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Real Estate India - Online Real Estate - buy sell rent commercial residential properties in India - Zameen-Zaidad.com
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Home loan Interest Gets Benefit |
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Home
loan takers can rejoice. The revised discussion paper on the Direct Tax Code
(DTC) has proposed to continue with the existing system of deducting interest
payment (up to Rs 1.5 lakh) against home loan from total income before
calculating the tax liability.
The discussion paper released on August 2009 had proposed to do away with all
the exemptions, including the tax benefit on interest payment against home loan.
This, if implemented, could discourage home buyers.
However, the department had also increased the exemption limit to Rs 3 lakh from
the present level of Rs 1.1 lakh against investments in select instruments like
PPF, pension funds and life insurance schemes. The Rs 1.5 lakh interest benefit
against home loan will be included under 3 lakh ceiling.
In the DTC, the government had earlier argued that as the exemption limit
against investments has been increased, taxpayers will not be affected if
benefit on interest payment against home loan is withdrawn. However, the
withdrawal attracted a lot of criticism. And the government finally decided to
get back to the earlier system.
Even if the interest payment against home loan is not treated as a separate
category and will be the part of the exemption limit of Rs 3 lakh, taxpayers
will still benefit. According to the original DTC proposal, interest payment
against home loan was not allowed for deduction from the income. As many
middle-income taxpayers will find it difficult to exhaust the 3 lakh ceiling,
inclusion of interest payment of Rs 1.5 lakh in the total exemption limit will
be beneficial.
According to experts, government should continue with the deduction against
interest payment on home loan as a separate category, considering contribution
of the housing sector to the gross domestic product.
Courtesy TOI dtd: 16/06/2010 |
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GOVT. MULLS INCOME TEX EXEMPTION ON HOME LOANS |
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Government is considering to double the income tax exemption on home loans from
the present limit of 1.5 lac to Rs. 3.00 lac. This proposal is being discussed
by the committee of secretaries that was set up in view of the global financial
, crisis affecting, interalia, the real estate sector. Such an exemption will
surely reduce the heavy cost of borrowing on home loans.
The basic reason behind this is to boost consumption to drive domestic demand
which means a rise in income tax exemption will provide higher disposable
incomes. Since the government is very much concerned about the negative
industrial growth, it may announce shortly a stimulus package to boost the
demand in all sectors viz-a-viz housing, automobiles, chemicals including other
sectors to beat the down turn.
The government is likely to pressurize the real estate players to reciprocate by
slashing the prices of residential properties suitably making them clear that
this would be the last stimulus package. The government has recently earmarked a
mini-budget which includes Rs. 20,000 cr additional investment on infrastructure
and cut excise duty across-the-board. It has also provided a package for banks
aimed at making home loan cheaper.
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FDI IN 600-1,000CR SLAB MAY NOT REQUIRE CABINET STAMP |
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Move Will Cut A Layer Of Clearances For MNCs Planning Investment In The Band
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The government plans to do away with its mandatory Cabinet Committee on Economic
Affairs' (CCEA) approval for foreign investment proposals involving amounts
above Rs 600 crore and up to Rs 1,000 crore in a further liberalisation of its
foreign investment rules, officials say.
The department of industrial policy and promotion (Dipp) has decided to modify
the 1999 regulation, which makes CCEA approval compulsory for investments, in
addition to the approval of Foreign Investment Promotion Board (FIPB). However,
proposals involving investments of more than Rs 1,000 crore will still need
mandatory CCEA clearance. "We have been asked by the department of economic
affairs (DEA) and FIPB for relaxing the norm. We have decided to review (it)," a
senior Dipp official, who asked not to be named, told ET. The official, however,
said the plan would need to be cleared by the Cabinet before being notified.
The planned move will cut one layer of clearances for foreign investors planning
investments above Rs 600 crore and up to Rs 1,000 crore. It will also make it
easier for existing foreign investors that wish to enhance their investments. At
present, if a foreign investor has invested up to Rs 600 crore in an existing
venture and wishes to scale up its investment even by, say, Rs 10 crore, it
needs approvals from both FIPB and CCEA. "It has been noticed that a number of
proposals are held up for Cabinet clearance even after being cleared by FIPB,"
the official said.
According to another official in the same department, the move will enable CCEA,
which deals with several matters of economic importance, to focus on more
important issues.
During 2007-08, India received foreign direct investment worth $24.5 billion, up
56% on the $15.58 billion received in 2006-07. Mauritius, the US, UK and
Singapore are the biggest investors into the country. Financial and
non-financial services topped the list of sectors attracting the highest amount
of foreign investment in the last financial year. This was followed by computer
hardware and software, housing and real estate, telecom and construction,
government data showed.
Courtesy:- ET dtd:- 1st Dec. 2008
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WACHOVIA MAY PICK UP STAKE IN HIRANANDANI'S REALTY ARM |
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US Bank Completes $77-M Investments In Convertible Debentures Of Indian Realty
Co
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US-BANK Wachovia could pick up a significant equity stake in Hiranandani
Realtors, part of Mumbai-based property developer Hiranandani Group. In the last
one year, Wachovia has invested Rs 304 crore into the Indian firm through
financial instruments that will be converted into equity.
A source involved in the transaction said Wachovia had entered into an agreement
in August 2007 to invest $77 million in Hiranandani Realtors. The investment was
to be in multiple tranches through debentures. As per mandatory documents
submitted to the RBI, the debentures were issued in three phases starting
October 2007 and the last tranche of Rs 106 crore came in May 2008.
"Thereafter, the two partners entered into a debenture subscription agreement on
September 18 that laid out details of a phase-wise conversion of the debentures
into equity," the source added. The exact quantum of equity that Wachovia will
pick in due course is not clear as it would depend on the portion of debentures
that Wachovia converts into equity as per its deal with Hiranandanis and the
value of the firm at that time.
While Wachovia can potentially convert the debentures into equity, the agreement
gives the Indian promoters an option of purchasing them back. In such a
scenario, fresh equity will be issued to the Hiranandanis.
Real estate sector has been facing tough times due to the credit crunch in
economy. It has been one of the worst hit in the stock market meltdown which has
hit the domestic bourses in 2008 with the BSE Realty index dropping more than
88% since hitting its peak in January this year. The inflow from Wachovia
happened before the fresh round of selling in the domestic stock market which
began in September. Hiranandani Realtors is part of the Hiranandani Upscale led
by Surendra Hiranandani, one of the cofounders of Hiranandani Group known for
its luxury townships in Mumbai. Hiranandani Realtors is developing a new
township in Chennai with a project cost of Rs 3,500 crore. The project is spread
over 108 acres and includes residential apartments, a hotel and some commercial
area.
Besides completing existing projects, Hiranandani Realtors is also looking to
pick an equity stake in another group firm—Lake point Builders—that has its own
existing township project in Bangalore. This is expected to be financed through
surplus cash with the firm currently parked in banks.
Wachovia, which is into banking, asset management, wealth management and
corporate and investment banking products and services, is being acquired by
Wells Fargo. Wells Fargo, the largest US bank by market capitalisation, had
announced a $15.1-billion deal last month after Citibank failed to buy out
Wachovia.
Courtesy:- ET dtd:- 1st Dec. 2008
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PRIORITISE LOANS, FM TO TELL REGIONAL BANKS |
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Finance minister P Chidambaram would be meeting regional heads of public sector
banks to push lending to industry.
He is likely to travel to all zonal headquarters in cities including Mumbai,
Kolkata and Chennai between December 5-8. The move comes in the backdrop of
industry complaining of unavailability of credit despite RBI's measures to ease
liquidity.
"The minister is likely to discuss measures to spruce up funding for
infrastructure. Increasing flow of funds to the sector is high on the government
agenda," a finance ministry official said.
Another finance ministry official said while banks would be asked to ensure
credit to their existing customers and honour their loan commitments, they could
not be asked to take over complete burden of private banks.
"If you were taking loans from private banks earlier and now want the government
banks to support you, because private banks are not honouring their commitment,
it could not be possible in all the cases," the official said.
He said the government had asked the bankers that if they have given credit for
a part of project, they should not stop lending for the remaining part of that
project.
"In fact, much cannot be done if the borrower has defaulted on earlier
obligations or if the creditworthiness has eroded," the second official said.
The finance ministry is also collating data on sectoral credit flow to find out
the real areas of concern. The ministry had earlier directed all the public
sector banks to submit fortnightly data on credit off take to monitor the
lending pattern and better understand the problem at ground level.
Courtesy:- ET dtd:- 28th Nov. 2008
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BUDGET TO SHARE SUB-10 L HOME LOAN BURDEN |
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The government is working on a proposal to subsidise housing loans below Rs 10
lakh by asking banks to give loans to individuals and builders at a lower
interest rate for five years. Builders will get the loan only for housing
projects that are under construction.
The government will compensate the banks by providing money from the Union
Budget. The committee of secretaries working on the bailout package for domestic
industry has asked the ministry of housing to prepare a detailed proposal which
will be examined by the prime minister's apex committee early next week. "As
much as 73% of total housing in the country is valued at Rs 7.5 lakh and below,"
a government official said.
The PM's apex committee — which includes the finance minister, the commerce
minister, RBI governor and the Planning Commission deputy chairman — is expected
to finalise an incentive package for industry. Speaking to ET, the government
official said the committee of secretaries (CoS) had proposed to provide housing
loans at 8% interest, a subsidy of 1-3%. Today, public sector banks give home
loans at 9-11% interest rates.
The CoS will focus on ways to boost demand for housing so that steel, cement and
capital goods also get a fillip. "Housing sector needs support immediately…
within two months. Otherwise, it will be too late," the official said.
The meeting of CoS with the Cabinet secretary on the package scheduled for
Thursday had to be postponed as the Cabinet secretary had to rush to Mumbai to
review the situation in the city under terrorist attack.
Courtesy:- ET dtd:- 28th Nov. 2008
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DEMAND FOR REALTY TO GET A BOOST AGAIN |
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As interest rates of home loans are all set to come down with major PSU banks
lowering there prime lending rates, demand for real estate will get a boost
again. And rising demand will not lead to any price increase, according to
developers and consultants. Developers feel that the construction activities and
demand will get a real push once the main home loan disbursing institutions like
ICICI Bank and HDFC Ltd, which together control more than 50% of the market,
will slash their rates. Rise in demand will also depend on willingness to give
loans by the banks at the ground level. Unitech MD Sanjay Chandra said that cut
in interest rate will increase activities as it will prompt end-users to buy
houses as EMIs will decline for same amount and tenure of loans. As many
builders have started developing affordable houses in the range of Rs 20 lakh to
Rs 50 lakh, lower interest rates will push purchases. After the cut, home loan
rate has come down to around 10.25% to 11% on amount up to Rs 30 lakh. But, the
rate for above Rs 30 lakh loan will still continue to be around 11.5 to 12%.
This is mainly because of RBI's provisioning norms, which increase the cost of
fund. Developers feel that to give a boost to the realty sector, the RBI should
remove the norms, which were framed to discourage home loans to contain price
rise in the sector. Now the situation has changed. Manu Garg of Landcraft
Developer said the present rate cut will not lead to increase in prices. He said
developers are keener to increase the turnover at present. So, lower rate will
lead to increase in building activities only, he said. Because of rise in
interest rates in the last one year, the real estate sector witnessed a
slowdown. This has forced realtors to launch affordable houses to increase sale.
They also reduced the average size of an apartment by almost 30% and cut prices
per sq ft by 10-15%. This led to availability of two-bed room flats at Rs 25
lakh, from Rs 35 lakh to Rs 40 lakh a few months earlier. But, the continuous
rise in interest rates to over 12% made home loan unaffordable to most of the
people. Some developers feel present rate cuts will not make much of difference.
CMD of developer Assotech, Sanjiv Srivastava, said as the cost of funds for the
banks still remained high because of high deposits rate of 9% to 10%, it is
doubtful that present announcement of rate cut will translate into disbursal of
loans at the ground level. He argued that unless banks find lending home loans
profitable, they would avoid lending.
Courtesy:- TOI dtd:- 07th Nov 2008
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CAPITAL WON'T BE A PROBLEM FOR REALTORS WITH STRONG FOUNDATION |
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Fund-Starved realtors may heave a sigh of relief. Banks, wary of lending to the
realty sector, are considering loans to the sector on a caseto-case basis,
especially for those facing genuine liquidity problems. The move follows Prime
Minister Manmohan Singh's assurance to the industry that liquidity should not be
a problem for companies having good fundamentals. Leading bankers have started
asking developers to present a detailed account of their business challenges.
Banks are also considering providing loans for purchase of land which was a
strict no-no so far. Public sector banks are taking the lead in reviving the
hopes of realtors.
"Our bank is not facing any liquidity problem and we have enough cash to lend.
Our bank is ready to lend to real-estate companies if their requirement is
genuine and their repayment capacity is good," Punjab National Bank official
said. Bankers are of the view that real estate companies should bring down
prices of properties instead of giving freebies. "If the developer is ready to
make the house available to the consumer at an affordable cost, there should be
no problem in extending a loan to such a developer. However, banks should keep
off companies that keep escalating the cost," a State Bank of India senior
official said.
Experts say RBI's recent moves will also provide sufficient cushion to banks to
lend to real estate companies. RBI slashed CRR by 350 basis points in the last
few weeks, which will infuse Rs 140,000 crore into the system. The central bank
will also inject liquidity through its repo tenders at 7.5% instead of 8%. RBI
has also lowered SLR to 24% from November 8 against the norm of 25% of the
banks' deposits. Real estate developers' association, Naredco, has had a series
of meetings with the leading banks, highlighting the effects of credit crunch on
the sector and their shrinking revenue streams.
When contacted, Assotech managing director and Naredco member Sanjeev Srivastava
told ET, "It has been brought to banks' notice that 90% of the real estate
market comprises unlisted firms. Hence, the market situation is not the
benchmark to draw conclusions about paying capabilities of unlisted companies.
Top bankers have given us positive signals that things would soon improve."
DLF executive director (finance) Saurav Chawla said that things have started
improving for the real estate sector. "In October, banks had temporarily shut
loan disbursals, but now interest rates have gone down and lending will regain
momentum. As far as DLF is concerned, in the hardest of the times, we could sell
our properties. We expect to do even better if liquidity improves," he said.
Industry players pointed out that banks are waiting for correction to happen in
the real estate sector. "With a slump in the domestic real estate sector due to
excessive credit crunch and demand slowdown, home buyers can expect a further
correction in real estate prices in the range of 20% in the short term. This
would improve paying capacity of the loan borrowers and reduce their overall
exposure," a Delhi based developer said.
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Courtesy:- ET dtd:- 4th Nov 2008 |
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REALTORS SEE DIP IN
HOME LOAN RATES, RISE IN SALES |
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Property developers see an upswing in demand for houses as
home loan rates are expected to come down after the Reserve Bank cut repo rate
today by 100 basis points.
"The cut in repo rate should reflect in lowering of home
loan rates. People should be able to buy homes at a cheaper rate, only then we
can sell more homes," said Rajeev Talwar, group executive director of DLF.
Added Sanjay Chandra, managing director of Unitech, "Repo
rate will make bankers revise mortgage rates, which will improve affordability
of houses and boost home sales," Chandra said.
Over the last nine months, RBI has raised the repo rate by
125 basis points to tame the rising inflation. In turn, commercial banks have
raised their consumer loan rates by 50-100 basis points. Thus, on an average,
the monthly installment on a Rs 10 lakh loan for 20 yrs has risen over 50 per
cent to Rs.12,740 on a 14.25 per cent interest rate from Rs 8,060 (7.5 per cent
interest rate) five yrs ago.
Due to high interest rates, property sales have halved from
the beginning of the current yr, blocking the source of funds for developers.
Rohtas Goel, CMD, Omaxe, said he expects home loan interest
rates to fall. "The cut will make funds cheaper for banks which may in turn
decrease the interest rates. "he said.
Courtesy:- BS - 21st Oct. 2008 |
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Fixed or Floating? |
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The interest rate on a home loan cans be either fixed or
floating. Choosing one is important as it has an impact on the total cost of the
loan borrowed. In case of a fixed interest loan, the rate of interest is decided
upfront at the time of taking the loan.
The rate is fixed for the entire tenure of the loan,
irrespective to the market rates of interest. In case the market interest rate
goes up, the borrower still pays on the agreed lower rates of interest. In case
the market interest rate comes down, the borrower tends to lose as he has to
continue paying the higher interest rate.
The borrowing is locked at a specific rate at the beginning
of the period, and remains so for the loan entire life of period. For example,
if the loan is availed at a fixed rate of 10 percent for 20 years, it will
remain so irrespective of whether the market rate is eight or 17 percent. In the
first case, the borrower loses, while in the other case he gains. However, in
some fixed rate loan options, the bank reserves the right to reset the rate of
interest after a certain number of years.
In case of floating rate loans the rate of interest is
linked to the market rate. The rate varies directly with the market rate of
interest. In case the market rates go down , the cost of
borrowing for the borrower also goes down. In case the market rate of
interest goes up, the cost of borrowing for the borrower also goes up, thus, the
borrower floats along with the market rates of interest. For example, suppose
the loan is availed at a floating rate of eight percent for 20 year. If three
years down the line the interest rates reduce to six percent, the interest on
the loan in also reduced to six percent. However, in case the interest rate
increase to 15 percent borrower will have to pay an interest rate of 15 percent.
The reduction in interest rate can be passed on to the
borrower though a reduction in the equated monthly installments (EMI) or through
a reduction in the loan tenure.
Then, there are hybrid loans which combing the features of
both the loans. The variants may be different. Such loans are offered in
addition to the traditional pure loan products. Hybrid rate products aim at
capturing virtues of both fixed as well as the floating interest rate options.
Each product has its own distinctive features which set it apart from others.
These products leave the choice of interest rates to the borrower. The give the
borrower the freedom to decide on the quantum of loan component which would be
under the fixed part and the proportion which would be under the floating part.
Some banks allow a certain percentage of the loan amount to
be at the fixed rate of interest and the balance at the floating rate of
interest. In another case, the interest rate for the first few years’ -3-5 years
– will be fixed and then it turns into floating. The applicable interest rates
at that point of time will be applicable to the balance loan amount.
What is a good
option today?
At the high interest rates, the fixed rate option is ruled
out. Even hybrid is not advisable, by the same logic. It is better to opt for
the floating interest rate loans. The increase in interest rate is not expected
to stay for a long time. This should be a temporary phase – normal to every
economic cycle. In the medium to long term, a softening of interest rates can be
expected. |
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ALTHOUGH
BANKS HAVE CHOSEN TO LAUNCH OFFERS IN THE FESTIVAL SEASON, EXPERTS FEEL SLUGGISH
LOAN GROWTH HAS PROMPTED THEM TO GO THE EXTRA MILE |
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Prospective home loan
borrowers have something to cheer about in this festive season. Housing finance
players are out to woo them by lowering lending rates. They have all geared up
to cash the increased flow of money in people’s pockets in the next two months
or so.
Housing Development Finance Corporation (HDFC) has lowered its
floating interest rates on new home loans by 0.75 percentage points to 10.50%
for a limited period. State Bank of India (SBI), too, announced similar
concessions for fresh home loan borrowers in Kolkata. SBI is offering the scheme
only at its home mela held in Kolkata.
The country’s largest bank is offering 10.50% interest for loans
above Rs 5 lakh in case of approved housing projects. In all other cases, the
bank will charge 10.75% from borrowers in Kolkata. These rates are available for
loans beyond a five-year term.
The latest in the bandwagon is Allahabad Bank. The Kolkata-based
bank has reduced interest rates on fresh housing loans by 0.50-0.75 percentage
points for the next three months starting from October 1. For loans below Rs 20
lakh, Allahabad Bank will charge a 9.75% rate for maturity up to five years,
10.25% for maturity above five years and up to 10 years, 10.50% for maturity
above 10 years up to 15 years and 11% for maturity above 15 years and up to 25
years.
The reduction in interest rates for fresh borrowers, however, does
not apply to existing floating rate home loan customers.
Incidentally, Bank of Baroda (BoB) lowered its rates in the first
week of September itself, well before the onset of the festive season. It cut
rates by up to 0.50 percentage points. Union Bank of India has recently reduced
the rate by 0.25 percentage points across all maturity buckets. Both BoB and
Union Bank have reduced their rates for an unspecified period.
A senior official with SBI said the move to lower home loan rates
is to target the large pool of middle-class borrowers. “The lowering of rates
would lure fresh borrowers when they have additional flow of cash in hand,” he
said.
Although banks and other housing finance players have chosen the
festive season to push their home loan products, industry observers say that the
sluggish home loan growth since April has prompted them to go the extra mile to
mobilise new home loan customers. The banks’ home loan books have grown less
than 5%, as opposed to 25-30% growth seen in the last few years.
Interestingly, ICICI Bank has so far kept its home loan rates
unchanged. The country’s largest housing finance company HDFC, announced the
`special’ 10.50% rate for new customers willing to avail of home loans at the
floating rate of interest. The offer is valid for all loans disbursed on or
before October 31, 2007.
NEW OFFERS
- HDFC has lowered floating interest rates on new
home loans by 0.75 percentage points to 10.50% for a limited period
- State Bank of India, too, announced similar
concessions for fresh home loan borrowers in Kolkata
- Allahabad Bank has reduced interest rates on
fresh housing loans by 0.50-0.75 percentage points for the next three months
starting from October 1
- Bank of Baroda lowered its rates in the first
week of September itself, well before the onset of the festive season
- Union Bank of India has recently reduced the rate
by 0.25 percentage points across all maturity buckets. Both BoB & Union Bank
have reduced rates for unspecified period
- The banks’ home loan books have grown less than
5%, as opposed to 25-30% growth seen in the last few years
- ICICI Bank has so far kept its home loan rates
unchanged
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SAFEGUARD YOUR HOME |
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ET Realty offers some advice on what you should not do while renovating your
house |
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A doctor always advises
' prevention is better than cure', it is the same for the safety of the
structure of your own house.
Even though, undoubtedly, there are many solutions and remedies to
repair a damaged structure, we must understand the importance of respecting the
existing structure, nurturing it and maintaining it for the safe and happy use
of your own space. Generally RCC structures do not collapse like a pack of cards
because they are designed for minimum one and half times prescribed and
allowable loads. Here are some minimum ' don'ts ' of certain critical elements
of structures in interiors which must be adhered to while carrying out any
interior renovations:
RCC Works:
Reinforced cement concrete beams and columns are the most common structural
membrane of any building. Do not ever chase concrete or cut the steel - leave
aside removing or reducing the size of these membranes.
Why? All RCC membranes are designed with concrete cover to protect
steel. While chasing it is likely to damage the cover over reinforcement, which
may result into corrosion of bars and slowly develop cracks and weaken the
structure.
Balconies:
Do not use enclosed balconies for kitchen, toilets, heavy storage, etc.
Why? While balconies are permitted to be enclosed by BMC for habitable purposes,
as per regulations they ought to be overhung or cantilevered. Adding additional
load certainly adds stress to existing structural framework.
Toilets and Kitchen:
Avoid changing the location of toilets and kitchen. Why? All toilets and
kitchens have common drainage and supply lines. These areas are also
specifically waterproofed and likely to be overtly used. Any change in location
damages the waterproofing and dampness or leakage within RCC membrane certainly
corrodes the steel and weakens the concrete.
Chajjas and Planters:
Do not extend your interior space over planters and chajjas.
Why? Chajjas are designed to protect doors and windows from weather
and planters are a so-called façade feature allowed by BMC. These are again
cantilevered structures with no provisions of additional dead or live loads. Any
stress on these cantilevered portions directly impacts the dynamics of
surrounding beams and columns.
Pipe Shafts:
Do not extend your interior space and enclose any pipe shafts.
Why? Pipe shafts are meant to hide pipes and other utilities
commonly laid in the building. It is illegal to enclose these common spaces.
While BMC does not have any regulation on size and shape of these shafts and
they are hollow, however, in recent times it is observed that it is tempting to
enclose these shafts to enhance the size of your bathroom, kitchen, etc. where
there is no structural provision.
Plinth:
Do not lower the existing plinth level.
Why? By lowering the plinth level, you may gain extra height but it
is likely to damage plinth or tie beams, top of footings, and so on, which are
at the very base of any structure. Lowering of the plinth also endangers water
ingress into your building.
Concealed electric, plumbing and AC works:
Do not chase or cut a hole in any structural membrane to conceal electrical,
plumbing or any utility services.
Why? For the same reasons as mentioned in the first item.
These are just few basics and most common abuses to RCC structures,
which are observed in many buildings in our city.
Always use the best material you can afford.
Follow good building practice and insist on best workmanship and
craftsmanship.
You must appoint a qualified interior designer or Architect and if
in doubt, obtain additional advice from a structural consultant for major civil
alterations.
Lastly, be vigilant to the smallest of cracks in the structure and
attend to it urgently.
Courtesy:
ET dtd: August 10, 2007 |
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FLOATING HOME LOAN: CHECK THE BENCHMARK RATE & RESET CLAUSE |
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If you are planning to take a floating rate home loan, ensure that the bank’s
process of changing the benchmark rate is transparent. Unlike banks in the UK,
where there are independent benchmark rates like Libor, here the bank itself
sets the rate,
A benchmark rate is the base to which banks/HFCs (housing finance companies) link
the effective rate of interest. The effective floating loan rate is usually 2-3%
higher/lower than this rate. This benchmark is not the actual cost of funds for
the bank, but an internal measure related to the cost of funds. The difference
between the cost of funds and your home loan rate is the bank’s ‘spread’.
Unlike other market instruments, the benchmark of home loans is not an
independent measure. It’s neither the Reserve Bank of India (RBI) nor the
National Housing Bank (NHB) which set the benchmark prime lending rate for home
loans. It’s the banks which compute their internal prime lending rates. For
example, HFCs benchmark the home loan rate on retail prime lending rate (RPLR)
while ICICI Bank uses floating reference rate as the base and the State Bank of
India (SBI) uses State Bank Advance Rate (SBAR). (For details on benchmarks and
floating rates, refer to the table)
Says an industry expert: “Banks can’t say ‘my PLR is the benchmark’. They have to
subscribe to an independent benchmark and outside PLR while giving a home loan.
They should ideally look at an objective benchmark reference rate like fixed
deposit rates, since they also represent the cost of funds for a bank or an
HFC.”
Banks and HFCs have tried and tested various independent benchmarks. UTI Bank and
Kotak Mahindra Bank had introduced an alternative home loan product, which
linked the interest rates to one-year fixed deposits.
Explains a Kotak Bank official: “We had introduced the FD rate-linked product, as
any rise in cost of funds would affect deposit rates, which in turn, would
influence lending rate as well. This would lead to a lot of transparency in the
rate calculation.” But for some internal reasons, both banks withdrew the
product. Currently, ING Vysya uses an independent benchmark — the three-month
FIMMDA-NSE Mumbai Inter-bank Offer Rate (Mibor) index operated by the National
Stock Exchange.
LOOKING OVERSEAS
IN AUSTRALIA, the benchmark rate for home loans is referred to as the average
annual percentage rate (AAPR). The AAPR includes interest payments and fees and
expresses all these costs in one rate, so it reflects the total annual cost to a
borrower of a loan. In fact, all lenders are mandated to disclose this benchmark
while advertising home and personal loans. In the UK, the mortgage rate is
linked to the London Inter-Bank Offered Rate. The mortgage interest rate is a
set percentage above Libor, reviewed on a regular basis and will fluctuate in
line with the movements in Libor. However, in China, banks are yet to use a
uniform mortgage rate as a benchmark although the monetary authority has asked
the banks to follow composite rate as the benchmark for home loans.
BENCHMARK EFFECT
Independent industry experts say that consumers have complained that they never
receive the benefits of falling rates even though banks are prompt in hiking
rates at the drop of a hat. The rationale is, if the cost of funds increase, a
bank has to hike the benchmark rate (hence home loan rate) to maintain the
spread. But that doesn’t hold true in a falling interest rate regime.
Says a UTI Bank official, “When interest rates are falling, a bank lowers the
prime lending rate only after the cost of funds falls by 0.5 to 0.75%. But if
the rates are climbing up, a bank is prompted to raise the rate for every 0.25%
rise in the cost of funds.”
RESET CLAUSE
IT’S VERY crucial for you to read the reset clause, especially in a floating home
loan. One main feature that differentiates the floating rate from a fixed rate
is the bank’s flexibility to change the rate in line with the rise in cost of
funds. But again, the frequency at which banks can raise the rate depends on the
reset clause mentioned in your home loan agreement.
As per industry practice, a bank/HFC can reset the floating interest rates on a
quarterly basis i.e, four times a year. For example, if the loan is sanctioned
at 2% below PLR, say 12.75%, you would pay 10.75%. On the other hand, if the PLR
rises to 13.25%, you would have to pay 11.25%.
Every time a bank/HFC increases the PLR, new customers’ are impacted by the hike.
However, the rate hike comes into effect with a lag depending upon the reset
clause. For example, if a bank announces the hike on June 1, the existing
customer will be impacted only by July 31, when the bank reviews it in the next
quarter.
According to industry experts, do look at your home loan agreement with a naked
eye before signing on the dotted line.
More than often a bank does not provide the home loan agreement unless you want
to sign it. But that doesn’t stop you from asking for a copy. A bank cannot deny
it as per the existing stipulations. Read the fine print before you make your
largest investment decision. Otherwise, it could become a big liability for you.
Courtesy: TOI dtd: August 9, 2007 |
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Dream home become a
reality |
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Owning a home
has always been one of the most cherished dreams for mast of us. With more
and more banks and financial companies coming up with interesting loan options,
s home has become a reality. However, certain institutions are a class
apart. LIC Housing Finance is one of them. 1.Top
Home Loans Provider Company.
2.Documents Required for
Home Loans.
Here are some reasons why a loan from LIC Housing Finance Ltd. Means complete
peace of mind.
Lowest Interest Rates. - Easy application, quick approval.
- Insurance-Linked security.
- Largest Network.
- No Hidden costs.
With a network of more than 100 offices in the country there is mo reason why you
will miss their friendly services.
This is not all, LICHFL also has an overseas office
in Dubai to cater to NRI demands. To be eligible for loan, you must be in
permanent service or engaged in a profession or business. You should have
a stable job a regular income. In fact the organization may be able to
advance you a loan under their scheme if you want to:-
- Construction purchase a new House/ Flat.
- Buy an existing house or flat not more than 35 years old.
- Extend an existing House.
- Renovation/repairs to an existing House/ Flat.
The loan amount is determined on the basis of the repayment capacity of the
applicant/s . Repayment capacity taken into consideration factors such as age,
income, dependents, assets, Liabilities, stability of occupation and continuity
of income, savings etc. The maximum loan would be Rs.100 lakhs per unit to any
individual applicant. It can be extended upto 85% of the cost of property value
(including stamp duty and Registration charges.
It grants term upto a maximum of 20 years (maximum 10 year under
Griha Shobha for NRIs and maximum 15 year under Griha Lakshmi). The term of
loan under no circumstances exceed the age of retirement or completion of 70
years of age whichever is earlier.
The security for the loan is the first mortgage of property to
be financed by way of deposit of the title deeds, subject to local laws. You
will also be required to furnish one guarantee from a person of sound financial
standing acceptable to LICHFL, preferably from government/ Public Sector and
then see your dreams turn into reality.
Courtesy: HT Dtd. 29-03-07 |
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Top Home Loans Provider Company |
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Features:
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Most high value transactions involve putting together
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Documents Required
for Home Loans |
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The requirement of document may
differ for different categories such as.
- If constructing on own land .
- If the property is being purchased is in Cooperative Society
- If a flat is purchased from the builder
- Self-Employed/Businessmen
- Salaried Individuals
The following documents required for availing of home loans
for various categories.
Salaried Individuals
- Salary slip/Form 16 A.
- A photocopy of the first and last pages of Ration card or copy of
PAN/Telephone/Electricity bills.
- A photocopy of Investments (FD Certificates, Shares, any fixed
asset etc. or any other documents supporting the financial background of the
borrower.
- A photocopy of LIC policies with the latest premium payment
receipts (if any).
- Photographs (as applicable).
- A photocopy of bank statement for the last six months.
Self-Employed/Businessmen
- A brief introduction of Business/Profession.
- Balance Sheet, Profit and Loss account and statement of income
with Income Tax returns for the last 3 years certified by a CA.
- A photocopy of Advance Tax payments (if applicable).
- A photocopy of Registration Certificate of estatblishment under
shops and Establishments Act/Factories Act.
- A photocopy of Registration Certificate for deduction of
Profession Tax (if applicable).
- Bank statements of Current and Saving accounts for the last 6
months.
- A photocopy of Certificate of Practice(if applicable).
- A photocopy of any bank loan (if applicable).
- A photocopy of the first and last pages of the Ration card or a
copy of PAN/Telephone/Electricity Bills.
- A photocopy of LIC policy (if applicable).
- A photocopy of investments (FD Certificates, Shares, any other
fixed asset).
For a builder Flat
- Original copy of your agreement with the builder.
- 7/12 extract or property register card of the land under
construction.
- Index II extract of your agreement with the builder.
- Copy of N.A. permission for the land from the collector.
- Search and title report (with the details of
documents) for the last 30 years.
- Development agreement between the owner of land and the builder.
- Copy of order under the Urban land Ceiling Act.
- Copy of building plans sanctioned by the competent authority.
- Commencement certificate granted by Corporation / Nagar Palika.
- Building completion certificate(if available).
- The latest receipts of taxes paid.
- Partnership deed or memorandum of association of the builders
firm.
For a Cooperative Society Flat
- Original share certificate of the Society.
- Allotment letter from the society in your name.
- Copy of the lease deed, if executed .
- Certificate of the registration of the society.
- Copy of the byelaws of the society.
- No objection certificate from the society.
- 7/12 extract or property register card in the society's name.
- Copy of N.A permission for the land from the collector.
- Search and title report(with the details of documents) for the
last 30 years.
- Copy of order under the Urban Land ceiling Act.
- Copy of the building plans sanctioned by the competent authority.
- Commencement certificate granted by Corporation / Nagar Palika.
- The latest receipts of taxes paid.
- Original Agreement to assign / Deed of assignment.
For a Flat Constructed on own Land
- Original sale deed of land and extract of Index II.
- Extract or property register card in his name.
- Copy of N.A. permission for land from the collector.
- Search and title report (with the details of documents) for the
last 10 years.
- Copy of order under Urban Land Ceiling Act.
- Copy of the building plans sanctioned by the competent authority.
- Building permission granted by Corporation / Nagar Palika.
- The latest receipts of taxes paid.
- Estimate of cost of construction certified by the architect.
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For more information mail to
info@zameen-zaidad.com |
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Real Estate India - Online Real Estate - buy sell rent commercial residential
properties in India - Zameen-Zaidad.com
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