Here we break down important details like who all can apply, how much the subsidy in rupee terms is and how the subsidy impacts the loan amount.
If you are looking to own a home of your own, under the Pradhan Mantri Awas Yojana (PMAY) scheme, there are only nine months left for you to arrange the amount for down payment, decide the location, builder and the home loan lender.
The recently introduced Credit Linked Subsidy Scheme (CLSS) for Middle Income Group (MIG) to be called CLSS for MIG will be for a period of one year starting 1.01.2017.
Let’s see who all are eligible for the MIG category, who all within a family can apply, how much is the subsidy in rupee terms and how does the subsidy impact the loan amount.
The middle-income earners
The new category MIG, introduced recently, will further comprise of two slabs. The Middle Income Group (MIG) – I will comprise of households having an annual income between Rs.6,00,001 up to Rs.12,00,000.
And, the Middle Income Group (MIG) – II will comprise of households having an annual income between Rs.12, 00,001 up to Rs.18, 00,000. So, effectively anyone earning between Rs 6 lakh and Rs 18 lakh per annum can avail the benefits of subsidized loans provided other conditions are met.
Who are all eligible?
The scheme is primarily aimed at providing housing for all. Therefore, understandably, all those who already own a home or any of their family member own a home, are kept out of the benefits of PMAY.
The rule says, “The beneficiary family should not own a pucca house and the beneficiary family should not have availed of central assistance under any housing scheme from Government of India.” A beneficiary family will comprise of husband, wife, unmarried sons and/or unmarried daughters. To avoid duplication, beneficiary family members have to provide their Aadhaar numbers while applying for the loan.
But, as per the guidelines, “An adult earning member (irrespective of marital status) can be treated as a separate household, provided that he/she does not own a pucca (an all weather dwelling unit) house in his / her name in any part of India.”
So, even if children (married or unmarried) are staying with their parents in a house owned by the parents (or on rent, in the same or another city), they can opt for PMAY provided they are earning and don’t own any other home.
For a married couple living on rent and even if their parents own a home, will anyhow is treated as a separate household. However, if they wish to avail PMAY benefits, they will be eligible for a single house, bought by either of the spouses or both together in joint ownership.
In the MIG – I category, individuals will get 4 per cent interest subsidy on a loan amount up to Rs 9 lakh, and in the MIG – II slab category individuals will get a 3 percent subsidy on a loan amount up to Rs 12 lakh. If one needs an additional loan, the lender will prove it but the additional loans beyond the subsidised loan amount will be at a non-subsidised rate.
How does it work
Say, someone in the MIG II category, wishes to buy a house costing Rs 60 lakh. After the mandatory minimum down payment of 20 percent i.e. Rs 12 lakh, the balance of Rs 48 lakh can be arranged through a loan. But under PMAY, a subsidy of 3 percent would be applicable till Rs 12 lakh, hence, the lender’s home loan interest rate will be applicable on the balance of Rs 36 lakh.
How is the subsidy adjusted
The interest subsidy amount will not be the differential of interest amount (of actual and subsided rate) but will be the net present value (NPV) of the interest subsidy amount. It is to be calculated at a discount rate of 9 percent. For calculating NPV of the subsidy, one will need the loan’s amortisation schedule as the interest portion of each Equated Monthly Installment (EMI) has to be considered. Thereafter, use the Fx function in an excel sheet to arrive at the NPV. Because of the subsidy amount, your loan amount reduces and, therefore, the interest burden to come down.
Suppose on a home loan of Rs 12 lakh, the NPV of the 3% interest subsidy comes to Rs 2.30 lakh. So, out of the loan amount of Rs 12 lakh, the amount of Rs 2.30 lakh will get deducted and the borrowers has to pay EMI on the balance i.e. Rs 9.7 lakh at a rate at which the lender is providing loans, which could be 8.75 or 9 percent or whatever the MCLR based home loan rate is the bank.
The interest subsidy will be credited upfront to the loan account of beneficiaries resulting in reduced effective housing loan (deducting it from the principal loan amount) and Equated Monthly Installment (EMI). The borrower will pay EMI as per agreed document rates on the remainder of the principal loan amount.
Loans under PMAY
The PMAY benefits can be availed if one wishes to acquire a new house from the developer or the builder and even for buying a house from the secondary market through repurchase. One may also take a loan for the construction of the house.
Interestingly, if someone already owning a home wants to avail PMAY benefit, there’s still a possibility. The government has clarified that the Mission (Housing for All by 2022) also provides for enhancements/incremental housing to the existing ‘pucca’ house under the CLSS component. So, a home loan provider cannot decline or not entertain an applicant seeking a home loan for the addition of a room, kitchen etc to the existing dwellings solely on the ground that the applicant is already possessing a pucca house.
Under PMAY, the area of the house is different for all categories but it’s the carpet area that is to be looked at. For MIG I, the carpet area is to be 90 sq mt (968.752 sq ft) and 110 sq mt (1184.03 sq ft) for MIG II category. Carpet area is the area enclosed within the walls i.e. actual area to lay the carpet. This area does not include the thickness of the inner walls. If you add up outer walls, balcony and other common areas, it’s the built-up area.
Further, when space for lobbies, stairs, elevators etc is added, the super built-up area is arrived at. Builders as of today are charging buyers on the super built-up area, a practice which the RERA is going to remove by making the buyer pay only on the basis of carpet area.
A 110 sq mt (1184.03 sq ft.) carpet area is close to 1480 sq ft of the built-up area as nearly 25 percent or even higher, is the difference between them. A 2 BHK could look feasible in several locations. This new move has made affordable housing scheme accessible to many people living in urban areas now.
Subsidised loans from where
One can avail PMAY linked loans from any primary lending institutions such as scheduled commercial banks, housing finance companies, Regional Rural Banks s, State Cooperative Banks, Urban Cooperative Banks, Small Finance Banks, Non Banking Financial Company etc. There will not be any processing charge for eligible housing loan amount as per income criteria under the Scheme. For additional loan amounts beyond the eligible loan amounts for interest subsidy lenders can charge the normal processing fee.
PMAY scheme for MIG buyers may not push up the demand for residential housing much. The benefit of Rs 2.3 lakh/Rs 2.35 lakh may not appeal much considering the cost of houses in the urban areas. The government may consider doing away with the area restriction of 90/110 sq mt to pep up the demand.
Affordable housing has been given infrastructure status in Budget 2017, which should aid developers in takings its associated benefits. But for a common man, the timely delivery of the house still remains a distant dream. For availing the benefits, the builders had to complete the affordable housing projects in 3 years but now (Budget 2017) have to complete in 5 years. Tread carefully and evaluate all the options before venturing out to explore the affordable housing segment, even if you are a first-time home buyer.
Source: ET Realty
Under Construction Flat Booking Finds Tax Deduction Under Time Constraints
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.
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.”
Retaining The Sustainability: 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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