of the cost as loan as compared with what you would get for an apartment. Usually, for an apartment, you can get about 80-85% of the total cost as loan. However, for plots, you can get only up to 70% of the value of the land, depending on your income and expenses.

What’s more, loans for plots also come at a higher interest rate than those for built-up residential properties.

Why this disparity?
It is usually easier to sell an apartment compared with plots. Lenders, therefore, look at plots as an illiquid asset. Moreover, there are safety concerns in terms of title dispute since a plot is usually vacant.

Loan value calculation
Banks usually calculate the value of the land based on the applicable circle rates in the area. If the land is located in a suburban area, the bank factors in the circle rate applicable to the nearest residential area from that location. After the valuation, the bank will assess your ability to repay the loan based on your income and other liabilities.

Loan tenor
While purchasing a land, banks lend for a maximum term of 15 years, subject to your retirement age. This is again lower than the maximum term of 20 years applicable in case of a built-up property.

What can you do?
Increasing purchasing power: As perceived by banks, any existing/previous loan increases your risk of default. Before you plan to buy land, try and repay your existing loan, if possible.

A joint loan would increase the purchasing power since two incomes will be considered for the calculation. You can take a joint loan with your spouse or blood relative. Here the proposed owners of the property will have to be co-applicants, but the co-applicants need not be co-owners. Moreover, if the property is registered in a woman’s name, the stamp duty would be less.

Buying elsewhere: If you are living in a metro city and prices are unaffordable for you, you can look at tier II and tier III cities. However, consider the risks involved. Also, keep in mind that if the bank you are borrowing from doesn’t have a branch in the city where you are buying the plot, you may not get the loan. The branch in that city verifies the details of the property.

Source: http://www.livemint.com/2012/02/02212712/Did-You-Know–For-plots-you.html

Lending rates may fall before RBI’s rate cut, says SBI

State Bank of India (SBI), the country’s largest lender, said interest rates may ease before the central bank reduces the policy rates, as higher rates have started hurting the industry.

“Rates are high and obviously it is hurting the industry. We are all hoping for that (lending rates to fall). In the long term, one of the things that will make industry viable and investment come back is to have lower lending rates,” Diwakar Gupta, managing director and chief financial officer of SBI, said on Wednesday.

When asked whether there was a possibility of rates being lowered before policy rate cut by RBI, he said, “Could be”. It will depend on the resources and how deposits flow into the bank, he added. At present, SBI’s base rate or the benchmark lending rate is at 10 per cent.

The Reserve Bank of India (RBI) raised interest rates 13 times between March, 2010 and October 2011, while pausing thereafter in the two policy meetings. In the last meetings, it reduced the cash reserve ratio — the proportion of deposits banks have to keep with RBI as cash — by 50 basis points to 5.5 per cent, signalling a policy shift towards reviving growth after nearly two years of fighting inflation. The central bank also said for interest rates to fall, inflation needs to ease. Economists expect RBI to cut rates from the April policy, if not from the next review meeting scheduled middle of next month.

Headline inflation eased to two and a half year low at 7.47 per cent in December after hovering around the double-digit mark for 20 months. RBI expects wholesale price index-based inflation to fall to six per cent by March-end.

Commenting on capital infusion in the bank by the government, Gupta said SBI’s capital adequacy ratio is likely to rise to more than eight per cent after the fund infusion. On Monday, SBI said the government would infuse close to Rs 8,000 crore via preferential allotment of shares by the bank.

Following the fund infusion, the government’s stake in the bank, which is at 59.4 per cent now, will also increase.

SBI will need to raise Rs 15,000–16,000 crore in the next financial year to meet the capital requirement. However, Gupta said the bank was adequately capitalised to meet Basel-III norms.

Source: http://business-standard.com/india/news/lending-rates-may-fall-before-rbis-rate-cut-says-sbi/463499/

Reduce interest rates to boost housing demand: Realtors

NEW DELHI: Real estate developers today said that RBI’s decision to cut cash reserve ratio (CRR) will help improve the liquidity position of various sectors, including realty, but felt that interest rates should be brought down to boost housing demand.

“The CRR cut will bring in liquidity. It will help the real estate market which is cash starved. However, it is important to see the interest rate shall have to come down to facilitate the home seekers to buy homes,” Confederation of Real Estate Developers’ Association of India (CREDAI) President Lalit Kumar Jain said in a statement.

In its third quarterly review of the monetary policy, RBI today injected Rs 32,000 crore into the system by lowering the CRR by 50 basis point but kept the short-term lending rate unchanged in view of persisting inflationary concerns.

Echoing the view, Unitech Managing Director Ajay Chandra said: “A reduction in the CRR is a positive move from the RBI as it will increase the credit-supply to different sectors of the economy.”

Chandra noted that an increase in the credit supply would also benefit the realty sector.

CREDAI Chairman Pradeep Jain said the apex bank has given a signal that interest rates would come down.

“For real estate sector in particular, this will serve as a signal that interest rates will now ease. Buyers may opt for floating rate loans at this juncture since the signal is clear. Also the rising input cost will not leave any space for reduction of price,” Jain, who is also Chairman of Parsvnath Developers, said.

Credai Chairman said that RBI has attempted to do a delicate balancing act between the need for growth and urgency of containing price line.

“In the end it (RBI) has acted with caution by keeping all rates unchanged and just by reducing CRR by 50 basis points. The tokenism has seen release of Rs 32,000 crore for the banking sector to lend. After the negative impact created by thirteen continuous rate hikes, this will prove insufficient to boost the growth,” he added.

CHD Developers Managing Director Gaurav Mittal welcomed the policy saying that it would help in improving sentiments.

Source: http://economictimes.indiatimes.com/markets/real-estate/news-/reduce-interest-rates-to-boost-housing-demand-realtors/articleshow/11616222.cms

NRIs too can avail home loans

NRIs too can avail home loans for purchase of residential property. They can purchase a house and can even take loan for self-construction on a plot and also for renovation/improvement of an existing residential property in India.

Like resident Indians, NRIs can avail up to 80-85 per cent of the cost of residential property as a home loan. However, the down payment should be directly remitted from abroad through normal banking channels or from non-resident external (NRE) account and/or non-resident (ordinary) (NRO) account in India. EMI payments too should be remitted from any of these accounts.

In the case of NRIs, however, there is a stress on certain pre-requisites such as qualifications, current job profile, past experience, probability of continuing abroad for the loan tenure and probability of servicing the loan with an extended tenure in case of return to India. The Loan-To-Value (LTV) ratio for NRI customers varies from one bank to another, though the manner of calculation is the same in case of a regular home loan.

The income taken into account for calculating the home loan eligibility is the repatriable income plus any income in India. For NRIs working in countries that restrict repatriation such as African countries, only the repatriable portion of the income is considered for calculating loan eligibility.

Though the regular home loan tenures can be up to 25 years, loan tenure for NRIs is normally 10-15 years. Along with the standard documents required for a home loan, NRIs need some additional documents such as the appointment letter and contract, labour card (if employed in the Middle East), salary certificate, bank statements and income tax returns filed in the country of residence.

Loan eligibility can be enhanced by taking a joint loan with relatives. However, for certain reasons banks allow only a select list of relatives to be joint owners of the property.

It is important that NRI provides General Power of Attorney (POA) in favour of a trustworthy relative as per the draft of the Bank which should be duly attested by the Indian consulate in the country of residence. In case the loan borrower is in India, the POA can be locally notarised. Most banks require the POA to ease the process of dealing with the NRI borrower. The POA holder only gets the powers that you give and does not have the power of dealing with the property.

Like resident Indians there are certain tax benefits too for NRIs on interest payments which can be useful if they have any taxable income in India.

Source: http://www.financialexpress.com/news/nris-too-can-avail-home-loans/899480/

Take a home cover and sleep well

Cricket maestro Sachin Tendulkar made headlines last week when bought a home insurance cover of Rs 100 crore. He is not only aware about the risks on the cricket field, he seems to be well informed of the risks like fire, natural calamity, burglary and theft. Reports suggest Tendulkar took an insurance cover of R 25 crore for household items in his Bandra home. The question one may ask is: why would a person as rich as Tendulkar need to cover his home and belongings?
You would get the answer once you try and imagine a situation wherein you come back from the office to find someone has broken your lock and taken away jewellery, electronic equipment etc setting you back by several lakhs of rupee.

Similarly, things bought through years of savings would vanish in a matter of minutes due to fire or natural calamity. While you cannot do much to prevent such incidents, beyond basic security measures, a household insurance is something you must have in your kitty. Such policies are available at a premium that on an average cost Rs 5 per day.

It is a policy that is designed to cover various risks and contingencies that any home owner might face. However, the insurance company may be quick to reject the claim if the fine print has not been understood.

The value of home structure is assessed by multiplying the area by the rate of construction, as on the date of taking the policy. For example, if your home is 1,000 square feet and the construction rate per square feet is R 500, then the sum insured for your home’s building structure would be Rs five lakh. While the home loan providers may insist on insurance for the entire loan amount, you need to take into account cost of construction on the built-up/ carpet area and exclude the land cost which is not covered.

On the other hand, the belongings inside the house are assessed on their market value. This means that the claim would be paid on the value of purchasing a similar new item, minus depreciation for the usage.

There are several clauses which you must look at before choosing which policy suits you best.

What is covered

Home insurance normallycovers most of the natural and man-made calamities.

* Fire

* Lightening

* Explosion/ implosion

* Aircraft damage

* Impact damage

* Riot, strike, malicious and terrorism damage

* Storm, cyclone, typhoon, tempest, hurricane, tornado, flood and inundation

* Subsidence and landslide including rockslide

* Bursting and/ or overflowing of water tanks, apparatus and pipes

* Missile testing operations

* Leakage from automatic sprinkler installation

* Bush fire

* Earthquake

The buildings and contents are covered for these perils. The sum insured is either on the re-instatement value or the market value. However, remember that depreciation would be applicable while calculating claim amount.

* Burglary and theft

Remember to check the policy wordings carefully as there is a technical difference between a theft, robbery and burglary.

According to HDFC Ergo general insurance, “burglary is said to take place when there is a forceful entry into the premises in order to rob while theft is said to take place when there is a robbery without any evidence of a forceful entry in the premise.”

The damage caused due to housebreaking and theft is normally covered.

* Optional cover for terrorism

Most general insurance companies provide a cover for acts of terrorism at an additional premium which you can opt for.

Common exclusions

While insurers may have different list of exclusions and the policy must be checked for exact wordings, normally any loss or damage suffered to the following is treated as an exception and are difficult to claim. The exclusions are the trickiest part and must be checked from the insurer should there be any confusion.

* Consumable articles

* Money/ securities/ stamps/ stamp collection

* Bullion and livestock

* Motor vehicles and pedal cycle

* Deeds/ bonds/ bills of exchange/ promissory notes/ shares

* Books/ manuscripts

* Loose precious stones, jewellery and valuables

Devil is in the detail

“Unless declared” is the term you must be most cautious about. An insurance company has no magic wand to find out, after a claim has been made, whether what you are claiming is correct or not except when some concrete proof is provided.

A lot of people do not make itemised declaration of their belongings and repent at the time of claim settlement. Make a list of each and every item and indicate the value against it. Do make sure to keep the bills and other proof of purchase as you may be asked to produce it at the time of claim settlement.

Jewellery is one of the most common and high value item which is normally ignored by the insured. “It is always better to prepare a list of such items to be insured. A valuation certificate of gold and other jewellery can come handy,” said Tapan Singhel, chief marketing officer, Bajaj Allianz General Insurance.

Another important point that needs to be checked is the sub-limits mentioned in the policy. The claim is subject to various caps on computers, refrigerators, gold jewellery, etc. This might come as a shock at the time of claim settlement so understand the policy before signing on the dotted line. As soon as you spot a loss, make sure to inform the insurer immediately. In case of a theft, file a first information report (FIR) in the nearest police station and inform the insurer.

Fire, earthquake or any other natural calamity do not give any advance warning before coming. Similarly, increasing cases of burglary, theft, and terrorism call for a careful assessment of risk and cover it through an insurance policy.

Source: http://www.financialexpress.com/news/take-a-home-cover-and-sleep-well/899978/0

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

RBI may reduce CRR in January policy review: HDFC

The Reserve Bank of India (RBI) may opt to reduce cash reserve ratio (CRR) in the monetary policy review on January 24 rather than cut the interest rates, Housing Development Finance Corp CEO Keki Mistry said today.

“RBI may cut the CRR than reducing the interest rate in the next policy review,” Mistry said addressing an event arranged by Wharton University of Pennsylvania titled ‘India Economic Forum’ here.

RBI has raised interest rates 13 times since March, 2010 by 375 basis points in its bid to control inflation which has been above 9% for a year. A rapid slowdown in food inflation in December has raised hopes of a reversal of the monetary tightening cycle.

Mistry, however, said that rising interest rates had minimal impact on the real estate market. “There is minimal impact of rising rates on real estate market, which is limited to metros. In Tier-II and other cities, the impact has been minimal,” he said.

Referring to outlook for the industry, Mistry said the current year would be better for the industry as interest rate environment is likely to be benign. Other experts from the real estate also echoed similar sentiment.

“As there is a huge demand-supply gap in the country as far as housing is concerned, current year should be better for the industry,” Chairman of Hiranandani Group, Niranjan Hiranandani said.

About the proposed formation of housing regulatory authority, he said that the bill would further delay the approval process causing delays in project completion.

“Real estate sector should have an enabling authority than a regulatory authority. Also, there should be a single window clearance system for speedy approvals,” Hiranandani said.

Source:http://www.moneycontrol.com/news/economy/rbi-may-reduce-crrjanuary-policy-review-hdfc_647803.html

Greater Noida: Great value for low costs

Located in Uttar Pradesh, barely 40 kilometres from New Delhi and 20 kilometres from Noida, the area of Greater Noida is slowly but surely on the path to becoming one of the largest industrial and education centres of the country. Real estate in this area is amplifying at a good pace in wake of its growing importance as a realty destination around Delhi. Like other areas of the NCR, Greater Noida too is home to a number of Indian and foreign companies, which is an advantage for the area. It is on its way to becoming a commercial hub. Real estate in this city has huge potential for development.

The proximity to Delhi and Noida and good connectivity with both cities has been a major catalyst for the growth of the city. The relatively pollution-free environment ranks it higher on the preference list of both developers and investors. The modern infrastructure in keeping with the demands of high quality living and improved living standards has made Greater Noida a destination of choice. In addition, a large number of construction projects offer quality housing and office space equipped with modern amenities, making real estate in the city all the more desirable.

To start with, the unaffordable property rates in Delhi had shifted the attention of developers to Noida, as it offered vast land at reasonable prices. Property in Noida flourished eventually to the extent that the property prices in the city have now skyrocketed. The builders are again in a fix and looking for other feasible options that may extend long term benefits and help cater to the phenomenal influx of population into the region. Thus, property in Greater Noida has come across as the next best option given its location advantage, good connectivity, green environs and the enormous potential fordevelopment.

Source:http://www.indianexpress.com/news/Greater-Noida–Great-value-for-low-costs/891367/

Nation Housing Bank to raise Rs 4,500 crore for housing

The National Housing Bank will raise about Rs 4,500 crore this fiscal to fund housing activities. It has fixed the refinancing disbursement target for 2011-12 at Rs 12,500 crore against Rs 11,723 crore in last fiscal. The funds will be utilised for refinancing home loans of housing finance companies and commercial banks.

Seminar on Affordable Housing

A 2-day affordable housing seminar will be held in Bangalore Le Meridian on December 14 and 15. Organised by UBM and Property World, the 2-day event will focus on the emerging and dynamic government and regulatory framework, innovative financing models and evolving mortgage financing, construction techniques and materials, power-packed networking opportunities and strategies through solution-focused workshop tailor-made to meet the critical business needs.

Industry speakers will analyse the dynamic case-studies followed by a site visit to a leading affordable housing construction site to gain practical, implementable solutions to the on-the-ground challenges developers face in the overall low-cost housing construction.

Marg to develop agri and rural infrastructure in Karnataka

Marg, a Chennai based developer, has signed a MoU with the Karnataka government to develop and operate various projects and services in agri and rural infrastructure and agri-industry domains in Karnataka with a total investment of Rs 4,000 crore over the next 5-7 years. The MoU was signed recently with the government of Karnataka on the occasion of Global Agribusiness and Food Processing Summit-2011 being held under Bounteous Karnataka.

Source: http://economictimes.indiatimes.com/features/et-realty/nhb-to-raise-rs-4500-crore-for-housing/articleshow/11102361.cms