Tuesday, 27 February 2018

Guide to smart banking: Know your home loan: It’s your life’s biggest financial decision

It is perhaps the single most important purchase that anyone makes in their lifetime, and the realisation of a dream. But owning a home is also, in a sense, a basic necessity. Securing a home loan, therefore, is one of the most important personal finance decisions an individual will make.

Today, home loan tenures vary from 10 to 30 years depending on the borrower’s age and the loan amount. Home buyers now have the option of going in for home finance from banks and financial institutions that not only help them with the best finance options based on their individual eligibility but also help them in the entire process of owning a home.

With so many incentives, more and more Indians are confidently embarking on the journey that leads to their dream home. In view of this renewed vigour among consumers, various Housing Finance Companies (HFCs) have enhanced their customer support programmes to encourage prospective home buyers to avail themselves of home loans. However, it is imperative from the borrower’s perspective to understand various aspects of home loans.

The right loan for you

There are an assortment of home loan schemes available in the market. Since a home loan is probably the biggest financial commitment you’ll take on, you will need to take the time and read through the fine print carefully before signing on the dotted line. A few of the options that individuals can go in for are: loans for purchase of ready property; loans for purchase of under-construction property; loans for self-construction; loans for purchase of plot; loans for renovation/extension of existing property; loans against existing property, and so on.

Based on the income criteria, some borrowers may qualify for the Pradhan Mantri Awas Yojana (PMAY), where an individual can avail of a credit-linked subsidy of up to ₹2.67 lakh, depending on eligibility. Borrowers can avail of benefits under this scheme for purchase/construction/extension/ improvement of their home.

But while negotiating the paperwork maze, you will need to get acquainted with a few technical terms and a few operational details.

Some of the critical ones are:

Loan-to-value ratio
Loan-to-value defines the ratio of a loan to the value of an asset purchased. Earlier the LTV was 80 per cent of the value, but now it has been increased to 90 per cent of the home loan value for properties up to ₹30 lakh.

Equated Monthly Instalment
One of the most critical factors that influences a home loan decision from the borrower’s perspective is the EMI, which is the monthly outflow of money that will go towards repaying the home loan. As a golden rule, never let your EMI exceed 40-45 per cent of your net monthly income. Also, note that there are no prepayment charges or penalties levied if the customer prepays his/her home loan.

The interest rate
Home loans typically come with two types of interest rates — fixed and floating. Under a fixed-rate arrangement, the interest rate on your home loan remains constant for a period of 3-5 years (depending on the scheme offered by the financial institution) or, in certain cases, for the full tenure of the loan. Under a floating interest rate regime, the interest rate on your home loan varies depending on the movement of cost of funds for the financial institution.

The rate on your home loan may increase or decrease in line with the trend in the cost of funds. A fixed rate will typically be higher than a floating rate; you should opt for a fixed-rate regime with caution, keeping in mind your judgment of the interest rate scenario. There are also options to switch between a fixed and floating rate of interest at anytime during your tenure of your loan.

Creditscore
A borrower’s credit score is a critical consideration for a financial institution while making an assessment of the individual’s home loan eligibility and the interest rate component. The credit score of an individual defines the credit-worthiness of the person and is one of the key determining factors for the approval of a home loan. While a good credit score is one of the most critical factors for the lender to ascertain home loan eligibility, it is not the only criteria. Banks and financial institutions prefer to lend to borrowers with a credit score higher than 750 since it reflects stronger credit-worthiness.

Over the years, securing a home loan has become a hassle-free procedure, with financial institutions increasingly focussing on providing the best deal to the customer. Affordable housing has emerged as a priority focus area for the government as well, which has been steadily laying out supportive measures and building a conducive environment with new and innovative policy measures to enable home ownership. With the expanding industry landscape, both new and existing home buyers have ample home loan options to choose from. They should embrace it at the earliest to make their home ownership dream a reality.

The writer is Joint Managing Director and CEO, DHFL

Read More: http://bit.ly/2GLdUQw

Source: The Hindu Businessline

Monday, 19 February 2018

Real Estate in India: Co-working space may be next growth driver


Co-working is one of the predominant new trends that are having both real-time and long-term impacts on the Indian real estate.

Driven by a thriving start-up ecosystem as well as growing demand from corporates, freelancers and consultants, among others, co-working spaces are growing like never before. So much so that by the end of 2018, as per industry estimates, India’s co-working space is likely to receive $400 million in investments and by 2020, the number of branded co-working spaces is estimated to grow to 400 centers across the nation from less than 100 in 2017.

Industry experts say that co-working is one of the predominant new trends that are having both real-time and long-term impacts on the Indian real estate. The Indian start-up ecosystem is in a boom mode and entrepreneurship is being strongly supported by the government. This has created a huge demand for flexible office spaces which meet the specific needs of start-ups which are beginning from a low capital and manpower base. The Indian business scene is now a hotbed of freelancers and consultants which are strongly supplementing the formal workforces.

Simultaneously, “even large corporates are opting for co-working spaces in some cities, either to cater to specific clients or as incubation centers in new cities which will later lead to expansion into formal office spaces. It, therefore, comes as no surprise that co-working office spaces have become so incredibly popular, and they are now cropping up all over the country – from Tier 1 right through to Tier 2 and Tier 3 cities. These spaces make it possible for start-ups to avail of a high degree of flexibility in their work environments, in terms of locations, facilities and of course costs. There are about 110 formal co-working office space players in the Indian market now,” says Anuj Puri, Chairman, ANAROCK Property Consultants.

Talking about the growth potential of co-working spaces in India, Vineet Taing, President, Vatika Business Centre, one of the largest Indian business centre providers, says, “Co-working spaces will continue to prosper ceaselessly, for long. By 2020, the number of seats in licensed commercial setup will grow by four fold. The growth is favored by rapid urbanization in India, start-ups culture, arrival of MNCs, positive signs by investors and of course, boundless client advantages offered by business centres or co-working spaces. Co-working spaces are just the extension of business centres which are in use since 1995. Business profitability will be commanded by extra services offered via successful integration of business requirements and hospitality services.”


It is expected that both international and domestic co-working operators will establish a presence in the central and suburban districts of main cities in the country. The number of co-working spaces is likely to further increase in Mumbai, Bengaluru and Gurgaon owing to the availability of opportunities for start-ups and adequate infrastructure in those cities.

Read More: http://bit.ly/2HunrfF
Source: Financial Express

Tuesday, 13 February 2018

Private equity investment in real estate to touch $100 billion by 2026: JLL India

In the past 12 years (2006-2017) India has seen investments of USD 42 billion, while in the next 10 years (2017-2026) it is expected to see inflows to the tune of USD 58 billion.

Private equity inflow in the real estate sector is estimated to touch USD 100 billion by 2026 and tier-1 and tier-2 cities will be its primary beneficiaries, property consultant JLL India said in a report.

Private equity in the last few years has been concentrated in Mumbai, Bengaluru and Delhi-NCR, with Mumbai seeing the highest percentage at 31 percent of PE investment, followed by Delhi-NCR 27 percent and Bengaluru at 12 percent. Tier-2 cities and other markets have seen limited activity in terms of private equity funding, JLL said.

In the past 12 years (2006-2017) India has seen investments of USD 42 billion, while in the next 10 years (2017-2026) it is expected to see inflows to the tune of USD 58 billion. According to the report, the flood gates will open wider when REITs (real estate investment trusts) get listed.

In terms of asset classes, the largest investments went to residential sector, which has seen a total of 44 percent of all private equity investment in the sector so far. Although the percentage share has reduced in the last couple of quarters, the attraction of the residential sector remains strong as the exit route is clear for this asset class, JLL said. It added that IT and commercial account for around 27 percent of PE investment.

“India’s attractiveness as a global investment destination has been steadily rising. We have seen numerous measures that have created a positive economic environment, bringing in key factors like transparency, accountability and ease of entry into various sectors in India. This gives India a fillip in attracting capital. This would be the key factor for private equity to bet big on the sector in the future. We will see the flood gates open the time REITs are listed in the market. As this would give the developers a good option to exit or convert their holdings in to tradable stocks, through income generating assets. Further, with the current size of the economy and its steady growth with GDP pegged over 7% year – on – year for the next 3 to 5 years,” said Ramesh Nair, CEO & Country Head, JLL India.

Private equity inflows, over the last 3 years (2014 – 2017), in office and IT / ITES rose by 150 percent, with a strong attraction towards office sector. Although the residential sector remained the highest invested sector, the rise in the same period was a mere 5 percent of total investment flows in pure equity.

Debt structures dominate fund inflows in the residential sector, which is a key reason as to why developers are overleveraged. This is on account of the general sluggishness in residential markets and investors unwilling to take downside risk.

With increased transparency and regulations, we can expect a return of equity to residential markets in 2018. Another key insight is that except office and residential sectors, all other sectors together account for only 30 percent of total investments since 2014, according to the report.


“Investors are yet to explore the possibilities of new asset classes which will show strong trends in the near future. Alternate assets classes such as retail, industrial, warehousing and alternatives will be promising,” said Nair.

Read More: http://bit.ly/2BNClyc
Source: Money Control

Friday, 9 February 2018

Budget 2018: How Jaitley's circle rate move will impact real estate deals


If a property's sale value is up to 5 per cent below its circle rate, the buyer and seller won't need to pay additional tax.


Property buyers and sellers in metros, especially in upmarket localities, won’t need to pay additional tax if the difference between the agreement and stamp duty values of the property is less than 5 per cent. The finance minister has proposed this relief in the Budget.
At present, if the sale price of the property is lower than the circle rate, the difference is added to the buyer’s income and taxed. Even the seller needs to calculate capital gains based on the circle rate and consequently, pay higher taxes due to the difference. Circle rates are state governments’ benchmark or reference property prices on which they calculate the stamp duty payable. It’s also known as ready reckoner or collector rates.
If there’s a transaction of property valued at Rs 10 million, but the circle rate is Rs 10.5 million, the buyer earlier would pay tax on Rs 500,000 based on his slab rate. An individual in 30 per cent tax bracket, for example, would pay Rs 150,000 in tax. The difference is considered as a ‘profit’ for the buyer under Section 56(2) of the Income-Tax Act. Now, he doesn’t need to pay any tax for variation up to five per cent.

A seller needs to calculate capital gain based on the price considered for stamp duty under Section 50C. Now, the seller’s tax liability will be slightly lower. If the gains at present were, say, Rs 798,120, it would come down by Rs 100,000 (see table).

But what if the difference between the property value and the circle rate is more than five per cent? In this case, the buyer and seller will not get the proposed tax benefit. “It has to be either 5 per cent or lower. Else, it will follow the current taxation system,” says Naveen Wadhwa, general manager, Taxmann.com. The changes are also made only for income tax purposes. “If the circle rates are higher, the buyer would still need to pay stamp duty based on those benchmark prices of the respective states,” says Wadhwa.


Experts say that such difference is usually seen in the upmarket localities in metros. “In suburbs, mostly, the circle rates are closer to actual property prices, and in tier II cities they are much lower,” says Pankaj Kapoor, managing director of real estate consultancy Liases Foras.
The proposal will essentially benefit buyers and sellers in areas where property prices have seen a much higher correction in the last two-three years. “If you look at Gurugram in Delhi NCR, prices in some localities are still below the government’s benchmark rates though the state government has lowered the circle rates in the past two years. But the regulations are such that buyers and sellers need to pay the tax out of their pocket on the difference,” says Ashutosh Limaye, head – research, JLL India. He further adds that there are times when two properties situated next to each other sell at different prices, but circle rates are the same for both. The government now recognises such disparity.
During his Budget speech, Finance Minister Arun Jaitley had explained the reason for this change: “Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors including the shape of the plot and location.”
Property buyers and sellers in metros, especially in upmarket localities, won’t need to pay additional tax if the difference between the agreement and stamp duty values of the property is less than 5 per cent.

Graph

The finance minister has proposed this relief in Budget 2018.
At present, if the sale price of a property is lower than the circle rate, the difference is added to the buyer’s income and taxed as ‘income from other source’. Even the seller needs to calculate his capital gains on the basis of the circle rate which means a higher tax payment. Circle rates are state governments’ benchmark or reference property prices on which they calculate the stamp duty payable. They are also known as ‘ready reckoner’ or ‘collector rates’.
For example, according to the present practice, if a property being sold is valued at Rs 10 million, but the circle rate is Rs 10.05 million, the buyer has to pay tax on Rs 500,000 based on his slab rate. An individual in the 30 per cent tax bracket pays Rs 150,000 in tax. The difference is considered as a ‘profit’ for the buyer under section 56(2) of the Income-tax Act. However, according to the Budget proposal, he will not need to pay any tax in case the variation is up to 5 per cent.
A seller needs to calculate his capital gains on the basis of the price considered for stamp duty under section 50C. Now, the seller’s tax liability will be slightly lower. If the gains at present were, say, Rs 798,120. It would come down by Rs 100,000 (see table).
But what if the difference between the property value and the circle rate is more than 5 per cent? In this case, the buyer and seller will not get the proposed tax benefit. “It has to be either 5 per cent or lower. Else, it will follow the current taxation system,” says Naveen Wadhwa, general manager, Taxmann.com. The changes are also made only for the income-tax purpose. “If the circle rates are higher, buyers would still need to pay stamp duty based on the benchmark prices in their respective states,” says Wadhwa.
Experts say that such a difference is usually seen in the upmarket localities in metros. “In suburbs, mostly, the circle rates are closer to actual property prices, and in Tier-II cities they are much lower,” says Pankaj Kapoor, MD of real estate consultancy Liases Foras.
The proposal will essentially benefit buyers and sellers in areas where property prices have seen a much higher correction in the past two-three years. “If you look at Gurgain in Delhi-NCR, prices in some localities are still below the government’s benchmark rates, despite the state government lowering the circle rates in the past two years. But the regulations are such that buyers and sellers need to pay the tax out of their pocket on the difference,” says Ashutosh Limaye, head of research, JLL India. He further adds, in some cases, two properties situated next to each other might sell at different prices, even as the circle rates is the same for both. The government now recognises such disparity.
During his Budget speech, Finance Minister Arun Jaitley had said: "Sometimes, this variation can occur in respect of different properties in the same area because of a variety of factors, including the shape of the plot and location."

Read More: http://bit.ly/2EoZ1pb
Source: Business Standard

Monday, 5 February 2018

Indo-Anglians: The newest and fastest-growing caste in India

An influential demographic or psychographic is emerging in India  – and it is  affluent, urban and highly educated.

Sometime around 2012 or 2013, my daughters stopped speaking in Konkani, our mother tongue. It isn’t entirely clear what provoked it. Perhaps it was a teacher at their Mumbai school encouraging students to speak more English at home. Or perhaps it was something else. It didn’t matter. What did matter was that our home became an almost exclusively English-speaking household, with the occasional Konkani conversation.

We were not alone. Clustered throughout the affluent sections of urban India are many families such as ours, predominantly speaking English and not the tongues they grew up with.

Some of these families, or at least parents in these English-speaking households, do make an attempt to speak their mother tongue as much as they speak in English. But even in these bilingual households, English still dominates. It takes an effort for the kids to speak in the Indian tongues, beyond a few simple phrases. English, on the other hand, comes naturally to them; the larger vocabulary they possess in English helping them express complex thoughts and propositions far easily.

I have been looking for a term, an acronym or a phrase that describes these families who speak English predominantly at home. These constitute an influential demographic, or rather a psychographic, in India  –  affluent, urban, highly educated, usually in intercaste or inter-religious unions. I propose to call them Indo-Anglians.

Friday, 2 February 2018

Why One Should Choose New Projects Over Resale Flats?

People thinking of buying a house always encounter this dilemma of whether to go for an old property or buy a new one. So, let me help you in figuring out why it is always better to go for a new project instead of a used property.

Your home will be an integral part of your identity. It is very difficult, if not impossible, to paint a unique masterpiece on a used canvas. Previous owners will always leave a certain imprint of their personality on the property.


When you go for a new project you are flooded with options. Right from modern amenities to developers offering you exclusive deals, pre-launch monetary benefit schemes, etc. The kind of amenities new projects provide are too good to resist. Today modern residential projects functions like a city within a city, these townships include amenities such as a club house, gymnasium, swimming pool, sport complexes, gardens, children’s play area, security and more. When you go for a new project you are not just offered a house, you are offered a lifestyle. The chances of getting these amenities in a resale flat is far too less.

Read More: https://goo.gl/5C6z4w
Source: Prrop