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Realty gloom over home loans




The year also saw the launch of differentiated home loan products. For instance, SBI launched home loans targeted at government employees and defence personnel

Though real estate prices have corrected in certain geographies and home loan rates have fallen by 30-50 basis points (bps) in 2016 from the previous year, there has not been much demand for home loans. Transmission of rates from the central bank to loan products was the theme for the year.

Interest rates

The Reserve Bank of India (RBI) cut the repo rate by 50 bps through the year. This is the rate at which the central bank lends money to commercial banks in case of a shortfall. The falling interest rate trend began in 2015 and continued in 2016. “Thanks to the falling interest rate environment, there was a 30-50 bps cut in home loan rates,” said Naveen Kukreja, co-founder and chief executive officer,

However, transmission was slow as banks did not pass on the benefit to end users.

There was, however, a big change in benchmark lending rates. Till 31 March, all floating rate loans were linked to base rates. On 1 April, that changed to marginal cost based lending rate (MCLR)—the new benchmark rate at which banks will lend to new borrowers. MCLR is built on four components—marginal cost of funds, negative carry on account of cash reserve ratio (CRR), operating costs and tenor premium. “With the introduction of MCLR, there is a straight 40 bps cut in the home loans. If base rate is 9.30%, our 1-year MCLR linked to home loan is 8.90%. More or less, the banking industry has followed this,” said M.G. Vaijinath, chief general manager-real estate and housing department, State Bank of India, the country’s largest lender. All new floating rate home loans are linked to 6-month or 1-year MCLR.

Fees and charges

Bankers say there is a shift in other charges as well for home loans. “Typically, the service charge or other charges for a home loan used to be a percentage of the loan amount, and range between 0.25% and 0.50%. That has been coming down to a flat fee of, say, Rs10,000-20,000,” said Sumit Bali, senior executive vice-president and head-personal assets, Kotak Mahindra Bank Ltd.

New avenues

Financial institutions have been focusing on digital products to provide faster services. Many banks have tie-ups with portals such as Bankbazaar, Deal4loans and Paisabazaar to get customers on board. “We have also seen banks getting comfortable with providing home loans online from the application to disbursal. Also there are multiple banks that are working towards building a back-end digital platform,” said Kukreja.

You may see more online home loans next year.

The year also saw the launch of differentiated home loan products. For instance, SBI launched home loans targeted at government employees and defence personnel. “When the Pay Commission was announced, we thought we should offer flexible repayment option for government employees since they tend to buy a house after 45 years of age, when only 10-15 years of their earning life remains,” said Vaijinath.

Banks also saw an uptick in overdraft against home loans.

What next?

Despite a fall in interest rates and price correction in the real estate market, the overall loan market has not grown. This may continue for the first few quarters in 2017. “After the demonetization drive settles, home loan demand will revive. Interest rate is likely to soften because inflation may soften further. There’s a downward interest rate bias,” said Bali.

If you are planning to take a loan, go for a floating rate loan. Also check for all charges besides the interest rate.

Source: livemint

Ahmedabad Real Estate News

Under Construction Flat Booking Finds Tax Deduction Under Time Constraints



Tax Deduction

If a buyer makes a transaction to book an under-construction flat and if he acquires it within the three-year period of the sale of his old house, then he is entitled to a tax deduction, says a ruling from the Mumbai bench of the Income-tax Appellate Tribunal (ITAT). If an apartment is booked in an under construction project than it must be viewed as a method of constructing residential tenements, says the December 18 judgment.

That means if the buyer uses the entire gain from the transaction to buy another house within two years or construct another house within three years. The two- and three-year period applies even if the buyer bought another house a year before selling the first one. But the property should have been bought in the name of the seller.

It is mandatory that within a period of two years after or one year before the date of transfer of old house, the taxpayer should construct a residential house or acquire another residential house within a period of three years from the date of transfer of the old house. The date of receipt of compensation will determine the period of acquisition or construction in a case of compulsory acquisition.

This exemption is effective and can only be claimed in respect of one residential house property purchased/constructed in India. In the case of multiple house purchases or constructions, the exemption under section 54 will be available in respect of one house only. Any purchases made outside the country does not fall under any kind of exemption. Section 54 gives relaxation in such cases by providing relief to the taxpayer who sells his residential house and acquires another residential house from the gained capital.

After the sale of an asset, the difference between the buying price and the selling price is a capital gain or a capital loss. These are further classified as long-term or short-term. If a property is held for 24 months or less, with effective from 2017-18, then that asset is treated as Short Term Capital Asset. Then an investor can make

treated as Long Term Capital Asset. Then only a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) can be made on that investment.

ITAT agreed that booking of a new flat in an under-construction apartment should be considered as a case of “construction” and not “purchase”, hence following the earlier decisions of the Bombay high court and the tribunal itself. Further ITAT allowed the fact that the construction can began prior to the date of sale of the old asset. Same was stated in the earlier judicial decisions of the Karnataka high court and Ahmedabad ITAT, that the date of commencement is not relevant but it is the completion of construction that comes in relevance to section 54.

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India Real Estate News

HDFC and Quikr Make A Deal



HDFC and Quikr Make A Deal

According to a deal between HDFC and Quikr, a stake of more than 3 percent will be given to the mortgage giant in return to its transfer of offline and online real estate brokerage business to the classified ads platform.

After acquiring Commonfloor in 2016 Quikr already has a major presence in online real estate broking.

“Most of the searches for real estate are moving online. Quikr has a much bigger presence online. Through this deal, we are partnering Quikr in the broking business,” said HDFC MD Renu Sud Karnad. According to her, this deal will strengthen Quirks position with offline support.

The deal suggests that HDFC will transfer to Quikr its entire shareholding in HDFC Realty, a real estate brokerage platform, and HDFC Developers, which runs the HDFC RED online platform.

Karnad added that the deal expects Quikr to generate home loan leads for HDFC. The transaction consists of a co-branded alliance between both parties and the HDFC brand will continue to be used online for a year.

The e-real estate classifieds platform HDFC RED has around 7,000 project listings and generates traffic of over 80,000 unique visitors per month. HDFC Realty has a 300-member, in-house sales team, and 7,000-strong nationwide broker network. Avendus Capital was the exclusive financial adviser to Quikr while Kotak Investment Banking acted as the exclusive financial adviser to HDFC on this.

30 million monthly users make Quikr India’s largest classifieds platform. It runs multiple vertical businesses across real estate, automobiles, jobs, services, and goods. The Quikr Home, its real estate vertical generates 3.5 million monthly unique visitors.

Both companies intend to work closely and conduct analytics and identify potential homebuyers, and therefore home loan customers, early in their home-buying journey. Quikr founder and CEO Pranay Chulet said, “We see great synergies between Quikr and HDFC as we start working together to bring a seamless online-to-offline platform to developers and consumers.”

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India Real Estate News

Retaining The Sustainability: GRIHA Launches Star Rating For Urban Homes



GRIHA Launches Star Rating For Urban Homes

Green Rating for Integrated Habitat Assessment (GRIHA), is the National Rating System of India, a Sanskrit word meaning – ‘Abode’. Human architecture has always consumed resources in the form of energy, water and material from the environment. From their construction to operation, these habitats absorb the resources throughout their life cycles, emitting wastes in the end. This emission could be direct in the form of municipal wastes or indirect emission into the atmosphere, such as from electricity generation. Hence GRIHA was formed to reduce an architecture’s resource consumption, waste production and overall environment impact up to certain national acceptable limits.

In attempt to quantify all these aspects, like energy consumption, waste generation etc. GRIHA tries to manage, control and bring down the respective to the best possible limit. Being a rating tool, it helps people to assess the performance of their respective projects against the national benchmarks.

Hence it becomes an evaluation of the environmental performance of an architecture on a holistic level. Covering its entire life cycle, this evaluation provides a specific standard for a ‘green building’. This rating system aims to strike a balance between established institutions and emerging concepts, on a national as well as the international level.

The process starts with an online submission of documents according to the criteria. Then a team of professionals and experts from GRIHA Secretariat takes a site visit for the evaluation of the building.  There are four different sections categorized by 34 criteria in GRIHA rating system. Some of them are site selection and site planning, conservation and efficient utilization of resources, building operation and maintenance, and innovation. 

Sanjay Seth, CEO, Green Rating for Integrated Habitat Assessment (GRIHA) Council says, “A rating between one and five stars is being provided, helping the costumers to know about the sustainability of the houses”.

According to the Union Minister, Hardeep Singh Puri, the climate resilient and sustainable buildings are the need of the hour. As the government is aiming to construct around 1.2 crore houses for the urban poor under the affordable housing scheme.

In one of his keynote addresses, Andreas Baum, Ambassador of Switzerland to India and Bhutan said that the Indo Swiss collaboration is operating with the Indian Bureau of Energy Efficiency in the development of guidelines for energy efficient housing.

“At present India is witnessing a rapid urbanisation, if each building becomes greener than the last one, then we have a huge opportunity and hope for our country. We need to look beyond the conventional methods of building, in order to provide our citizens with a good quality of life. Hence, GRIHA gains important in meeting our national goals with respect to a sustainable society”, says Dr Ajay Mathur, director general, TERI & president, GRIHA Council.

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