Taking a House is once in a life time decision for many of us with the spiraling prices of the property and the high interest rate regime in the market. Thus, selecting the right home loan product in the market becomes much more important for many of us to avoid any surprises later.
What are the right things Mr. Right did? Read on to learn a few useful tips from him.
- Good research: Do not go as per what your loan agent says. You do your own research of the best terms available in the market. Take advice of a reliable Loan Adviser to know what suits you the best.
- Spend conservatively: keep a tab on your spends during the home loan tenure. The old adage “A penny saved is a penny earned,” holds true in case of home loan too. When you save money, you could actually use it to foreclose the loan.
- Park your additional funds: A couple of banks have a facility, which allows borrowers to park their additional funds in the loan accounts. This will reduce the interest proportionately from the principal amount for the time that the amount was parked. This is an interesting option.
- Learn what is floating or fixed rates: there are two types of interest rates that banks offer: floating and fixed interests. Floating interest rate is linked to market. It moves in tandem with a base rate. Where as fixed interest remains fixed for a few months defined in the loan agreement. It is important to understand that in most cases floating rates work out cheaper than fixed rates in the long run.
- CIBIL Score : It is important to have a score of 750 plus to get attractive rate of interest on your Home loan. Cibil data indicate that 80% of the home loan approvals are given to customer who have a credit score of 750 plus. Low Cibil score could possibly reject your Home loan application or you may have to pay a higher interest rate.
- Understand foreclosure norms: Recently, RBI banned foreclosure penalties. So make sure you do not pay anything extra while foreclosing your loan.
- Save up to foreclose: if you can save Rs 1 lakh in the current fiscal, do not use it on a dream holiday abroad. Instead use it to foreclose your loan. My advice to every borrower is that learn to foreclose your loan as soon as possible. The sooner you free the amount you pay for equitable monthly installments (EMI), the earlier can you enjoy the freedom to spend that money on luxuries of life.
- Compare processing fees: whether it is for a fresh loan or for a balance transfer. Enquire in all the banks before you finalise.
- Read the documents: read everything written in the loan agreement before you sign on the dotted line. It is very important to be aware of terms and conditions.
- Increase the bridge funding: every borrower has to pay some money from his own pocket while buying a house. Try to pay as much as possible as down payment. This will reduce your interest paid on the principal.
Once the GST regime rolls in on July 1, apartment owners will have to pay about 2.5% additional tax on maintenance charges. The tax is applicable on flat owners who pay a maintenance charge of above Rs 5,000, excluding property tax, stamp duty, and electricity and water charges.
Under GST, the existing rate of 15.55% on maintenance charges will be replaced by 18%. The new rate is also applicable on housing societies that have an annual corpus or balance of more than Rs 20 lakh, again, excluding property tax, stamp duty, and electricity and water charges, and also maintenance charges gathered from apartment owners.
The GST rates have been announced and government has fixed 12 per cent for work contract while cement has been put in 28 per cent tax slab from earlier 23-24 per cent in the current tax regime.
Full availability of input tax credit and elimination of multiple indirect taxes will step-up a positive sentiment in the real estate sector. Industry experts said benefits of input tax credit on raw materials will negate the impact of putting cement in the highest tax slab of 28 per cent. Earlier the Credit in Input Tax Credit was not allowed to the Sector which was taxed in terms of Service Tax with abatement.
The full availability of input credit as compared to current regime is expected to be beneficial for reducing project costs under the GST system for the Real Estate Builders and Developers. Under GST regime entire input credit is allowed to the real estate sector. This should also incentivise the people to come within the tax net and rationalise the Market.
However a few things are not yet clear and the same would surely become more clear in the days to come with more clarity being issued by the Government.
The REAL ESTATE sector is already witnessing the reforms in terms of the introduction of RERA. Furter GST would be very helpful for the organised Sector and also bring in more transparency into the Sector. With more transperency will come more trust and should be very helpful for the Industry in the near future.
The Real Estate Sector is looking positively towards the GST. Hope in Years to come the Stamp duty would also come within the GST and make things more clear and affordable.
Union urban development minister M Venkaiah Naidu warned last week of penal action against realtors dishonouring their promises. But it’s not just builders who face punitive measures under the new Real Estate (Regulation and Development) Act. The ambitious legislation, which came into effect on May 1 across the country, also deals with plot promoters. The act is yet to be enacted in West Bengal as the state government has not ratified the draft rules.
The act refers to a plot promoter as “a person, who develops land into a project, whether or not the person also constructs structures on any of the plots, for the purpose of selling to other persons all or some of the plots in a project, whether with or without structures thereon.” This apart, real estate agents who facilitate sale or purchase of plots, marketed by promoters are also under the purview of the act. Like builders, plot promoters also must register their layouts with the real estate regulatory authority before launching their projects in the market.
Realtors said that including plot promoters would ensure that they do not deviate from assured amenities. About 45% of the total land for a proposed layout must be earmarked for facilities such as roads and Open Space Reservation (OSR) to obtain approval from planning authorities, while the rest can be developed as plots. Former president of Tamil Nadu chapter of Confederation of Real Estate Developers Associations of India (CREDAI) N Nandakumar said that many plot promoters offer attractive facilities to woo customers, but fail to deliver. “For instance, some promise black-topped road, though buyers end up with gravel pathways. A few even offer to plant saplings and nothing would be available in reality,” he said. Nandakumar notes that a section of plot promoters seldom adheres to the development regulations with much of the space earmarked for common amenities being diverted for other commercial purposes. “Against this backdrop, RERA can play an effective role as the promoters should provide the amenities assured to buyers,” he added.
The act clearly states that defaulting promoters shall be punishable with imprisonment for a term which may extend up to three years or with fine which may extend up to a further 10% of the estimated cost of the project or with both.
RERA will also open a window to access complete details about real estate projects. That details on all projects registered with RERA will be available in an exclusive portal. to be created by the authority. It (web portal) “It will be a great tool for understating a project ahead of buying a property.
The Real Estate Act (RERA) comes into forcewith an objective of safeguarding the interests of buyers across the country. However, West Bengal is one of the states that failed to officially implement RERA.
The Housing Minister of West Bengal and Mayor of Kolkata Municipal, Sovan Chaterjee spoke exclusively to India Today and talked about RERA.
Chaterjee said, “It is not an easy job to implement the RERA in the state of West Bengal because of the environment and other factors that are changing rapidly. It involves a lot of complexity. We are not overruling the RERA system but taking their advice and regulations into consideration. We are also examining the details of the issue and diversely discussing the matter with the concerned agents.”
The minister added, “Many criterion are given in the draft’s agenda but it is not possible to apply all on the ground work. That is why different processes need to be adapted and revised. We are working on it and then finally we can go through the actual process of RERA.”
HERE IS WHAT YOU NEED TO KNOW ABOUT RERA
The Real Estate Regulation and Development Act is expected to bring transparency and accountability in the realty sector and ensure consumers will not be cheated or taken for a ride by the developers. The act will also ensure that consumers won’t have to endure late deliveries
Objective of RERA is not to pressurise developers, but to safeguard interests of buyers by ensuring they don’t get cheated.
Source : News bytes
The Central Board of Direct Taxes (CBDT) on Thursday released the draft Income Computation and Disclosure Standard (ICDS) on real estate transactions for public consultation. The proposed ICDS will be applicable for determination of income from all forms of transactions in real estate, including land and buildings.
The draft ICDS doesn’t mandate obtaining all critical approvals for revenue recognition after the Real Estate (Regulation and Development) Act, 2016, (RERA), came into effect. It also proposes recognition of transferable development rights (TDR) at the fair value against fair market value or net book value as per the guidance note prepared by the Institute of Chartered Accountants of India (ICAI).
The transactions will include sale of plots of land (including long-term sale type leases) with or without any developments, development and sale of residential and commercial units, row houses, independent houses, with or without an undivided share in land. He added that acquisition, utilisation and transfer of development rights, redevelopment of existing buildings and structures and joint development agreements for any of the above activities will also be included.
Further, the proposed ICDS does away with the ceiling for revenue recognition based on stage of completion determined with reference to the project cost incurred. The draft is based on the guidance note issued on real estate transactions issued by ICAI with certain modifications as suggested by the government’s ICDS committee.
The specific ICDS on real estate transactions shall be a welcome move as it will bring clarity and certainty in application of provisions of ICDS and computation of taxable income to the sector. It can be expected that in near future ICDS will be issued for other specific sectors where application of ICDS III & IV on income is unclear.
The draft ICDS has made changes in five areas compared to the guidance note. These areas are definition of project and project cost, revenue recognition, application of percentage of completion method (POCM) for real estate projects and transferable development rights (TDRs).
CA Sanjay Goyal
Despite union government’s ardent instruction several states failed to meet the deadline of state real estate rules notification. West Bengal is one of those states, who has yet not finalized their drafts. RERA came into force on May 1, 2017. Central government has extended the time period for another 3 months, which completes on July 1. But sooner or later RERA will be implemented in West Bengal too, and according to that as potential buyers one should know how it would regulate the residential property sale in Kolkata.
The central Real Estate Regulation and Development Act (RERA) has been diluted by several states which have by far notified their state RERA norms. As per RERA developers must upload their project details, step-by-step development process (3 months basis) on RERA official site followed by the personal details of himself. Documents related to the project and land for e.g.- land registration, clearance certificate, title deed everything need to be visible before the potential investors. The unadulterated execution of RERA in Bengal will genuinely push the residential property sale in Siliguri, securing buyers’ interest throughout.
RERA will focus on the carpet area based price for the both commercial and residential properties across the country.
As of now the residential and Commercial property sale in Siliguri has been practicing based on the super-built area, but after May 01, carpet area of the property will be set as a key parameter of the project pricing starting from affordable to ultra luxury projects.
Let’s know about the carpet area based pricing
Any property on Sevoke Road with a super built area of 1500 sq ft in prime location, worth selling price of Rs. 3000 per sq ft, randomly we assume that within this 1500 sq area 1100-1200 sq ft is the carpet area of the very property and the remaining 300-400 sq ft is space is occupied by the walls, staircase, passage, lift etc. With the RERA implementation buyers are likely to pay for only the carpet area of the apartment.
How will it impact realty transaction?
Let’s us tell you property price is not going to fall in the coming years or soon, neither promoters will pay from their pocket for the common shared area of the apartments. Developers will include this price in the selling price of the property and for the eternity buyers will have to pay this cost. This particular execution is only to clarify the confusion of buyers related to super-built and carpet area, as mostly they are seen mixing the both terms and whirled in the trickery of the builders. This process will clarify the ambiguity between buyers and the builders.
Asking about the present status of residential property sale in Siliguri and upcoming RERA implementation in West Bengal, the RERA expert of Siliguri CA Sanjay Goyal said, “The new pricing model will be a uniform platform for both the buyers and the builders. Buyer will be more aware of what they are paying for. Real estate practice will gain its much-awaited trustworthiness, as it’s surely going to strengthen the bond between buyer and seller. Else RERA has legal route for both of them.”
For residential property sale in Siliguri CA Sanjay Goyal added, “RERA implementation is likely to fetch foreign investment and positive investments from reliable sources in the realty sector. But carpet based pricing won’t directly affect the pricing of projects.”
CA Sanjay Goyal further added that “Siliguri is one of those markets which stands out in terms of transperancy and clarity in Real Estate Transactions. So the public faith on Real Estate transactions would further increase with RERA inplementations”.
From the point of view of the Realtors/Agents, he said that this will organise the highly unorganised Real Estate Market in terms of advisors. Currently and more so in the past, builders and Realtors have not given each other the due deserved respect. Now the scenario will change and there will be less instances of misunderstandings too. Hope each one understands the importance and contribution of the other in the Real Estate Industry.
Good Days are Ahead for sure..
The Goods and Services Tax (GST) is beyond doubt the most revolutionary tax-related reform to be seen in India in several decades, since it will eliminate the conflicting and cascading taxation structures which have confounded several industries over the past few decades. It will most certainly have a profound effect on India’s economic prospects.
A single indirect tax which covers all goods and services will, in the long run, increase tax collection by making it easier for retailers and several other businesses to comply and also moderate overall taxation levels. That said, it should be remembered that the favourable effects of this new taxation regime will become evident only within 2-3 years of its implementation.
Though the goods and services tax (GST) tax structure has been announced, there is still a lot of conjecture about which tax rate will be applicable to the real estate and construction industry.
The tax rate is not decided yet and it would be premature to comment on it at this point. The expectations are for real estate to be in the 12% bracket. However, the GST rate is not the only important factor. The abatement rules as applicable under the service tax regime and the input tax credit facility for developers will determine if the effective tax incidence on real estate is lower or higher under GST.
Impact on Residential Real Estate:
If we look at the residential property sector, sales are not just impacted by tax rates but also by sentiment, and also on account of the trust deficit which the Real Estate Regulation & Development Act – or RERA – now seeks to address. That said, if costs do go higher under GST, the lower prevailing current home loan rates could assuage the impact to some extent.
Buyers and investors as well as developers are understandably worried that the final ticket size of homes will increase even if the Government levies GST at 12%, when compared to the existing service tax rates. Developers are still awaiting further clarity on this, but they know that it is in the interest of their business to keep ticket sizes range-bound. Evolving market dynamics have already brought about a change in the manner in which developers work. Staying customer-centric and delivery-focused to create a differentiated identity will be the most logical and likely method for them to adopt.
Impact on Rental Housing
Other doubts pertain to the rental housing market, which would naturally be impacted if the Government were to tax residential leases under GST. The common apprehension is that if this were to happen, the rental housing segment may see a huge slump over the medium-term, since residential leases are currently not taxed at all.
Here, it is pertinent to note that residential leasing is an inherent demand which will not evaporate merely by higher taxes. Certainly, we may be looking at a rental stagnation or marginal decline as the market readjusts to the new dynamics which GST will infuse. However, rental housing demand is sticky and end-user-driven in nature, so we are definitely not looking at a major slump in this segment because of GST even if it does tax residential leases.
Impact on Commercial Real Estate
When it comes to GST’s impact on the commercial office real estate market – with the existing service tax for commercial leases at 15%, GST would be likely neutral overall (at 12% slight savings, and at 18% slight increase).
Impact on Affordable Housing
Affordable housing is currently exempt from service tax. It is likely that the government may come out with a clarification regarding the applicability or continuing exemption under the GST.
Large private equity firms and non-banking finance companies are now getting interested in affordable housing
, thanks to the government’s recent incentives for this segment, including infrastructure status and speedy approvals.
So far, this segment was financed by funds with smaller ticket size which specialized only in affordable housing.The government has been pushing affordable housing in its bid to achieve ‘Housing For All by 2022’ and the efforts are showing with money flowing into this segment.
Kotak Realty Fund, that focused more on mid-income housing projects, is now evaluating the affordable home segment. “It is a large market to address. It is a business of low margins and fast turnaround. Hence the approvals need to come fast to convert land quickly into cash flow to make decent returns and the developer should be able to control costs well,” said Vikas Chimakurthy, senior ED, Kotak Realty Fund.
According to JLL India, builders of budget housing now have access to cheaper sources of funds, thanks to the newly-granted infrastructure status. As per statistics, the shortage of housing currently stands at around 1.87 crore homes, and nearly 95% of the shortage is in the affordable segment. Now, developers can and will focus more on launching projects in this segment, where the demand is maximum.
Some investors believe that private equity firms need to deploy a differentiated strategy while investing in affordable housing.
Typically, private equity firms would like to invest in affordable housing on ‘last-in first-out’ basis. Private equity funds can finance lastmile land aggregation and statutory payments for which construction finance is not an option. Private equity funds can take periodic exits through early surplus and the developer can bring in cheaper construction finance lenders with the project up and running.
Interestingly, equity flows have reduced in the residential sector in the past four-five years and made way for largely debt and structured instruments. The relative slowdown that this asset class has seen over the past three-four years has made investors somewhat conservative and made them turn to construction debt, last-mile funding and bundling receivables to ensure that their investments are protected against the lien of the asset.
In a country where slums sit cheek-by-jowl next to palatial luxury—including what’s been reported as the world’s most expensive private home—India’s unhoused may soon become a more potent economic growth driver.
Prime Minister Narendra Modi’s drive to bring homes to the country’s 1.3 billion people, rising incomes and the best affordability in two decades will unleash a $1.3 trillion wave of investment in housing over the next seven years, according to CLSA India Pvt.
The firm expects 60 million new homes to be built between 2018 and 2024, creating about 2 million jobs annually and giving a tailwind of as much as 75 basis points to India’s gross domestic product. The volume of social and affordable housing will rise almost 70% to 10.5 million annually by 2024, exceeding the 33% increase in the premium market.
“The housing sector is at a tipping point and will be the economy’s next big growth driver,” Mumbai-based analyst Mahesh Nandurkar and his colleagues wrote in a note last week. “The catalyst is the government’s big push for an ambitious housing program.”
Modi has been on a mission to expand affordable housing in Asia’s third-largest economy. In February, the government granted affordable-housing builders “infrastructure status,” making them eligible for state incentives, subsidies, tax benefits and institutional funding. In June 2015, it announced a “Housing for All” program which aims to construct 20 million homes across the country and in December it announced rebates and interest waivers for home loans under the program.
That’s not all that’s expected to fan demand. In the past five years, mortgage rates have dropped about 275 basis points to about 8.5%. Prices have remained stable while per-capita incomes have posted a compound annual growth rate of about 10%, according to the CLSA note.
While India’s real estate industry extended a slump after Modi’s sudden decision to ban 86% of the nation’s cash in November, affordable housing was growing the fastest before demonetization and the whole market has shown signs of snapping back.
The report predates the latest reform to regulate India’s notoriously unreliable property developers. Under laws that came into force 1 May 1 construction companies will have to use at least 70% of sale proceeds to complete residential projects, rather than funnel money to other jobs. Developers will also no longer be allowed to start pre-selling apartments before all building approvals are obtained. Those who don’t comply could face as many as three years in jail.
CLSA expects volume growth in new home construction to jump to a compound annual growth rate of about 8% over the next seven years from zero over the past five years.
So while luxury residences like 27-story “Antilia” owned by Reliance Industries Ltd chairman Mukesh D Ambani, and reported to worth anywhere from more than $400 million to over a $1 billion, have hogged Mumbai’s skyline, more affordable options may soon be springing up
Days after government announced implementation of the Real Estate (Regulation and Development) Act, the largest public lender in the country has cut the home laon rates by 25 basis points in a bid to woo homebuyers.
The new lending rates of 8.35 per cent will be applicable for only affordable housing loans which are under Rs 30 lakh.
For male borrowers, the limited period offer is valid till July 31 and the reduction is 20 bps to 8.40 per cent, SBI Managing Director for national banking, Rajnish Kumar said.
The new rate reduction of 25 per cent for women will be for the salaried borrowers and for the non-salaried, it will be 20 bps cut.
Similar will be the rates applicable to male salaried and non-salaried borrowers.
One percentage point is 100 basis points (bps).
This a huge saving for the borrower as the 25 bps reduction translates into a saving of Rs 530 per month on EMIs,” he said.
The new rates will be effective tomorrow.
“This is giant leap to give a fillip to the affordable housing segment keeping the Prime Minister’s vision of providing ‘housing for all’ by 2022,” Kumar said, adding that the lender now offers the lowest rates in the industry.
With a home loan book of Rs 2.23 trillion, SBI leads the segment with 25-26 per cent market share, Kumar said further.
However, he is of the view that the new offer may not push up its market share significantly as 45 per cent of its Rs 2.23 trillion home loan book is under Rs 30 lakh bracket.
The delay in possession of their homes has been the biggest concern for the buyers of the real estate properties. For many of the homebuyers, across locations and with almost the builders, the delay has extended to almost six years or more now, with no possession in sight. In the absence of a regulator and with no rules in place, the builder-buyer battle appeared one-sided.
Now, the real estate sector has got its own regulator from May 1, 2017, the date when the Real Estate (Regulation and Development) Act, 2016 (RERA) became effective in the entire country. Each state and UT will have its own Regulatory Authority (RA) which will frame regulations and rules according to the Act.
Let’s see what’s RERA has got in store to ensure timely possession of properties. In respect of the ongoing projects that have not received a completion certificate, the developers have to get them registered too. Once registered, they too will have to follow the rules, regulations of the state RA.
Builders can continue the marketing of their ongoing projects till July 31, 2017, even if they are not registered with the Real Estate Regulatory Authority (RERA). However, no new project can be launched without it being registered with RERA.
Allaying all the speculation, spokesperson of union ministry of housing and urban poverty alleviation (HUPA) said that according to the Real Estate (Regulation and Development) Act (RERA), existing ongoing projects need to file for registration with their respective regulatory authority by July 31. Till then the developers can continue their marketing and other activities like construction and securing the approvals from the existing authorities.
In the next three months, all the legal infrastructure required to implement RERA will be in place, which will enable the developers to register the ongoing projects to apply for registration, the spokesperson said. Only those developers of on-going projects, who do not file for registration of a project with the authority, will have to stop advertising or marketing of the project.
According to the RERA 2016, “Projects that are ongoing on the date of commencement of this Act and for which the completion certificate has not been issued, the promoter shall make an application to the authority for registration of the said project within a period of three months from the date of commencement of this Act.”
However, no new project can be launched till it is registered with the regulator. At the same time, the law has also prohibited any pre-launch marketing of a real estate project.
CA. Sanjay Goyal (B.COM, FCA)
The Act became effective on 01st of May, incorporating sections on mandatory registration of projects, enhanced responsibilities and obligations of project promoters, as well as penalties that can be imposed for deviation from rules. However many states like our own West Bengal is yet to notify the Rules. There has been a Delay in notification and non-uniformity of the Real Estate (Regulation and Development) Act, 2016 (RERA) across various states, which in turn is likely to dilute implementation and effectiveness of the Act.
Currently a large amount of Confusion exists among the stakeholder as to the steps to be taken by them to comply with the RERA. In West Bengal the State has still not notified the rules, so the Developers and Realtors who intend to register themselves do not know what to do. At the same time, they are also not sure whether they can advertise their projects or work complying with the RERA without registration or wait till the day the state government notifies the Rules. In Siliguri also the big question coming up before the RERA advisers is “What should the Builders do currently if they intend to register the projects immediately and comply with the Act?”, “What would be the fate if the State Government delays the notification of the rules further ?”. “What is the Fault of the person responsible for registration if the state government does not appoint a regulator for the registration ?” and many such similar question.
Since registration with the RERA has been made mandatory for any project to be marketed and sold, further delay in setting up regulatory infrastructure could impact the operations of real estate developers, especially in case of new project launches.
For effective implementation of the provisions, the state governments had to frame rules governing these sections and set up state-level real estate regulatory authorities (RERA) and appellate tribunals to implement the rules. As on date, West Bengal has not yet notified the Rules. The absence of a regulator or appropriate rules can result in a regulatory vacuum and dilution of the Act’s provisions.
The implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA Act), is set to bring about a paradigm shift in the way the real estate industry operates in India. The basic objective of the RERA Act is to protect the interest of consumers through a regulatory regime that improves the transparency level and accountability of real estate developers.
All ongoing projects (which have not received occupancy certificate till date) are also required to apply for registration with the RERA within three months of the Act’s commencement. In this regard, customers may defer their purchasing decision until a project is registered with the RERA, thereby putting pressure on the demand in the near term. Also it would prevent the marketing, construction and Sales activities of ongoing projects with a fear of penalty for non compliance with the Central Act.
It would be highly desirable that the Centre and state Govt both come out with clarifications at the earliest to resolve this stalemate situation as the economy and a particular Sector largely depends to the Real Estate Sector.