Home loan rates set to soar to double digits

Planning to take a home loan? Be prepared to shell out double-digit interest rates soon. Lenders say it's only a matter of time before they are forced to pass on the higher cost of funds to borrowers after the Reserve Bank of India increased key policy rates by 25 basis points on Tuesday.

The rate hike, the seventh successive one since January 2010, is aimed at controlling inflation which the RBI described as a "dominant concern". The rate of inflation as measured by the wholesale price index is now forecast to be at 7% by end-March, much higher than the original estimate of 5%.

At present, new borrowers get loans at close to 9.5%. But borrowers who have availed of home loans around five years back are already paying over 12% following successive increases in prime lending rates.

The increase in policy rates may seem modest. But banks are already in deficit mode and borrowing over Rs 1 lakh crore from RBI on a daily basis.

"The liquidity situation is very tight and the cost of funds has gone up for all. Interest rates on home loans would also go up to double digits," said HDFC chairman Deepak Parekh. He pointed out that top corporates were already borrowing at 10% and more.

Higher interest rates should be good news for depositors, though their enthusiasm for fixed deposits is likely to wane since inflationary expectations could discourage savings. Rising interest rates could also restrain real estate prices in the medium term by tempering demand.

Unveiling its quarterly monetary policy review, the RBI on Tuesday hiked the repo and reverse repo — the rates at which it lends to and borrows from banks — to 6.5% and 5.5% respectively. According to bankers, the 25 basis point hike was a moderate step and by itself not disruptive to growth.

Most banks were expecting that the central bank would take further measures to ease liquidity. Many in the financial sector expected the rate hike to be in the order of 50 basis points. "Going forward, higher demand-side pressures emanating from generalized inflation are likely to surface. Not taming inflation could act as an impediment to the economy's 8-9% medium term growth rate objective," said Ajay Srinivasan, chief executive, financial services, Aditya Birla Group.

What ought to worry borrowers is that RBI has told banks in no uncertain terms that they must slow down lending. The biggest concern for the central bank now is that in the third quarter, banks have lent more money than they raised in the form of deposits.

Banks have been at pains to explain this — they had surplus funds from the previous fiscal, were raising funds through issue of bonds, and some of the large loans to telecom and oil companies were a blip in loan growth.

However, there is a fear that the 24% growth in bank credit is adding to consumption demand which is one of the drivers of inflation.

"We have definitely moved into a higher rate environment. Globally there are concerns over inflation and there is domestic pressure on rates," said Shikha Sharma, MD, Axis Bank. According to M V Nair, chairman, Union Bank of India, "The intent of the policy is clear. Lending rates should go up, but how much and when would be determined by each bank."

Read more: Home loan rates set to soar to double digits - The Times of India http://timesofindia.indiatimes.com/business/india-business/Home-loan-rates-set-to-soar-to-double-digits/articleshow/7364157.cms#ixzz1C7lZZnLk

Home-Loan tips: Hyderabad realty in consolidation phase

Home-Loan tips: Hyderabad realty in consolidation phase: "Hyderabad realty in consolidation phase Prickly issue:Players say the market will see robust growth but price increases are out fornow. —V...."

Hyderabad realty in consolidation phase

Hyderabad realty in consolidation phase

Prickly issue:Players say the market will see robust growth but price increases are out fornow. —

V. Rishi Kumar

The real estate market in Hyderabad is entering a phase of consolidation, after a relatively extended subdued phase.

Majority of builders continue to maintain prices, which had settled down to their lows in the last quarter of 2010 after ruling high in 2007-2008. End-users, having postponed purchases for some time, have begun to take a call on buying properties.

An interaction with some of the property developers shows that this trend is likely to continue. Also, most of the issues with regard to demand for a separate statehood have been factored, they say.

“Price rise at this point is a sensitive issue. No buyer would like to hear anything on that front at least for some more time,” said Mr S. Pochendar, Chief Operating Officer of Lanco Hills, which is developing a mixed development project with residential and office spaces near the IT hub of Hyderabad.

Positive tone

Ms Snehal Mantri, Director-Marketing of Mantri Developers, said: “The general outlook for real estate is positive even though there have been some concerns about issue of separate statehood. In fact, the market may get buoyant from April onwards as we enter the new financial year when people again take a call on real-estate investments.”

Mr R. Karthik, Chief Marketing Officer of Lodha Developers, said that the realty market shows a reasonably robust pattern in the past few months. There are some distinct patterns within the realty market across the country. While some markets such as Mumbai have shown selective price increases in the past couple of months, Hyderabad market continues to reflect a steady price pattern.

“If at all, this trend of steady prices is likely to continue for some more time. Possibly, we may see some builders taking a call from April next. Therefore, this phase is ideally suited for genuine buyers as they also have come to realise that prices have come to more affordable levels compared with highs seen in the past,” Mr Karthik said.

Mr C. Sekhar Reddy, Vice-President of Credai, said the New Year has begun on a very positive sentiment with people discounting various developments, including the demand for separate statehood. In the last three months and first three weeks this year, the confidence level is on a high.

During the past two months, several developers have announced new projects in Hyderabad. These include those of the Prestige Group, My Home, Vasathi Housing, Kirthi Constructions and Lodha Developers, among others.

Mr Pochendar said: “Pricing is a sensitive issue. The market is just picking up and any adverse news can affect the battered sentiment of buyers. If there is any move to do so, they will again stay away from fresh purchases. However, a couple of developers have announced marginal hikes in rates.

“With regard to commercial property, the builders are strategising and are likely to take a call on new ventures. In some places, there is some over-supply. But then it won't be long before new projects are announced. This would be necessary as IT companies, in particular, have begun to announce expansion and are recruiting in large numbers.”

Ms Mantri said: “From the Mantri perspective, we continue to scout for new projects and are also considering expansion of the existing project. The trend of fresh recruitments in various sectors of the economy, particularly the IT sector, augurs well for real-estate projects. This will trigger more interest and purchases.”

Input cost

For nearly two years prices have drifted lower, but they have stabilised now. But the prices of inputs and labour have gone up. This may prompt some developers to take a call on gradual increase in prices as the current rates could be lower by about 20 per cent if you consider the costs, Mr Karthik said.

Referring to the commercial property demand, he said, “The market now seeks differentiated products. The customer, who is king now, wants what suits him rather than adjusting to what is available. Therefore, we have launched Supremus office space project in Mumbai and plan to come up with similar ones in Hyderabad later.”

Meanwhile, the long pending issue of a new owner for Maytas Properties has ended on a happy note. IL&FS has been chosen as the successful suitor by the Company law Board. Hundreds of buyers of properties in the Hill County project now feel secure that they will be able to move to their new home with the new management taking control.

( http://www.thehindubusinessline.com/iw/2011/01/23/stories/2011012350470900.htm)

Give Your Home A Smart Makeover

Give Your Home A Smart Makeover

There are many ways to do up your home without blowing up all your money. Here’s how you can plan your budget

Sakina Babwani

BUYING a dream house, it seems, is an easier task than converting that house into a dream abode. The right seating and lighting arrangement, the right colour of the fabrics, the comfort factor… the list just goes on and on. No wonder then that the Indian middle class is spending a lot of its time and money on renovating homes.
However, many would confess that the task is not an easy one. “After running around for locating a house and securing a loan, we thought doing up the house would be a small task. We already had the colour scheme in mind – actually, we picked it up from the hotel we stayed during a holiday. However, the colour just wouldn’t work for our house because of the lack of sunlight,” says Shilpa (surname with-held). “We spent a lot of money and we had to put up with the stuff for around three years. We invited very few people home during the period,” she adds. Now, you know why certain neighbours would never open their doors completely or invite you over.
Keep It Simple: The house in that glossy magazine or your favourite holiday resort may have looked stunning. But imitating the same design won’t get you the same results. For example, space is a big issue in many large cities, especially in Mumbai. So, rule number one in doing up your home is to keep it as minimal and simple as possible. Says Sanjay Puri, prinicipal architect, Sanjay Puri Architects, “You must stick to a minimal design for your house. Most houses in Mumbai are small. Keeping that in mind, you should not spend too much on storage, and other things. Have lesser number of elements in your home. That way, you will be able to give your home a spacious look and also it will help you save money,” he adds. That tip should stop people about to clutter their homes with stuff they have seen in western interior magazines.
Draw Up A Budget:Sure, you can already picture the house after it goes for a makeover? That’s a good sign. At least you know what you want. But how about your wallet? Do you know much it would cost to make it look like a Devdas set? Sort of, right? That’s not good enough, you must have a figure in mind. This is because once you have a figure in mind, you will be able to pick stuff that will stay within budget. For example, you can redo your bathroom for a lakh or a few thousands. It is entirely up to you. Also, having a budget ensures that you don’t overspend on a particular section. For example, if you have already overshot your budget doing up the drawing room, then you may have to break your deposit or liquidate your investments to do up your bedroom.
“Most people start renovating their home without having a proper plan in place. Many of my clients come to me confused. They do not know what they want,” says interior decorator Tina Dharamsey. She offers an example: “When it comes to finishings, they don’t know whether they want a sunmica finish or a laminated finish. There is too much of trial and error. That way you end up wasting too much money.”
How To Draw Up A Budget: Don’t blow up your savings doing up the house. Remember, you may want to redo it in the next five years. Two, don’t borrow heavily just to beautify the house. Borrowing large amounts can be justified only if your house needs urgent work to make it inhabitable.
Avoid A Theme: Often people tend to replicate a theme they have seen somewhere. However, experts are of the view that you should never have a fixed theme for your home. The problem with a fixed theme is that you would then have to get all the artefacts according to the chosen theme.
For example, if you have decided to have a Mediterranean theme, you will have to purchase furniture that goes with the theme. Now, suppose you decide to change the look of your home after three years, then the makeover would become a Herculean task. That’s because you will then have to incur heavy expenses changing the furniture, artefacts and furnishings. Thus, the money spent on getting that expensive Mediterranean furniture will go down the drain. “Never go overboard with your theme. The best way would be to keep 80% of your home neutral and maybe you could have a theme for the remaining 20%. Maybe you could have just one wall with a particular theme, but not the entire house,” says Puri.
Save On Furniture: Furniture showrooms and malls are the first stop for many people looking to redo their homes. Getting rid of the heavy, unaesthetic furniture mostly tops the agenda, say experts. However, you can save a tidy sum if you steer clear of furniture showroom in posh localities or branded ones. “You could buy your furniture from small wood-work workshops. There may be some difference in the quality and durability, but it’s worth it if it helps you save more in terms of your budget,” says Reena Mehta of Visual Merchandiser.
Another way to save money (this is especially handy for those with a tight budget) is to refurbish your old furniture. Rohan Surani, who just renovated his plush Bandra pad says, “I did not want to spend too much on getting new furniture. Also, my old furniture was in good shape, so I decided to make use of it. I used the wood of my old furniture and made new furniture out of it. That way I got new furniture and it didn’t weigh too heavy on my pocket as well.”
Bath, Kitchen, Wiring: You can pick up stuff in this category based on your pocket. The basic advice everyone offers is to opt for cheaper brands, which provide economical fittings. But avoid compromising on quality. Much as you focus on the exterior looks, don’t forget the interior, which includes your wiring and pipes. There’s no point in having plush exteriors if your internal wirng and pipes are not of good quality. pend a little on good quality internal ittings and try to save elsewhere. If you re t oo c onstrained b y y our b udget, hen you should avoid concealed wirng, which would weigh heavy on your pocket. Also, avoid Italian marble if you’re planning a low-budget renovation. This is because it’s not only expensive but also there tends to be a lot of wastage. Usually you have to buy Italian marble in big slabs, after which it needs to be cut into smaller tiles to suit your home, resulting in wastage. This is an expensive proposition for most people. Instead you could opt for glass tiles. In fact, a great variety of Chinese tiles are now available in the market that would suit your budget. Since for most people renovating a house is a once-in-a-lifetime phenomenon, make sure you do justice to your home as well as your purse. “Try styling your own home. Look for trendy things in local places. Avoid the brands,” says Mehta.

HOME REMEDIES

• Don’t renovate your home through the trial and error route. Keep a fixed plan in place. It will help you avoid unnecessary expenditure

• Keep a budget in place before you start renovating your home. This will help you keep a tab on your expenses

• Avoid keeping a fixed theme for your home. Themes weigh heavy on your pocket. Stick to a minimalist design

• Avoid buying your furniture from branded stores. Instead, you could opt for furniture sold in small woodwork shops in local places

• If you are constrained by your budget, innovate. Use your old wooden furniture to design your new furniture

• Walls tend to wear out fast. So, use a good quality paint so that you don’t have to paint them too often
void using wallpapers. Wallpapers end to be expensive. Painted walls are asier to maintain
pt for economical bath and kitchen fittings than designer fittings. But avoid compromising on quality

• If you have a tight budget, then you should avoid concealed wiring, as it is an expensive option

( http://epaper.timesofindia.com/Default/Client.asp?Daily=ETD&showST=true&login=default&pub=ET&Enter=true&Skin=ETNEW&GZ=T)

No signs of revival for residential sector

The much awaited year-end has come and gone, but prayers of real estate on Telangana seem to have gone unanswered.

Robbed off its heights that were realised during the boom phase, the sector continues to struggle to recover on its way back and though it had hopes on some clarity emerging on the T-factor, the scenario remains the same.

Office space

Though some respite has come for the section that is dealing with commercial and office spaces since the second half of last year registered demand and occupancy showing signs of growth, the residential side of the industry remains mired in dilemmas and sales that refuse to pick up.

The sale of plots and land has taken a thorough beating and even the constructed residential spaces continue to wait for deliverance.

Such is the situation that even the Hyderabad Metropolitan Development Authority (HMDA), which has been toying with the idea of going in for auction of its plots to make its coffer feel better, is yet to take the plunge.

Continued growth

Though the predominant opinion across all sections appear to be that irrespective of solutions to the T-factor, the real estate will continue to grow around the city, the key affecting the issue happens to be the pricing and hopes of them going in for a slash.

Arguments related to the fortunes of real estate and their linkages to the T-factor are made but seniors in the industry reject them on ground of lacking in practicalities.

If separation is to take place, it could lead to a flight of capital and investors might choose to capitalise new and emerging locations, which turns out to be an oft repeated premise.

National players

Yet, the fact remains that the city and its suburbs has witnessed lots of investment being pumped in by companies with presence across the country and not just from the State.

“These builders and developers selected Hyderabad given its future prospects and, in fact, coming days will see more people coming here with their monies,” a builder says.The growing belt of IT and ITES along what once were the city peripheries holds enough potential for bringing in more capital to set up more residential enclaves alongside.

Also, infrastructure development is happening around the city in a big way that will finally result in residential conglomerations coming up.

Unexplored areas

One such is the Outer Ring Road (ORR), which when completed and fully operational, as promised within next two years, holds huge potential of residential and commercial growth alongside it.

International players

Also, as a builder points out, the road to the new international airport at Shamshabad and also the peripheries of the facility, have not really been exploited so far and coming couple of years will see it metamorphose beyond recognition.

Wait and watch

Most agree that the buyers are caught in a wait and watch scenario and till they step out of it, things will not change. “Its erroneous to assume that prices will go down further, but given the prevailing scenario, the buyers could not be faulted for getting into that thought process,” points out another. Correction has already taken place and prices could not be reduced as a horde of factors influence the pricing and even the cost of construction has gone up. The costs of construction materials have been rising continuously , they argue.

Correction in pricing

The year 2008-09 was the year of correction, which altered not only pricing but also the shape of the end product. From high-end and spacious flats with international brand fittings, the focus shifted to more conservative dwellings with reduced sizes.

The pricing, which ranged between Rs.4,000 to Rs.4,500 per sft, too, has come down to the range of Rs.2,600 to Rs.2,900 per sft.

T. LALITH SINGH

Things To Do Before You Sell Your House

Things To Do Before You Sell Your House

And, before you rush to buy a new house from that money, get your paperwork in order to avoid nasty surprises

Vidyalaxmi

PLANNING to sell your old house to buy a new one? You may have settled for a smaller house constrained by your budget and the size of the family. Today, a better-paying job, an asset in the form of an old house may make the dream of buying a new house possible. Typically, it’s never too difficult to put a flat on sale in metros such as Delhi, Mumbai or Chennai. There is always a demand for real estate in these cities, which will fetch you the market value or even higher, depending upon the amenities, suburb and the area of the house. But it is important to ascertain the right value of the house and wind up the process in time so that you are not homeless from the time you leave the old house to the time you occupy the new one.

Evaluation Of The House: The value of a property depends upon several factors, such as the location, size of the house other amenities and the overall market trends in terms of appreciation and depreciation. But before putting your house on the block, you have to get the right value for your house, “Typically most individuals are aware about the rates in and around their locality. But if an investor is keen on selling, he should ideally get a surveyor or a couple of brokers to check out with your neighbours. Get the property evaluated by 2-3 brokers to get an accurate quote,” says Gulam Zia, director, National Advisory Services, Knight Frank.
Document Checklist: A buyer may not insist on all the documents but if he is planning to avail of a housing loan, then the bank will insist on the smallest document related to the house. Hence, it is always better to do a document check before you start negotiating with potential buyers. The most important documents required to sell a residential property are the housing society share certificate and the sale/ purchase deed. The sale deed will confirm the land/flat is on your name (the seller’s name) and only you have the full right to sell the land/flat. You need a copy of previous deeds if you have also bought it as a resale property. The previous deed/deeds are required to confirm the authenticity of the deal and the property. You also need original copies of the stamp duty and registered house documents. The seller will also require a no-objection certificate (NOC) from the housing society. In case of joint ownership, the owner/owners have to submit documented consent from the joint owners. “Homebuyers insist on these documents if they are opting for a housing loan. Apart from the title clearance and NOC, the precise details regarding the age of the building, the floor plan, the carpet and built-up area, the conveyance of the society, car parking status, land title (free hold/lease hold/collectors land) and transfer charges of the building and the apartment need to be attended to,” Zia adds.
The Case Of Missing Documents: Often houses which are 30-40 years old may not have proper registration. There have been announcements for homeowners to update the required paperwork. If you have not completed the required procedure, you should ideally pay off the outstanding stamp duty and file for a registration. “In the case of a missing share certificate, the intending seller should request the housing society to issue a duplicate copy. If the sale/purchase deed and/or chain of agreements/deeds are misplaced, an indemnity bond needs to be furnished by the seller along with a confirmation letter from the housing society,” explains Mrunal Duggar, V-P, homebay residential, Jones Lang La-Salle Meghraj. Similarly, if the original copy of stamp duty and registered house documents are unavailable, an indemnity bond must be furnished by the seller. “In any case, the deed must be registered after paying up the valid stamp duty. A public notice will also have to be issued,” Duggar adds. But remember you cannot sell the mortgaged property. Borrowers tend to take the payments in tranches and pay off the loan from one such instalment. But if the buyer insists on 100% paperwork before he pays the first instalment, then you cannot carry forward the deal if you are servicing the loan.
Tax Implications: When you sell a house and make a profit, in financial jargon, you are supposed to have made capital gain. You have to pay a certain tax on this profit, which is called the capital gains tax. But you can be exempted from this tax if you invest in another house subject to certain conditions (see table). The long-term capital gain on the sale of a house can be claimed as exempt from tax under Section 54 whereas the long-term capital gain on the sale of any asset other than a house can be claimed exempt under Section 54F. To claim full exemption under Section 54, you must invest the amount of long-term capital gains in a residential house whereas under Section 54F you are required to invest the amount of net sale proceeds in a residential house. Further, exemption under Section 54F cannot be claimed if you own more than one house at the time of sale of the asset. Under both the Sections, the new house can be purchased either within a year before the date of sale or within two years from the date of sale. If you cannot make the required investment before the due date for filing of return of the year in which the property is sold, the amount of capital gain or net consideration, as the case may be, is required to be deposited in a separate account (called Capital Gains Tax Saving Scheme Account) in a nationalised bank before you file the return. You can use the balance in this account to make payments for your purchase of house. Note that, you can reinvest only in a residential property. This does not include a commercial property or a vacant plot of land. Similarly, short-term capital gains enjoy no exemption under either of the Sections.
“The house you are planning to sell would be classified as short-term capital asset if the holding period is less than three years. There is no exemption available on reinvestment, be it a new house or capital gains tax saving bonds,” explains Vaibhav Sankla, executive director, Adroit.
Stay Put Till The New House Is Ready: It’s important to buy a flat which is ready for possession. Typically, builders promise a certain timeline by which they hand over the house to you. But there is no legal binding on such deadlines. Since this timeline is not mentioned on the agreement, you are at the builder’s mercy till the project is completed. Hence, always opt for a ‘ready for possession’ house if you plan to sell the old house. Otherwise, you may have to stay in a rented flat and foot the double expense of a rent and a loan.
The need for bigger space is justified. But first get the paperwork in place for both the houses, arrange for the loan and other finances, finalise the buy-first followed by the sale within a short span of time. Otherwise, you may end up paying a huge bill or end up being homeless.
LEST YOU FORGET
BEFORE SELLING THE OLD HOUSE
Get your property evaluated by surveyors or brokers to arrive at its right market value
Get all the documents in place according to the bank’s requirement for a housing loan
If you have misplaced the sale/purchase deed and/or chain of agreements, furnish an indemnity bond with a confirmation letter from the housing society
You may take payments from the buyer in tranches and pay off the loan from one such instalment. But on paper, you cannot sell your mortgaged property
Pay off the outstanding stamp duty and apply for missing documents before putting the house on sale
…& BUYING A NEW HOUSE
Ask for intimation of disapproval (IOD) that lists out the conditions on which the building should be constructed
The IOD document is usually valid for one year and has to be revalidated thereafter
Ask for the commencement certificate. It is issued by local authorities. It gives licence to the builder to begin construction only after all the terms and conditions have been met
Ask for occupation certificate. It is issued by the local municipal body after the builder provides for basic amenities such as water and electricity
If you are buying a house on resale, you must not forget to ask for the title deed

Source :- ( http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETD/2011/01/14&PageLabel=16&EntityId=Ar01600&ViewMode=HTML&GZ=T)

Save More To Buy That Dream Home

Put your home aspirations on hold for now. Build a kitty to counter potential hikes in interest rates & realty prices

MOST people eagerly wait to know what their stars foretell in the New Year. However, Pramod has different priorities this year. All he wants to know from yearly forecasts — he has been devouring every forecast for every sector — is whether he would be able to buy a house in Mumbai. He has been waiting since the past two years for his turn to own a house. First, it was the runaway prices which dissuaded him from chasing his dream home. Then, the interest rate spike further dampened his enthusiasm. But he is determined to buy a house this year — provided there is a20-25%correction in prices and slight easing of interest rate. So, what do the stars have in store for him?

We really don’t know whether it is Saturn or Pluto or their combination, but the forecast says Pramod will have to wait at least three to six months to see his wish come true. And, not too many astrologers are willing to bet on whether the price would decline across the board all over the country. As for interest rates, they are fairly certain they would peak in the next six months and start easing… provided stars don’t turn retrograde during the period.
However, even before that potential buyers have to confront some unpleasant developments on the home front. First, one has to shell out more towards down payment to the bank. “Recently, Reserve Bank of India (RBI) directed banks to reduce their exposure on flats costing above . 20 lakh from the earlier up to 90% to 80% now. This means that the buyer would have to take care of the extra margin money of 10%,” Pankaj Kapoor, managing director of Laises Foras, a real estate research agency said. Simply put, earlier banks used to lend around . 45 lakh for a . 50-lakh house, now they will lend only . 40 lakh. That means if you were banking on a bigger loan from the bank, it is time to hit the pause button and take stock whether you can shell out the extra money without stretching your finances. Imagine, this could be a crucial factor if you are opting for floating rate loan, as your EMI could soar if there is a hike in base rate of the bank.
Soaring Interest Rates: As if higher realty prices were not enough, buyers must now also deal with rising interest rates. Recently, a host of banks have increased interest rates on both deposit and lending rates. The so-called teaser loan with lower interest rates in the initial three years also has been tweaked. In short, you should be ready to fork out more if you are taking a home loan. Kapoor also says that apart from the interest paid on the loan, one also now needs to pay an additional interest component of 25 to 50 basis points if the loan is above . 75 lakh. “This comes into play as none of the new projects in Mumbai is priced below . 1 crore.”
That is not the only bad news for Mumbai buyers. The ready reckoner rates of Mumbai property prices were recently revised and property rates, as per the government circular, are expected to go up by 25-30% on an average. “This means that the stamp duty and the registration charges, which are generally a fixed percentage of the property price, are also expected to go up,” says Kapoor. Also, property buyers in Maharashtra will have to pay an additional 1% value added tax and 3.3% service tax on the value of the property to the state government.
Wait For Six Months: No wonder, suddenly people looking at planets for clues about their prospects of owning a house. The moral of the story is that don’t be in a hurry to buy a place. “There is a possibility of a correction in prices around 15-20% in select pockets. We are basing this on the information that most real estate developers are starved of funds as they have exhausted every avenue of borrowing. Also, there is hardly any sales taking place,” says D Sundrarajan, investment experts, Trendy Investment, a wealth management firm.
Sunil Mantri, chairman & managing director, Sunil Mantri Realty group and the president of Maharashtra Chamber of Housing & Indus-try (MCHI) says that property prices could correct marginally by around 5-15% this year. “The good news is that prices are also expected to be more or less stable. In central Mumbai, with a lot of new projects coming up, buyers will have a lot more choices to make.”
He adds that Mumbai is soon turning into a city of contrasts with even projects in the same locality commanding different pricing. “The finest example is that property projects situated in the east and the west of the same area have a price difference of at least 15-30%. Connectivity, premium demography and the presence of slums play a major role in deciding the pricing. Kapoor also feels that potential buyers should wait for three to six months before buying their dream house. “Realty prices have peaked and the demand for houses are very low. We expect the prices to correct by at least 15-25% across the country. In some pockets, they could be higher,” he says.
Ramesh Nair, MD, West India, Jones Lang LaSalle India, a property consultancy firm, believes real estate pricing is highly location-specific. “Property prices have already begun correcting in over-heated locations in Mumbai, while they continue to hold steady and even ascend in many parts like Navi Mumbai,” he says. Property prices in Navi Mumbai have suddenly appreciated after the announcement of the international airport project. Nair says if buyers are considering buying into an area where prices have peaked, stagnated and are likely to correct, it is advisable to wait for at least six months before pressing the buy button. “However, if they are looking at growth corridors where there is considerable demand driving residential sales, the best time is now since prices there will rise further.”
And that is not an isolated view. If you talk to real estate developers, they will put up a brave face and tell you all the predictions are wrong. In fact, many of them expect prices to appreciate by at least 10%. “With a lot of choices for the buyer, now is actually the best time to buy the property. We anticipate prices to go further appreciate by at least another 10-15% this year,” says Niranjan Hiranandani, chairman, Hiranandani group of companies.
Tread With Caution: Financial experts are asking their clients to proceed very cautiously since both the value of property and the EMI is barely within the means of most individuals. “The down payment has gone up. The likely EMI is huge. Then you also have to factor in that it may balloon anytime because of the floating interest rate… You have to be very careful about what you are committing,” says a wealth manager who doesn’t want to be quoted. “Sure, it is an emotional decision to own a house, but I would like individuals to be a bit pragmatic while deciding on their purchase. They should include job loss, extra EMI… everything before taking the final call.”
Save, save and save more. That is another advice coming from experts. Sundararajan, for one, feels every prospective should save more so that they have enough to pay upfront to the bank and also if possible enough to take care of the extra EMI due to rise in interest rates. “At no point of time, the EMI outgo should be above 50%. While taking a home loan, provide for 1% hike in rates to see whether the outgo exceeds the limit,” he says. If the servicing of the loan goes beyond 50%, you will find it difficult to manage your family finances.

( Source :- http://epaper.timesofindia.com/Default/Client.asp?Daily=ETD&showST=true&login=default&pub=ET&Enter=true&Skin=ETNEW&GZ=T&AW=1294451043531)

ALL ABOUT TAX ON RENT

Income from house property shall be restructured under the Direct Taxes Code

The Direct Taxes Code Bill, 2010, is a bill to consolidate and amend the law relating to direct taxes such as income-tax and wealth-tax. After the Direct Taxes Code, 2010 becomes law, it shall come into effect from 1st April, 2012. The provisions relating to income from house property have also been restructured under the Code which are given below.

The income from letting of any house property owned by any person shall be computed under the head "income from house property" and such income shall be computed under this head notwithstanding that the letting, if any of the property is in the nature of trade, commerce or business.
The income from house property owned by two or more persons having definite and ascertainable shares shall be computed separately for each such person in respect of his share, and in case where such shares are not definite and ascertainable, such persons shall be assessed as an association of persons in respect of such property.
These provisions shall not apply to a property or any portion of a property which (i) is used by the person as a hospital, hotel, convention centre or cold storage, and (ii) forms part of Special Economic Zone, the income from which is computed under the head "income from business". These provisions shall also not apply to house property which is not ready for use during the financial year.
The income from house property shall be the gross rent as reduced by the aggregate amount of permitted deductions. The gross rent in respect of a house property shall be the amount of rent received or receivable, directly or indirectly for the financial year or part thereof for which such property is let out.
The permitted deductions for the purpose of computation of income from house property are (a) the amount of taxes levied by a local authority in respect of such property, to the extent the amount is actually paid during the financial year.
(b) a sum equal to twenty per cent of the gross rent towards repair and maintenance of such property,
(c) the amount of interest on loan taken for the purposes of acquisition , construction, repair or renovation of the property or interest on loan taken for the purpose of repayment of such abovementioned loan.
The above interest which pertains to the period prior to the financial year in which the house property has been acquired or constructed shall be allowed as deduction in five equal installments beginning from such financial year, and such interest shall be reduced by any part thereof which has been allowed as deduction under any other provision of the Code.
The amount of rent received in advance shall be included in the gross rent of the financial year to which the rent relates. Also the amount of rent received in arrears shall be deemed to be the income from house property of the financial year in which such rent is received, and such arrears shall be included whether the person is the owner of the property in that year or not, and a sum equal to twenty per cent of the arrears shall be allowed as deduction towards repair and maintenance of the property.
The concept of presumptive rent has been done away with in the Code. Further under the present Income Tax Act, a deduction of thirty per cent of the annual value is allowed. The annual value is arrived at after deduction of taxes levied by the local authority from the rent.

( Source :- Economic times)

Home-Loan tips: Optimise your tax breaks by opting for a joint hom...

Home-Loan tips: Optimise your tax breaks by opting for a joint hom...: "A home loan often means all the more caution with money management and monthly budgets. It also means some smart thinking on the part of the..."

Optimise your tax breaks by opting for a joint home loan

A home loan often means all the more caution with money management and monthly budgets. It also means some smart thinking on the part of the individual who is taking up the home loan.

Apart from things like evaluating fund flow, future job prospects, negotiating a pay hike, understanding loan eligibility, maintaining a good credit score and getting the best interest rate in the market, one also needs to consider the possibility of opting for a joint home loan!

WHO CAN OPT FOR IT?

Banks insist that all co-owners of the home must be co-borrowers in a joint home loan.

- One could team up with parents or the spouse to be able to maximize the benefits of a joint home loan.

- Some banks allow brothers to take a joint home loan provided they opt to become co-owners of the property.

The exceptions are sisters, friends or unmarried couples living together as most banks generally don’t allow them to opt for a joint home loan.

KEY ADVANTAGES OF A JOINT HOME LOAN

a. Banks do not allow a person to borrow to an extent where their EMI exceeds more than around 40-50% of their monthly income. This ensures that there is no stress on an individual’s monthly budget. Hence, when the incomes of all the joint applicants are combined to decide the loan eligibility, the result is a better loan amount for a better home.

b. All co-applicants are eligible for simultaneous tax rebates under Section 80 C for principal repaid and under Section 24 for interest repaid. However, these tax deductions are capped at 1 L for the principal repaid and 1.5 L for the interest repaid. Do note that this is applied for each individual loan applicant thus maximizing the tax benefits on the home loan.

If you and your spouse earn similar incomes, then its best to opt for an equal co-ownership of the property and split the tax benefits of the home loan equally as well. In case one of you fall under a smaller tax bracket, it is good to let the partner with the higher pay make a higher contribution towards the home loan resulting in a better tax benefit collectively. This would help you optimize the benefits from the tax exemption on principal and interest repaid.

Eg. Let’s say the principal and interest repayment on your home loan for a given year is Rs 2.4 lakh and Rs 3.5 lakh respectively. Now, under Section 80C, you can get a maximum tax deduction of Rs 1 lakh on principal repaid and under Section 24 you can get a tax break of up to Rs 1.5 lakh on interest repaid.

However, if you and your spouse have opted for a joint home loan, you would collectively be able to claim a deduction of Rs 2 lakh and Rs 3 lakh on the principal and interest repaid.

Do note that the tax benefits are according to the proportion of the loan. That is, if the ratio of the loan is 70:30, then a loan of say, Rs 50 lakh will be split as Rs 35 lakh and Rs 15 lakh respectively and this ratio will be applicable while calculating tax benefits on the interest and principal repaid on this loan.

Also keep in mind, that tax slabs might change according to new budget specifications each year and there could be changes in the gross income as well, not to mention changes in the total principal and interest repaid in every new year of the home loan. In this respect, the interest repaid will become considerably lesser and the principal repaid will become higher during the latter years of the loan.

For tax purposes, it is best to procure a home loan sharing agreement, detailing the ownership proportion in a stamp paper, as legal proof for ownership.

So taking a joint home loan has the significant twin benefit of increasing your loan eligibility and maximizing your tax rebate. Do remember that though the banks insist that all co-owners of the property should also be co-applicants in a joint home loan, the reverse need not be true.

( Source :- http://in.reuters.com/article/idINIndia-53765220101224?pageNumber=2 )

Home-Loan tips: Reduce your tax liability by investing in a house

Home-Loan tips: Reduce your tax liability by investing in a house: "Through generations, Indians have not only learnt, but also mastered the art of 'saving' and 'investing'. In our country, we save not just t..."

Reduce your tax liability by investing in a house

Through generations, Indians have not only learnt, but also mastered the art of 'saving' and 'investing'. In our country, we save not just to meet contingencies, but also for growth that will support the future of our progeny.

As a civilisation, we also emotionally bond with our immovable property, especially in our homes. Besides these s ofter intangibles derived by investing in house property, the following tax benefits can be a compelling reason to buy property.

Where house property is purchased using loaned funds, the owner is eligible for a deduction of Rs 100,000 towards repayment of the principal amount of the housing loan. This deduction is however, subject to an overall cap along with various other prescribed investments under Section 80C of the Act.

It is important to note that this benefit is not envisaged under the provisions of the new Direct Tax Code that will come into effect from April 1, 2012.

House owners are also allowed to claim the interest on housing loan as deduction from the taxable income. The benefit on account of de-duction for interest on housing loan is illustrated below:

Consider an example of two persons A and B. Their annual salaries are Rs 10,00,000 and they are entitled to an HRA of Rs 20,000 per month. A stays in a self-occupied property and 'B' in a rented house (rent per month Rs 15,000) in the same locality.

A has borrowed Rs 30,00,000 @ 10% per annum and the cost of the property is Rs 30,00,000. In 20 years, total outflow of A would be Rs 6,948,240 (including interest of Rs 3,948,240) towards repayment of loan. Assuming increase in rentals @ 6% per annum, B's outflows will be Rs 6,621,406 in 20 years.

The tax savings by A and B would also significantly differ. While A will be entitled to claim deduction of interest up to Rs 1,50,000, B will be entitled to claim HRA of approximately Rs 1,20,000.

However, as the tenure of home loan decreases, the tax savings earned by A on the interest would decrease vis-à-vis the tax savings of B on account of HRA. In this case, it is worthwhile to note that the appreciated value of A's property will be manifold at the end of 20 years, while, B would not create any new asset.

The benefit of interest deductions continue to exist in the proposed new Direct Tax Code. In addition to the above, investment in a house property is also eligi-ble for exemption from payment of capital gains subject to fulfilment of certain conditions.

To avail this benefit, the taxpayer would have to invest/reinvest the capital gains for purchasing HP. Such exemption is available only if the capital gain is a long-term and arises due to transfer of any long-term capital asset.

The new Direct Tax Code also provides for similar exemption in respect of long-term capital gains. Accordingly, investment in HP can be explored where any person wishes to reduce tax liability in respect of long-term capital gains.
By NAVEEN AGARWAL (Senior Manager, Tax & Regulatory Services, Ernst & Young)

Amicable solution to Statehood issue will spur realty growth, say sector players

V. Rishi Kumar

Hyderabad, Dec. 30

Real estate segment players are looking at the year ahead with a sense of optimism and feel that the ongoing issues relating to Telangana State creation and the submission of the report by the Srikrishna Commission will settle down in an amicable manner.

They believe that the Telangana factor has already been factored by the industry and the prospective buyers. However, they maintain that the sector should see some speculative buying which is necessary to create more excitement and the Andhra Pradesh Government should extend some of the sops it had announced earlier.

Mr K. Ravinder Reddy, Chairman and Managing Director of Janapriya Engineers Syndicate Ltd and Chairman of AP Builders Association, told Business Line that the recent Supreme Court judgment in the Babri issue was a pointer as to how a workable solution was provided where all the stakeholders took the order in their stride.

“I personally expect that the Srikrishna Committee will do something similar so that everyone gains,” he said.

Mr Reddy said, “We have a reason to be optimistic as the sector has already reached its lows in terms of pricing and buyer interest. From here on, it could only get better. Once peace and tranquillity is ensured, the real estate business will get better from the current situation. Genuine buyers, who have been postponing their decisions, will start buying the right fit and create the buzz in the market again.”

Looking for changes

Mr Prem Kumar, President of AP Real Estate Developers Association (APREDA) and Managing Director of Doyen Constructions, said “while it may not be appropriate to predict the outcome of the findings of the Srikrishna panel and its fallout, since it has already been debated extensively. The fact is there has been a lot of uncertainty, not only in the sector but in the State and due to change in political leadership.”

“In the last few months the sales have picked up and all those people in need of homes are deciding to buy. But there are many others who are keen to buy but have been postponing hoping some more changes. Either way, once the issue settles down, we will see sales going up. However, he felt that some of the sops that the Government offered to apartments below 1,200 sq.ft and other rebates in the firm of stamp duty need to be extended. These lapse in December,” Mr Kumar said.

“As a representative of the real estate builders' body, we have articulated these issues and hope that the Government would take a favourable decision. That will not only enthuse buyers, but also accelerate registrations and, thereby, add to the State's revenues,” he said.

Mr Anand Reddy, Managing Director of PEBL Constructions, said that the real estate has presented different patterns in the last three years. From a high in 2007 end and early 2008, and the lows seen in all of 2009, it has gradually picked up in 2010.

It continues to be stable now. Surely those genuinely requiring properties will take a plunge next year enthused by attractive rates builders are offering.

Citing their own projects, Mr Anand Reddy said “there have been 15 per cent conversion of visitors in the last four months. We hope this will go up as people will no longer consider postponing as they have realised that the property rates are at their lows. If at all this could only go up as things settle down.”

(Source:- http://www.thehindubusinessline.com/2010/12/31/stories/2010123151541700.htm)

Loans to cost 1% more this year on high prices Rising Demand For Funds, Tight Liquidity May Push Up Rates

BORROWING costs are poised to rise at least 1 percentage point this calendar year as the Reserve Bank of India (RBI) may be forced to tighten rates to contain price rise that is accelerating beyond most policymakers’ forecast.
Bankers and economists believe rates may rise by another 50-100 basis points in 2011 as demand for loans surges in an economy expanding at near 9% and liquidity remains tight reflected in record bank borrowings from RBI.
“Interest rates have not yet peaked,” said S Raman, Chairman & Managing Director at Canara Bank. “Rates may go up if liquidity remains tight and demand for loans increases.”
RBI data show credit grew 23.7%, surpassing the central bank’s target of 20% for the fiscal. Deposit growth slowed at 14.7%, reflecting investors’ preference for higher-yielding assets due to soaring inflation.
On Friday, the country’s largest private bank, ICICI Bank, and largest government-owned bank, State Bank of India, raised lending rates, signalling higher cost of borrowing for individuals, farmers and corporates will continue. SBI raised its base rate—the new tool to price loans for best-rated customers—by 40 basis points to 8% while ICICI raised it to 8.25% from 7.75%. A basis point is 0.01 percentage point. Bank margins may face pressure
MOST other banks have also raised their base rate to 9% in recent weeks. The revised prime lending rates of SBI and ICICI bank stand at 12.75% and 17%, respectively. “Unless inflation comes down, rates will not come down. It will also depend on liquidity situation,” said RP Pradeep, CMD of Corporation Bank. Inflation, after showing temporary signs of cooling for a few months, is rearing its head again. Input costs for manufacturers are soaring and food prices are rising at record pace after unseasonal rains spoiled farm output. Bank margins—the difference between cost of deposits and yield on advances—too are likely to come under pressure in coming months. The margins vary from 3.3% in case of SBI to around 4% forprivate banks such as HDFC Bank.
“So long as there is pressure on liquidity, pressure on margins will continue,” said KR Kamath, CMD of Punjab National Bank. ``Also, there will be resistance among borrowers to absorb a hike in lending rates, but if deposits do not grow in turn with credit growth, banks will need to attract depositors by offering higher rates keeping inflation in mind.” The central bank would stick to its choice of tight liquidity stance to reduce asset price bubbles. “RBI is likely to continue with (its) tight liquidity stand to ensure efficient transmission of monetary policy. However, we do expect liquidity deficit level to come off to Rs 50,000-60,000 crore once demand and supply gap normalises,” said Hemant Mishr, head of global markets, Standard Chartered Bank.

( Source:- http://epaper.timesofindia.com/Default/Scripting/ArticleWin.asp?From=Archive&Source=Page&Skin=ETNEW&BaseHref=ETM/2011/01/03&PageLabel=1&EntityId=Ar00104&ViewMode=HTML&GZ=T)

Tougher norms for housing finance companies

India’s housing regulator has tightened lending norms governing housing finance companies, a move that will impact home loan seekers.

The National Housing Bank ( NHB )) has mandated that housing finance firms make greater provisions for loans extended to companies and builders while limiting the amount a person can borrow against property.

The new rules require housing finance companies to provision, or keep aside, 0.4% of the total outstanding loans by September 2011. This would apply to all loans other than individual housing loans. “We want them (housing finance firms) to build up adequate capital reserves for that segment, which can be very volatile and prone to risk,” said National Housing Bank Chairman and Managing Director RV Verma.

The new norms also limit the amount a person can borrow against property to 90% when the value of the property is less than 20 lakh. There was earlier no limit on such loans as they were classified as the priority sector. All other loans against property have been capped at 80% of the property’s value.

The regulator is of the view that since this segment is very competitive, some lenders were tempted to extend up to 100% loan against property. Such loans have the potential to impact the balance sheet of a lender in the long run, it said.

The norms also mandate a risk weight of 125% for new home loans above 75 lakh. This means for every rupee lent, lenders would have to keep aside 1.25.

“Most of the developed economies have similar guidelines for housing finance companies,” said Verma.

The regulator has also directed housing finance companies to maintain a 2% provision on teaser loans. This includes any other loan with special rates, where the interest rate is low in the first few years.

“These are positive steps which will help in ensuring a level playing field in the industry,” said Anil Sachidanand, CEO of Dewan Housing Finance.

The housing finance firm has less than 2% exposure towards builders or corporates. Sachidanand is of the view that the cap could have been lowered to around 80% for loans less than 20 lakh as it would ensure that borrowers have to pay more from their side and encourage savings.

( Source:- http://economictimes.indiatimes.com/news/politics/nation/tougher-norms-for-housing-finance-companies/articleshow/7175678.cms )