By Accommodation Times (www.accommodationtimes.com)
New Delhi:
Realtors gladly have welcomed the Reserve Bank of India’s decision to deduction in Cash Reserve Ratio (CRR) will help to get better the liquidity position of all sectors including realty sector, as well as cited that interest rates should be reduced to shoot up the housing demand.
The cut in CRR will bring in liquidity, which will help to falling real estate sector.
In its 3rd Q review of the monetary policy RBI has injected Rs 32,000 crore into the system by lowering the CRR by 50 basis point.
Pradeep Jain, Chairman, Parsvnath Developers Limited and Chairman, Confederation of Real Estate Developers’ Association of India (CREDAI) said that, “RBI, in its Credit Policy Review has attempted to do a delicate balancing act between the need for growth and urgency of containing price line. In the end it has acted with caution by keeping all rates unchanged and just by reducing Cash Reserve Ratio (CRR) by 50 bps. The tokenism has seen release of Rs 32000 crore for the banking sector to lend. After the negative impact created by thirteen continuous rate hikes, this will prove insufficient to boost the growth. “
That the economic growth has been reined in is clear enough with RBI too reducing the target growth rate. But more critical for the productive sector is consumption of funds by the government sector leaving private investment short of liquidity. In last one and half year the investments have drastically shifted towards public sector which has impacted the private players very badly. Hopefully the Union Budget will correct the aberration and help RBI ease monetary policy. Only then growth will receive the relevant support, Jain said.
For real estate sector in particular, this will serve as a signal that interest rates will now ease. Buyers may opt for floating rate loans at this juncture since the signal is clear. Also the rising input cost will not leave any space for reduction of price. Buyers are expected to take the signal. We only hope that the forthcoming Union Budget will leave RBI room to address the issue of easing monetary policy aggressively, he added.
Echoing the view Gaurav Mittal, Managing Director, CHD Developers Ltd. Member, Governing Council, CREDAI, “We are happy that RBI has taken cognizance of the plight of the productive sector and has lowered the CRR by 50 bps.”
This move will help curb to some extent the negative sentiments in the economy in general and real estate sector in particular. The policy actions are expected to improve liquidity in the system and anchor medium-term inflation expectations, Mittal said.
However this is just an indication that the sequence of rate rise is now behind us. What we will need now consolidation of government finances so that funds are available for the private sector. However the signal will serve as a boost for the real estate sector with sentiments of buyers turning favorable. This move is set to help stimulate growth. We thank Reserve Bank of India for realizing the need of the hour and taking the right decision by not hiking the rates, he added.
Manoj Paliwal, CFO, Omkar Realtors & Developers on Monetary policy also expressed his view on the CRR cut says, “0.50% reduction in CRR announced by RBI is a step in right direction although too less and a bit late. We do not foresee any immediate impact on the interest rate which is disappointing as Real Estate is top notch priority for the common man. Therefore, liquidity for real estate companies will improve only after other sectors have got sufficient funding.”

From last couple of months real estate market has witnessed of slowdown lesser sales in residential projects as well as commercial properties. The home loan borrowers are consistently witnessed of rising EMI payments. When slowdown graph headed upward then simultaneously housing finance rates goes up too. Vice a versa the inflation rate comes down, borrowers get some relief as their repayment burden also eases.
Inflation has affected to housing finance companies (HFC) harshly it is reflecting as biggest money lenders such as ICICI, HDFC and SBI has taken the several robust steps to retain home loan borrowers. The HFC’s has taken the steps such as
1. Waived off the pre payment charges on floating home loan.
2. SBI waived off half processing fee on home loans.
3. Launched the dual-rate housing loan scheme

Whereas, Banks are expecting a massive fall in property prices, and have withdrawn prepayment charges to enable those who are on shaky wicket. Besides, this was an order of RBI to not charge prepayment charges. The big worry of banks today is housing loan default, which has already become 3.4% and will spell a doom if it crosses 5%. Every body knows that property prices are falling, but somehow we do not want to talk about it. The media is also shy. Perhaps, when the bubble bursts comprehensively only will people will come to know that the house the bough for a crore, is now not even worth 55Lakhs.
On the other hand Reserve Bank of India in the previous year has increased the interest rate by 12 times but bank has failed to curb the inflation rate.

Non Residential Indians can also avail housing finance provisions for buying a residential property. They can buy a home and even can borrow home loan for self construction as well as redevelopment of the existing building in India.
The resident of India can avail home loan up to 80-85% of the total cost of property. Whereas, they can send down payment directly from abroad through any bank channel and also can use the
Non-resident external (NRE) account for make payments. And same procedure is for making EMI payments.
The FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available.
However, for availing home loans, NRIs have to fulfill certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more.

The State Bank of India biggest money lender of home loan across the country recently in the last three months has taken major steps to bring back home loan customers from the counterparts. The bank have waived off the 50percent processing fee on home loans whereas the rivals were increasing it to offset losses on waiver of pre-payment penalty.
The senior official has said that “this move has taken to make goodwill in the market, however the home loan borrowers are loosing their confidence in banks by saying lenders are levying to them for several duties.”
In metro cities where transaction values are much higher comparatively rest of the nation. The bank has waived off the processing charges to Rs.10, 000 on housing finance above the value of Rs.75L. Also loans in the. 30 lakh to . 75 lakh range, the fee will be. 6,500, down from. 10,000. For loans below. 30 lakh, the prevailing rate of 0.25% has been retained. The new charges are affected from January 11.

As the investments are diversified across 10-15 cities, across 20-25 projects, 1-3 projects per city
Private Equity (PE) Players step in as savior for Real Estate developers in rising interest rate regime
How the traditional funding sources are drying up and how PE is the only source of funding for the cash trapped realtors.
PE can insure corporate governance in real estate players. The firm also enjoying the position of only source of funding gives it muscles to bargain with developers and bring in certain corporate governance, ultimately helping the consumer as well as real estate sector. This is the robust move has been taken by the private equity firm to succor the dwindling property market.

Highlights

Tax benefits get divided among co-applicants in case of a joint loan
The division takes place in the same proportion in which the asset is owned by each co-applicant
Each co-applicant can claim a maximum tax rebate of up to Rs. 1 lakh for principal repayment and Rs. 1.5 lakh for interest payment
The very first condition is the house property has to be bought by the individuals jointly, and this should be in their joint names.
The share of each holder should be clearly mentioned so that there is absolute clarity on the percentage ownership of each co-owner.
Tax benefits of Home Loan- Overall there are two types of tax benefits that are available on the repayment of a housing loan.

Interest paid on the loan is eligible for a deduction up to Rs. 1.5 lakh per annum from the taxable income of the individual under Sec 24 when the property is self-occupied or it is one ownership property lying vacant.
The return of the capital of the loan along with the interest up to Rs. 1 lakh is included in the benefit under Sec 80C.
The planning in the entire issue has to be done in such a manner that all the joint holders are able to take the tax benefit and no part of the total repayment goes waste.

Advantage for joint home loan takers-

Tax benefit

Joint holders can claim the maximum tax benefits individually. This means each holder can get a tax rebate of Rs. 1 lakh for principal repayment under Sec 80C and Rs. 1.5 lakh for interest payment under Sec 24.

The tax benefits are applied according to the proportion of the loan taken by everyone involved in the joint loan. For e.g. if the ratio of ownership is 70%:30% then the loan amount of 50 L will be split as 35 L and 15 L respectively and interest/principal applicable to the respective amounts will be taken into account for each individual taking the loan. For claiming your tax, it is best to procure a home sharing agreement, detailing the ownership proportion in a stamp paper, as legal proof for ownership.

To get the best out of the tax savings, 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. In the case of an earning couple, this would make most sense as other expenses can be manged with the income of the person making a lesser share towards the loan. This would help you optimize the benefits from the tax exemption on principal and interest repaid.

Increased Loan Amount Eligibility
If more than one person takes a home loan then income of all the co-owners will be considered by the lenders. This can help increase the size of the loan. In this case, the bank combines the incomes of both the applicants, and thus, can sanction a proportionately higher loan amount. Buying a house jointly facilitates a larger loan as income of all the co-owners would be considered by the lenders.

Additional benefits:

In many states, a lower property registration fee is levied in case the property is owned by women either individually or jointly.
If husband and wife jointly own a property reduces the succession issues.
So taking a joint home loan has the significant twin benefit of increasing your loan eligibility and maximizing your tax rebate. There is one rule banks insist on when you apply for a joint home loan, which is that all co-owners of the property should also be co-applicants but the reverse need not be true.

Under Construction house- Another aspect that needs to be remembered is if you are buying a house under construction that you can claim tax benefits only after the construction of the house is completed.

Joint structure- The term ‘joint benefit’ in a housing loan refers to a situation where more than one person takes and repays a home loan. Here, the co-applicants are family members, which include husband and wife or father and son or father and daughter or mother and son or mother and daughter as the case may be. In such a situation, tax benefits have to be divided between all co-applicants and hence known as joint benefits.

Joint account – The repayment of a joint loan has to be made from a joint account owned by the co-applicants. Each of them needs to contribute his/her share to the account. But there are times when this is not possible and in case the payment is being made from just one person’s account then there has to be a method whereby the other individual is contributing his/her share. This will ensure that the benefits are also available in an adequate manner and that there are conditions that are being fulfilled in the process.

Considering New Direct Tax Code- New borrowers need to keep an eye out for developments in the housing loan sector. While planning any housing loan benefit, they have to keep in mind the conditions mentioned in the New Direct Tax Code. This code, coming into effect from April 2011, eliminates the benefit of a housing loan. This means that if the code is passed in its present format, both the benefits on interest payment as well as capital repayment will not be available to co-applicants.

Disadvantage of a home loan in joint names

1. If you buy another house in future then as per Income Tax Act if a person has more than one house in his name, one of them will be treated as self-occupied, and another will be treated as let-out – even if it is not actually let out on rent. You would need to pay income tax on the rent received if this second house is actually rented out. But if it is not rented out, it is deemed as rented out, and you would have to pay income tax on an amount that you would have received as rent as per prevailing market rates.

2. You have to pay wealth tax on one of your house. As per Wealth tax Act only one house is exempt from Wealth Tax. You have to pay tax on one of the house of your choice but you can deduct loan amount against the house for which you taken loan while calculating taxable wealth.

When one should take Home Loan in Joint names:- Take the home loan in joint names

If You need a higher loan amount then your eligibility in Individual capacity
The income tax savings by opting for a joint loan is significantly higher than a single-name loan
When one should take Home Loan in Joint names -

You have enough loan eligibility as single applicant
The income tax savings by opting for a joint loan is not significantly higher than a single-name loan
You plan to purchase another house in near future

Courtesy : Taxguru

Banks, Financial Institutions, NBFC’s and privately owned Realty Finance companies give loans to property buyers, they factor in a long-term interest on the principle amount. In the eventuality a customer is keen on pre-paying the balance amount within the first 5 years and before the formal tenure let’s say 20 years. “The lending institution stands to incur a planned loss of ROI through interest for the next 15 years. Hence as a deterrent the institutions implemented a penalty clause for any customers who were keen to foreclose their borrowings,” Manoj Asrani Brand & Marketing Manager -Soham World said. In many cases customers obliged the institutions due to their financial stability. However due to some serious lobbying initiatives by consumer forums and activists, the lending institutions saw this as an opportunity. They terminated the penalty clauses in the hope that HNI’s and service class would actively opt for loans. This action hasn’t really fructified into large borrowings, as the current scenario suggests, there are more than 40,000 residential assets lying unsold in the price range of 1.5 to 4 crore in Mumbai.

The contemporary property market condition is a big reason of worry not only for Builders but for housing finance companies and homebuyers too. As sales graph is going constantly down, due to lesser sales realtors are finding difficult to complete their projects and on the other side rising debt has become bottleneck for them. But now crisis period will come to an end as Whit Knight will bat for their relief.
The biggest executive quit Morgan Stanley recently to set up a fund that will focus on anxious assets as he expects real estate NPA levels to rise over the next few quarters. Last month, a start-up real estate firm, Citrus Ventures, bought two under construction assets in Bangalore, which it will develop and sell, and is looking for more. Toronto-based investment giant Brookfield Asset Management, which has bought a few distressed assets in the US, recently entered India through a joint venture with the Piramal group.
Following to the biggest market players’ footstep Ascendas India Development Trust is also looking to invest $350miilion fund in real estate sector, out of which 50% of fund will be used for buying anxious assets metro cities such as Mumbai, Bangalore, Hyderabad and Chennai. Also Edelweiss Alternate Asset Advisors has raised $300 million through three funds that will also invest in special situations and stressed assets.
According to the Reserve Bank of India (RBI) in its half yearly assessment said that there is a slight rise in NPA, specially in property market, infra and priority sectors in the recent past.

Floating home loan rates is now become more attractive for home buyers, as the all major housing finance companies have abolished the prepayment charges on floating home loan rates, according to the bank officials floating rates will really float after the implementation of the scheme.
Similarly, from last 23 November month ICICI bank has written off the prepayment penalties on floating home loan for both the old and new customers. This is applicable for partial or full prepayment of housing finance. The private bank was the last of big lenders in home laon to continue to implementation a penalty on borrowers who chose to close their loan account even if it was from their own resources. Now any floating rate loan can be repaid without penalty.
As per the reports of Internet Content Rating Association (ICRA) there is already upsurge in prepayment in housing finance. The rating agency has completed an analysis of home loan portfolios that have been securitized and subsequently rated by ICRA. The median monthly pre-payment rate has been around 1.1%.

Recently, HSBC one of the biggest borrowers of the country has also moving on the foot steps of ICICI, Axis and HDFC Bank, as it has also launched the dual-rate housing loan scheme. According to the new scheme, in which customer can’t make any prepayments during the fixed-rate period, whereas in second option where he/she can do so, as per certain terms.
The fixed rates in option 1 range from 11.25% per annum (if the initial fixed-rate period is one, two or three years) and 11.50% (fixed-rate period of five years). For the flexibility of pre-payment offered in option 2, the bank will charge 25 basis points higher than in the first option as interest.
However, if one will choose the five-year fixed rate scheme with the privilege to make prepayments, the scheme is little tricky. Prepayment of over 25% of the unpaid amount will lure charges of 5% in the first year, 4% in the second, 3% in the third, 2% in the fourth and that will be last one 1% in the fifth year. Upon expiry of the fixed rate period, the interest rate will be linked to the bank’s rate prevalent then. So, for the balance tenure, the loan will carry an interest rate of base rate plus 2%.