Latest Property News on 'Home Loans'

एसबीआई: होमलोन प्रीपेमेंट पर पेनल्टी नहीं

देश के सबसे बड़े बैंक स्टेट बैंक ऑफ इंडिया ने होम लोन के प्रीपेमेंट पर पेनल्टी खत्म करने का फैसला लिया है। बैंक के एक सीनियर ऑफिसर के मुताबिक सभी प्रकार के होमलोन के प्रीमेंट पर लगने वाले चार्ज तत्काल प्रभाव से खत्म कर दिए गए हैं। बैंक द्वारा मई 2011 से पहले फ्लोटिंग रेट पर लोन लेने वालों से प्रीपेमेंट चार्ज लिया ज रहा था। प्रीपेमेंट के रूप में कस्टमर को बाकी रकम का 2 फीसदी पेनल्टी देना पड़ता था। यह चार्ज उन लोगों पर लगाया जा रहा था जो इस बैंक का लोन किसी और बैंक की मदद से चुकता करते थे।

एसबीआई ने हालांकि फ्लोटिंग रेट पर लोन लेने वाले नए ग्राहकों को इस छूट की सुविधा मई से ही दे दी थी। हालिया फैसले से पुराने ग्राहकों को भी यह सुविधा मिल गई है। एसबीआई के इस फैसले से माना जा रहा है कि अन्य बैंक भी इस तरह की पहल करेंगे। अब तक बैंकों और अन्य हाउजिंग फाइनैंस कंपनियों के प्रीपेमेंट पर 2 से 4 फीसदी का चार्ज लिया जा रहा है। लेकिन अन्य बैंक कब तक इस दिशा में पहल करेंगे, इस बारे में कुछ साफ नहीं है।

अधिकारियों के मुताबिक ऐसा ग्राहकों की सुविधा के लिए किया गया है। साथ ही अब पुराने और नए ग्राहकों के बीच कोई भेदभाव नहीं रह जाएगा। एसबीआई के इस दम के बाद माना जा रहा है कि दूसर बैंकों को भी अपने ग्राहकों को बनाए रखने के लिए इस तरह की सुविधा देनी पड़ेगी। लेकिन वहीं दूसरी ओर इंडियन बैंक असोसिएशन ने आरबीआई से बैंकों द्वारा इस तरह का छूट देने में परेशानी की बात कही है। बैंकों को इस बात का डर है कि इससे उनकी आमदनी कम होने के साथ साथ संपत्ति-देनदारी का अनुपात भी गड़बड़ा सकता है।

Source: http://navbharattimes.indiatimes.com/articleshow/12385072.cms

Union Budget 2012-13: Interest costs to go low on affordable housing projects

Realty developers who are developing affordable housing projects will be able to lower interest costs after the budget allowed companies to borrow overseas.

The extension of the 1% interest subvention scheme for affordable housing continues for another year, benefitting buyers in the market for houses worth upto Rs 25 lakhs.

Budget at ET: Budget 2012 | Union Budget | Live Union Budget Blog | Railway Budget | Budget News | Economic Survey of India

The real estate has been caught in a pincer between falling sales and high costs and a stubbornly high debt. Sales volume in most cities except Bangalore has suffered.

However, not all the expectations have been delivered. The most important demand of increase in the limit on tax deduction available on home loans interest from current Rs 1.5 lakhs remains unanswered.

Realty shares such as DLF, DB Realty, HDIL, Unitech, Parsvnath Developers that extended gains up to 3% during the budget speech, have now moved downward as no major positive measure was announced. Currently, shares of Unitech, Sobha Developers, Godrej Properties and D B Realty are trading with nearly 1% loss.

No loan for stamp duty, other fees

In order to curb property price speculation, the Reserve Bank of India through a notification issued in February asked commercial banks to exclude documentation and stamp duty charges from the evaluation of the property value. In simple words, the housing loan sanctioned to you would not include these charges and you would have to shell out these from your own pocket.

Stamp duty is the tax that you pay to the state government when you buy a property or get a property transferred in your name. It is imposed on the sale of a house or any other form of immovable property. In apartment projects, you pay the stamp duty at the time of registration, which happens after the developer offers you the property’s possession. While buying a property there are related documentation that require some amount. Usually stamp duty and documentation amounts to 8-10% of the total property cost.

Says B.N.S. Ratnakar, general manager, Central Bank of India, “Earlier, banks included this amount in the entire loan amount. Now for new loans, the amount disbursed will not have this component. This announcement will add burden to your pocket. However, in the longer term, it is a good move and will reduce the burden on banks.”

How is stamp duty calculated?

Stamp duty and related documentation depend on the value and size of the property. This is not uniform in the country and not all states follow the same method of calculating. While some states have a lower stamp duty for women, most calculate it on the basis of property value and there is no difference in charges for men and women. For example, in Orissa apartments above Rs15 lakh attract 7% of the property value as stamp duty. Some other states, such as Maharashtra, West Bengal, Bihar and Jharkhand, too, follow the same method.
How is property value calculated?

Banks determine the market value of properties in an area by taking recent sales figures of at least two or three properties that are comparable in building style, size, area, type and year of construction. For example, comparing a new three-bedroom apartment in Noida’s Sector 62 with an old three-bedroom independent floor at upmarket Jor Bagh in New Delhi may not be fair. This basic comparison helps bank valuers arrive at an average market value.

But factors such as the age of the property and its condition are also factored in while reaching this value. The amenities and infrastructure around a property has a major impact on the value of a property. In general, for old properties, valuers factor in appreciation at 5% per annum. So, the last sale value is increased at this rate to arrive at the current value.

In an apartment complex, additional charges such as stamp duty or fee for an extra parking space in an apartment complex is subtracted to reach a property’s market value.

What it means for you

Says Chintan Patel, director (real estate practice), Ernst and Young, “It will impact the buying capacity of buyers in the small- to medium-sized apartment category. Transaction in this space will be affected. However, in the long term, the impact would be negligible as the property prices will increase. Property appreciation will balance the extra burden on your pocket.” In the short term, RBI’s move may lead to a slight reduction in home sales.

Realty industry hails CRR cut

Realty industry hails CRR cut

New Delhi: Terming RBI’s decision to reduce cash reserve ratio (CRR) as a “positive step”, the realty body CREDAI today said the move would enable financial institutions to fund real estate projects.

The body also sought cut in short-term lending and borrowing rates — repo and reverse repo — to bring down the interest rates.

In order to ease liquidity situation, the Reserve Bank today slashed CRR, the portion of deposits banks are required to keep with the central bank, by 0.75 percentage point to infuse Rs 48,000 crore into the economy.

“This is a positive step by the RBI. This will help financial institutions to lend money to entrepreneurs for the growth of business as well as the economy,” Confederation of Real Estate Developers Association of India (CREDAI) Chairman Pradeep Jain said.

He expects financial institutions would fund real estate projects, as the sector is the second biggest employer in the country.

Jain, however, said RBI should cut repo and reverse repo rates to reduce the cost of funds to developers as well as home buyers.

The realty sector is currently facing a tight liquidity situation, which has led to delays in ongoing projects.

Recently, a report from research firm PropEquity suggested that 45 per cent of the housing projects in NCR, Mumbai and Bangalore are facing delays due to the paucity of funds and lack of demand.

The sharp increase in repo and reverse repo rates in the last two years has affected housing demand. The interest outgo of most of the developers, sitting on a huge debt, has also gone up significantly.

-Financial Expresss

RBI cuts CRR cut by 75 bps; paves way for lower interest rates and easier liquidity

MUMBAI: Minutes after money market traders hung up their phones, the Reserve Bank of India unexpectedly slashed the cash reserve ratio (CRR) of banks by as much as 75 basis points, setting the tone for lower interest rates and easier liquidity.

Perhaps, it didn’t have a choice: next week’s industrial production numbers are likely to dip, high-street banks have been paying through their nose to borrow, and Rs 60,000 crore will flow out of the market by March 15 as corporates pay advance tax.

If the RBI had dragged its feet, it would have been forced to cut CRR – the slice of customer deposits banks keep as cash with the central bank – on March 15 with retrospective effect. Only once in the past has the central bank cut CRR with retrospective effect – something it wanted to avoid with the money market gasping for breath.

Friday’s CRR cut, from 5.5% to 4.75%, will immediately release Rs 48,000 crore into the system. While it’s unlikely to have a dramatic impact on liquidity and rates, it may improve market sentiment.

“It’s purely a liquidity-easing measure. Banks may not rush to cut lending and deposits rates due to year-end considerations. But a cut in policy rates and easing of liquidity could prompt banks to cut rates,” said RK Bakshi, executive director, Bank of Baroda. The RBI had last cut CRR on January 24 by 50 bps.

According to Rana Kapoor, MD & CEO, Yes Bank, “Unless we see liquidity deficit stabilising in the range of Rs 40,000-60,000 crore, banks are unlikely to cut deposit or lending rates.” Banks have been borrowing more than Rs 1 lakh crore overnight money from the RBI.

There is a widely-shared perception that the CRR cut also reflects some quid pro quo between the Reserve Bank and government, which may have promised that fiscal deficit would be reined in.

Significantly, the CRR cut comes a fortnight after C Rangarajan, chairman of the PM’s Economic Advisory Council, said he favoured open market operations to CRR cut for managing liquidity.

Home loan borrowers may have to wait a little longer for softer rates, but corporate borrowers in the bond market will see their costs dip. In the last few deals before the market closed on Friday, interest rates on certificates of deposits (CDs) fell from 11.30% to 10.95%.

A rate cut on reporting Friday is more effective in easing liquidity conditions as banks have to park lesser funds with the Reserve Bank with immediate effect.

“I think the RBI is finally beginning to recognise the urgent need to revive growth. This greater-than-expected CRR cut is also a signal to the upcoming monetary policy, where they are likely to cut repo rates as well,” said Rajiv Kumar, secretary, FICCI. Rashesh Shah, chairman & CEO, Edelweiss Group, said, “It will be positive for the market.”

Source: http://economictimes.indiatimes.com/news/economy/policy/rbi-cuts-crr-cut-by-75-bps-paves-way-for-lower-interest-rates-and-easier-liquidity/articleshow/12202883.cms

Where will you get the funds?

Banks could be giving smaller loans after RBI’s notification on property valuation, says Vandana Ramnani

T he Reserve Bank of India’s recent notification to banks to stop taking stamp duty and registration costs into consideration for property valuation could make life difficult for you if you’re planning to buy a home.

Apart from just giving a loan of 80% on the property price, banks will now release smaller loan amounts. Arranging for 30% of the property price can definitely be tough. It will result in what Divya Baweja, senior director, Deloitte in India, calls “detrimental cash flow issue for individuals“.

Though the move will curb speculation, realty experts say will lead to a decline of 5-10% in home sales, especially in the midsegment. The thought of paying more money could force potential buyers to “postpone their purchase.

This will have an impact on the demand and loan disbursements but not on property valuations,“ says Sachin Sandhir, managing direcmanaging dire tor, RICS South Asia. GET READY TO PAY UP The Reserve Bank of India (RBI) has issued a notification to banks to exclude stamp duty, registration and other similar charges while calculating the value of a property a bank intends to finance Following the new notification, prospective buyers will have to shell out 10% more from their own funds for registration and stamp duty

The optimistic, however, think impact will be minimal, affecting ready-to-move-in units instead of new launches.

Om Ahuja, CEO residential services, JLLS says the notification is expected to have only a short-term impact. The RBI is only trying to be cautious and ensure that there is no overleveraging by investors or actual users. Land costs have shot up and form 70 to 80% of the total cost of property in large cities and pose a big challenge in India. The mortgage aspect is very small. In the short term, this may lead to reduction in home sales but in the medium to long-term, people will get reconciled to it, he adds.

For under-construction properties, the impact will be felt at a later stage when the stamp duty is required to be paid. The notification might result in short term deferment of plans for a few consumers. Further, the buyers might have to resort to personal loans to meet the higher down payment requirements for the ready-to-move-in property, adds Neeraj Bansal, director advisory, risk consulting, KPMG.

Source: http://epaper.hindustantimes.com/PUBLICATIONS/HT/HD/2012/02/25/ArticleHtmls/Where-will-you-get-the-funds-25022012223007.shtml?Mode=1

EASY ON THOSE EMIs

Will raising the tax exemption level on home loan interest also boost demand for housing?

Home owners paying EMIs see a ray of hope in the finance ministry’s proposal to raise the tax exemption c limit on loan interest to R3 R lakh per annum from the curR rent R1.5 lakh. This will leave c them with more disposable o income and boost spending h on housing. n Realty experts’ opinions, c however, are divided. Some n say incentivising tax benefits m will supplement housing in demand. Others fear the r move will artificially inflate R demand and `play into the hands of developers’, creatK ing bad loans in bank books. e The tax exemption Y announcement is expected to p be made in the budget, b scheduled to be tabled in parp liament on March 16. a This is one of the many e recommendations made by t the National Real Estate Development Council to the ministry of opment and housing and urban poverty alleviation. This could also be an indication of the real estate sector’s budget wishlist finally becoming realistic.

How will raising the tax limit help borrowers? Take Rajeev Sharma’s case. He is currently paying an EMI of R30,000 on a home loan of R30 lakh. Assuming that he is currently in the tax bracket of 30% (ie paying tax at the highest slab), he will have a net (additional) annual tax cost savings of R45,000 (or a net tax savings of R3,750 per month) if deduction is increased to R3 lakh. This will reduce his monthly EMI from R30,000 to R26,250 a month.

According to Gaurav Karnik, tax partner-real estate practice, Ernst & Young, the move will have a positive impact on the home buyers’ sentiments as it will provide a cushion by marginally offsetting the high interest cost burden impacting their overall EMIs. This will also provide an impetus to the real estate sector by supporting demand. It will make houses a more attractive investment option due to tax cost savings.

Anil Kothuri of Edelweiss Housing agrees, saying the move will lower the effective interest rate on home loans and will make home loans more attractive.

Since loss under “income from house property“ (interest on self-occupied house property in this case) can be offset against the salary income, this will have a positive impact of reducing the tax burden for salaried individuals holding on to the property, says Divya Baweja, senior director, Deloitte in India.

Many feel the move is not enough for the realty sector.

“Home sales have slowed down due to prices increasing. Unless there is a clear policy change in terms of making land available to the developer at reasonable prices, the benefits of this measure will not percolate to the common man. Today, the income level of a couple may have gone up but not affordability. The earlier benchmark of a five-year joint annual income equalling

the value of the apartment does not hold true any longer. So, even though income levels have gone up, affordability has gone out of hand,“ adds Om Ahuja CEO residential services, Jones Lang La Salle.

PN Mishra, executive director (business development), Ansal API, says the move will lead to more demand in the affordable housing segment, encouraging more developers to enter the segment .

For Uma Shashikant of the Centre for Investment Education and Learning, increasing the limit would be “dangerous“. The right thing to do if the government cares about home ownership is to take supply-side measures, free up land, build infrastructure, and so on.

The objective should be to make it affordable for a family to own a home, in terms of how many years of income it would take to own a home.

This ratio is too high in India and can be brought down only when prices come down.

Fiscal incentives for home ownership help speculators, too, not just homeowners. Though they ensure prices move up further from the pumped up demand, one should also not forget that they bleed the budget.
What this will do is artificially inflate the demand for homes, play into the hands of unscrupulous builders and developers, and create bad loans in the books of banks. This will be a wrong move, Shashikant adds.

Source: http://epaper.hindustantimes.com/PUBLICATIONS/HT/HD/2012/02/25/ArticleHtmls/EASY-ON-THOSE-EMIs-25022012223008.shtml?Mode=1

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/