Benefits of Taking a Joint Home Loan

February 2018

An immediate family member (salaried or self employed, Indian or NRI) can be a co-applicant.

A co-applicant to your home loan helps –

• - increase your loan eligibility
• - buy a bigger home
• - get your home in your preferred location
• - avail of higher tax benefits
• - share loan repayment

A co-applicant need not be part owner of the property

Women co-applicants could enjoy a lower rate

A home is a ‘once-in-a-lifetime’ investment for many of us. It is natural that we want to make it as big and better as practically possible. Affordability is what determines the size, location and quality of our home. No doubt, having the possibility of availing a home loan has improved affordability. However, your home loan eligibility depends on your age, income levels, other loans that you are still repaying, etc. Lenders have prudent norms which stipulate that your home loan EMI combined with all the other EMIs that you may be presently repaying, cannot exceed a certain level of your take-home pay.

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IMPROVING YOUR HOME LOAN ELIGIBILITY

One way to increase your home loan eligibility is to add co-applicants with independent income source. The lender will consider their income while assessing your repayment capacity, which in turn, will increase the amount of home loan you are eligible for.

WHO CAN BE A CO-APPLICANT?

Generally, an immediate family member can be your co-applicant. The co-applicant can be salaried or self-employed; Non-Resident Indians or NRIs is also eligible to be co-applicants.

CO-APPLICANT VERSUS CO-OWNER

A distinction needs to be made here between a co-owner and a co-applicant. A co-owner is a joint owner of the property whereas a co-applicant need not be a part owner of the property. The basic principle is that all co-owners of the property will have to be co-applicants of the home loan. However, all co-applicants need not necessarily be co-owners. Their only income is considered for credit / loan appraisal.

KEY BENEFITS OF TAKING A JOINT HOME LOAN

There are two important benefits of a joint home loan. They are:

1. HIGHER LOAN ELIGIBILITY:

By pooling their incomes together while making a joint home loan application, the applicants become eligible for a higher loan amount and can hence afford a bigger / better home.

2. HIGHER TAX BENEFITS:

By applying jointly for a home loan, tax deduction available on home loans can be enjoyed by the co-applicants separately, provided they are co-owners of the property and each of them is contributing to the home loan repayment. a) Principal repayments are eligible for deduction under Section 80C of the Income Tax Act up to a maximum limit of Rs.1.50 lakh. b) Home loan interest payments enjoy tax deduction under Section 24 up to Rs 2 lakh if the property is self-occupied; if the property is let out, the entire interest becomes eligible for tax deduction, i.e., there is no maximum limit. In a joint home loan, since each co-applicant is eligible individually for the above deduction, the collective tax benefits are much higher than in the case of a single applicant loan. The actual amount of tax benefit enjoyed by each co-applicant is in proportion to their contribution in repayment of principal and interest, subject to the limits mentioned above. Co-applicants can therefore plan how much tax benefit they would like to avail based on which they can decide what proportion of the loan each is going to repay.

SPECIAL INTEREST RATES FOR WOMEN CO-APPLICANTS:

Some lenders offer a differentiated home loan interest rate for women customers, which is usually a few basis points lower than the normal home loan rates. To take benefit of the discounted interest rate, a woman has to be the sole or joint owner of the property and an applicant or co-applicant for the home loan.

CAVEATS

While in most cases it helps to take a joint home loan, indicated below are some situations when you should avoid applying for a joint home loan:

• You are not a co-owner of the property.
• Your eligibility as a single applicant meets your loan requirement.
• You have a low credit rating due a poor credit history.
• You are repaying an ongoing loan, availed as per your maximum loan eligibility.
• You are currently purchasing a lower value property (maybe for investment purposes) and may purchase a bigger property in the future for self occupancy.
• You are about to retire shortly.

REPAYMENT RESPONSIBILITY

Home loan repayment is the collective and also individual responsibility of all co-applicants. Loan payments can be made in any way the applicants choose; they can separately make the EMI payment or do so through a joint bank account.

DOCUMENTATION

Proper home loan documents such as your KYC (proof of identity and address), income and property documents are essential to avail the loan quickly and smoothly. It is on the basis of these documents that lenders process your home loan application. All co-applicants’ KYC documents need to be submitted to the lender while income proof of only those co-applicants whose income is to be considered for loan appraisal need to be submitted.

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Source: hdfc.com

8 Things to Check Before You Move Into a Rental Home

Planning to change or move into a new rental home? Tenants usually look for basic amenities like electricity, water, parking facility and other convenient amenities. However, there is much more to it which should be certainly checked before you finalize a home on rent.

Let us throw light on some of these essential checks which in turn would help you avoid any problems when you move in and start staying in your new home.

Credits : freepik.com

POWER POINTS IN THE PROPERTY

High Voltage points in kitchen and for geyser in bathrooms and charging point just beside the bed are certainly needed. This is not all, look for the points for your electrical appliances like refrigerator, iron etc. and plan your move accordingly. The size of your furniture will decide whether the space where the point has been provided can accommodate it or not. Also, check if the points are 3 times more than your appliances to be operated.

STORAGE SPACE

When you are in the process of shortlisting your new home on rent, it is important to ensure there is ample storage space to place your books, duvets, quilts and other items when not in use. You also need an extra space away from sight to keep cleaning items like mobs, brooms and cleaners.

CONDITION OF WALLS

Check out for the seepage issues if any in the walls of the property. Make sure the walls not messy and disappointing for anyone who comes to your home. The locks and windows need to be checked thoroughly whether they are working fine or not. In case of any damage to glasses or other issues with the walls or windows, need to be informed to the landlord and whether they will be repaired or replaced before you move in or not.

INFESTATION OF RODENTS OR INSECTS

Check for any insects or rodent droppings and make it as an integral part of your inspection. It is extremely necessary to know of any such problems before you move in so that the property can be treated with appropriate measures. Ground floor properties more prone to such problems.

STATUS OF FLOORING

Closely check See if there are any damages in the flooring of different rooms. This is one thing that often gets overlooked while you are looking out for a rental house. Checking it in advance would any undue charges levied on you when you vacate the house. So, thoroughly check for any damage or discoloration in tiles or flooring.

BATHROOM FITTINGS

Make sure bathroom fittings are checked before you move. Flush of each toilet is in working condition. Plumbing is as per your expectation. Check the faucets of sinks and wash basins for the running water. Check under the sinks and bathrooms for any type of seepage. Fill the sinks to check for water clogging if any.

MOBILE SIGNAL RECEPTION

This is another major concern there days. It is often observed that tenants come to know that the property they have moved into is not ideally receiving the mobile signals. The reception is quite poor in some rooms of the home. So go to each room, pull out your mobile phone and check for the signals in each room.

APPLIANCES PROVIDED

If you are moving into a furnished property for which ofcourse you are being charged accordingly, make sure that each of the appliances offered is in working condition. This may include refrigerator, washing machine, AC, gas stove etc. Ask for the repair or replacement if you find anything in non-working condition.

So, keep these necessary checks in mind when you visit a property for rent.

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Source: magicbricks.com

5 Financial Aspects To Consider Before You Decide To Buy A Home

February 2018

Buying your First Home? It is evident that you will have several questions in mind as a first time home buyer. We have compiled 5 most important financial aspects to consider before you buy your new home.

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FINANCIAL PLANNING

The first step towards a proper financial planning for your dream home would be to review your current financial obligations such as other loans, insurance amount etc. This will provide you the right picture of your true income. Your budget will be a factor of the EMI that you can pay off and what your monthly expenses are. Apart from this, you should also account for the hidden charges such as registration, stamp duty, maintenance etc, when finalizing your budget & loan amount.

Once you have decided the loan amount, move on to check how much would you be able to put as down payment. Typically, these range from 15 to 20% of the property value, and offer a confidence to the bank about your credibility. You can also choose to take a loan with zero down payment, but this will result in an increase in your monthly EMIs.

IMPROVING YOUR CREDIT SCORE

This plays a critical role in your loan application. Once you have applied for the loan, the lender checks for your credit score, as this is a clear indication of the credit worthiness of the applicant. So it would be advised to check your score with any of the credit bureaus like CIBIL, TransUnion etc. before applying for a loan, and ensure that it is in the better range.

CHOOSING THE RIGHT LOAN?

It is important that you do your market research thoroughly, as it will help you select the most suited financing option. With a variety of options now available for loans, one always has the privilege of negotiating rightly with the bank, thus reducing your interest rate and save yourself a lot of money.

But before selecting the right loan, just keep few important parameters in mind: how much loan are you eligible for, what will be the interest rates, how can I get the loan processed with minimal fee, what should be by EMI, what other expenses do I have.

Additionally, you always have the option to choose between the floating interest rate and the fixed interest rate.

SELECTING THE RIGHT LOCATION & BUILDER

While choosing the location, keep softer aspects such as connectivity, safety, proximity to markets, schools, public transport in mind. You should also be aware of the future developments planning in that area.

Also, before finalizing a property, do a thorough background check of the builder, as to how many projects he has done, what has been the delivery record, quality of construction, rate of appreciation of previously developed projects etc.

HOME INSPECTION & LEGAL DUE DILIGENCE

Do a thorough inspection of the property you are planning to buy to spot defects, if any. There are many professionals who would do this on your behalf and provide you a detailed report on the current defects as well as the potential damages, if any.

Additionally, there are a lot of legal documents that are required to be verified without which the sale of property is incomplete. Make sure that these are verified and signed. These include Sale agreement, registration, encumbrance certificate etc.

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Source: magicbricks.com

Things To Know Before Buying New Property

February 2018

Arnav Pandya

There is a bit of work that a buyer would need to take when they buy a house property and this relates to the process of paying taxes. While capital gains tax is present at the time of the sale of the property and this is a calculation that would be influenced by the cost price that is paid at the current juncture there is also another provision of tax deducted at source that will come into the picture. Many people do not have an idea of this provision because they do not regularly buy and sell property and hence this is something that needs to be taken into consideration. Here is a closer look at the applicable conditions that need to be followed.

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REPORTING

The whole purpose of introducing the element of tax deducted at source in a property transaction is that a lot of them actually escape the attention of the tax authorities. Many of these are carried out in cash and there is often no permanent account number that is present when the deal is registered. This actually leads to the transaction slipping through the tax net and hence to avoid this the tax department has come up with the proposal of the deduction and this becomes an important thing to follow.

BASIC CONDITIONS

The basic condition that is applicable for the property transactions is that if this has taken place after June 1, 2013 then there would have to be a tax deducted on source if the consideration of the property exceeds Rs 50 lakh. This is meant to ensure that smaller properties remain out of the tax net and that larger sales are recorded and there is no tax avoidance especially when it comes to under reporting too. Once the details of the property are present then the tax department can ensure that they take a closer look at the entire deal and the valuation so that if there is a problem then this can be tackled.

BUYER

The TDS has to be undertaken by the buyer of the property and not the seller so it becomes the responsibility of the buyer to ensure that they complete the process when the transaction is being completed. There is another condition that they will have to fulfil which is that once the tax is deducted from the seller then the amount has to be deposited with the government. This is important to complete the transaction and hence this is required as per the procedures. There could have been a problem for the buyer since they do not have a tax deducted at source number but there is an exemption that is given for such purchases because these are one time purchases and hence in such cases the tax can be deposited after the usage of the PAN is done. This saves a lot of trouble because the individual does not need to go and take a TAN just for the purpose of a single transaction.

DETAILS

There are several other details that are important in the whole process. The first is that the TDS has to be deposited with the government within a period of seven days from the end of the month in which the TDS has been deducted. This gives some time to the buyer to ensure that they complete this part of the transaction. One can make the payment online too but one needs to be careful to ensure that there is a proper way in which the details related to the transaction are entered. There is also the facility of making the payment online when the details are filed and in the end the buyer has to give the TDS certificate to the seller of the property and this can be downloaded from the income tax website.

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Source: moneycontrol.com

Turn Your Home Into Haveli With These Vintage Ideas

When the point finally comes where you are ready to invest in your own flat, there are many considerations that are likely to confuse you. However, the most confusion that Indian middle-class homebuyers usually face is whether to a smaller or a larger flat. One of the biggest contributors to the confusion is that home purchase is rarely, if ever, done without consulting others.

SWINGS

Who doesn’t wish to have a gorgeous swing that can enhance the look of your living room substantially? It adds an amazing earthy feel to the ambience and also a fun element to the décor. Stack up some colourful pillows on the swing to balance the earthy vibe.

BRASS / COPPER VIGNETTES

Brass or Copper vignettes go perfectly with everything as they have a rustic and antique-y vibe. From using them as your flower vase to showpieces, these items are available in large varieties of idols, pots, trays, flower shaped bowls or even candle stands.

Credits : freepik.com

CENTER TABLE

Center Tables are the essence of the living room, so it is important to highlight it with an extra charm. But it doesn’t have to be a ‘table’ always! You can revamp an old wine storage or a wooden trunk by adding low height legs to it and create your own vintage centre table.

RUGS – CARPETS

Indulge in the gorgeous looking Persian rugs and carpets for your living room to brighten up instantly! With a variety of motifs from natural flowers, interlocking patterns, geometrics, and delicate animals can be seen in almost all Persian carpets. Splashing colour all over the room, these are worth investing in as they give a perfect vintage yet urban look.

MIRROR

Having a mirror in your living room not only gives you a chance to take a quick glance at yourself as you step out but also adds a lot of detailed decoration by adding an illusion of depth, sophistication, and function to your home. Mirrors are the best thing you can humour for your living room. And while keeping that in mind, adding a mirror with a vintage wooden framework is nothing but a plus point!

CHANDELIER / WALL LAMPS

What’s a royal living room without some fancy lightings? Adding the most amazing element – Chandelier to a room that ensures to make it look every bit of vintage! It royal, intricate and lights up the room within seconds. You can also put up small wall lamps if you aren’t a chandelier lover. Adding cute little bulbs for the dim lighting setup in these lamps is a perfect way to enhance your living room.

FOOTSTOOLS / OTTOMAN

Ottomans are just another element to add to your living space that can add colour, and ease to the décor. Not only can they be used to rest your leg while you read your newspaper, but it can be utilized as small ottoman stools for extra seating around the living room. With the embroidered or colourful patchwork done on the seats, they are a perfect addition to the earthy vibe of your living room.

FURNITURE

The essential part of your living room can play in the easiest way to make it look straight out of the yesteryears! The furniture can be the highlight, in-case you want to keep it simple and don’t want to add any of the above elements. Wooden with intricately carved designs, the upholstery should be rich and opulent as well with prints ranging from paisleys to floral brocades can very well be the perfect piece of furniture to add to your space. You can also add a relaxing yet the clichéd vintage rocking chair for you to relax with a book. Some other options that you can pick are recliners or single couches that can add an illusion of a bigger room.

These were some easy ways to add some vintage vibe to enhance your living room and give it a Haweli look. Have any better ideas? Do share in the comments section below.

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Source: polkacafe.com

Low Property Valuations May Spoil Your Home-Buying Dream

February 2018

Home loans have an important factor called loan to value. Banks lend up to 75% to 80% of the value of the property.

Recently, we received an enquiry from an applicant who wanted to switch his home loan from a lender who was not reducing the interest rates to one who was offering cheaper loans. Though this seems a business opportunity for any mortgage broker, beware of the circumstances in the valuation market in India right now.

This gentleman with a fat pay cheque owns a property in Mumbai. The property is sold by one of the topmost developers in Mumbai. Banks simply refused to refinance his loan outstanding. The reason cited was low property valuation today. Most lenders are citing up to 20 to 25 percent lower property valuation as compared to a year ago. The bankers are quick to point out that the builder himself is selling at much lower price than the price he sold in CY2015.

For the beginners, home loans have an important factor called loan to value. Banks lend up to 75 percent (for more than Rs 75 lakh of loan amount) to 80 percent (for less than Rs 75 lakh of loan amount) of the value of the property. This should be best understood with an example. Say you have bought a property at Rs 2 crore. And the registration happened at that price two years ago. You funded that property with 75 percent loan – which translates into a home loan of Rs 1.5 crore. Now after two years, the lenders value that home at Rs 1.5 crore due to 25 percent correction in home prices. If you try to refinance your home loan, the maximum loan you will get at 75 percent loan to value ratio is Rs 1.125 crore.

This may be a shock for many home-owners, but it has transpired within six months of demonetization. It is a situation that is caused due to changing dynamics of the real estate sector, for both residential and commercial segment.

Credits : freepik.com

A property developer recently said, "We are offering best rates possible, just to make the stock move. We have lakhs of square feet of space - ready (100 percent with OC), almost ready (80 percent+) and sitting on land bank. What do we do holding onto the price? The extreme times need extreme measures."

Of course, but it is affecting the cost of the properties of those developers too who are willing to hold on. The larger brands seem to be more keen in 'letting go' than the B or C category players who always had lesser margins. Not getting into whether it is right or not, it is only fair to each one weighing their options and position.

Interestingly, banks, especially the multinational ones, are getting the brunt of it. They generally engage prime valuation firms with reputable background. Some of these valuation companies are multinational, too, and hence their approach matched. These high-end valuers are sending reports of very low valuation following these discounting strategies of developers. As a result, banks are unable to do business which was always a piece of cake for them earlier. Without naming any lenders, this is a general 'known secret' among the sales team of theirs and to avoid an irate client later, they are refusing business at the inception itself, resulting into low volume disbursal.

Relief is private lenders are closer to the ground reality and able to glide through this wave by bringing in documents of the recent sales (sale agreement), showing that the list price hasn't really gone down.

By virtue of doing more number of loans in a single property, these lenders always are in the possession of a current deal of another borrower which helps them take a call above the valuation report they receive from their outsourced partners.

Now, coming to the ready resale transactions and their valuations, it is actually worse. There is no ready reference of price that has been paid recently, as most of them had a cash component not reflecting in any papers. Let’s understand this with an example. In a transaction the price paid was Rs 2 crore and Rs 1.50 crore was the value it was registered at. Now after a couple of years, valuers do not hesitate to bring it down to Rs 1.25 crore given the perception of a market wide correction in the price.

There has been instances wherein, though the buyer is registering the house at Rs 2 crore (since paying fully by bank transaction now), paying full stamp duty charges, the bank stands with a valuation of Rs 1.25 crore in hand. The home loan applications of such borrowers are moving from one lender to the other. After multiple trials, the borrower is forced to choose the best he gets. His self-contribution towards the property is sometime hitting 50 percent of the buying cost.

Loan Against Property (LAP) is a cash-out loan for these difficult times and proven helpful for many businessmen as well as salaried individuals. Banks fund 55-60 percent of the market value of the immovable asset. LAPs, too, are subject to loan to value ratio and suffer from the same phenomenon of falling valuations. The property is priced lower than it used to be, just a year ago, resulting in lesser funding. All lenders love this product due to high margin, but the competition is steeper now as the borrower is no more looking at a cheap interest rate, but at a higher loan amount.

Under the above circumstances, many sale transactions are getting cancelled and banks have to let go of their business more often than earlier. Even old clients with great profile, fat pay package, wealth relationship, super credit score is of no use now.

Ultimately, the focus of home loan has boiled down to the more important word- HOME. Loan is secondary. Should this condition prevail for another year or so, banks will be losing front-line sales managers (their most earning is through incentives and not doing volume-business is getting hit below the belt for them), and that may result in some lenders packing their mortgage portfolio or getting into a completely different strategy for survival.

While the banks may find their way out, if you are keen to buy your dream home, be careful. It is not only your profile as a borrower that matters but also the property you are looking at. Be sure about the valuation element and do not blindly offer token money to sellers looking at historical prices. You may be in for an odd shock. Though the rates are low and property prices are falling, do not test the depth of the waters with both feet.

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Source: moneycontrol.com

The Emergence of Tier-II and Tier III Cities

February 2018

In the past few years, the real estate growth story has clearly shifted from the metros and Tier-I cities to small towns and cities, typically known as Tier-II and III cities. The central government mission of Housing For All and Smart Cities will further provide growth in these towns and cities. Scarcity of land resources, high land and construction-related cost, unaffordable property prices and declining demand, inadequate infrastructural facilities and high cost of living across metros and Tier-I cities have prompted end-users as well as developers to shift their focus to Tier-II and III cities. From investment point of view too, these cities offer better prospects on the back of steady price appreciation in recent times.

Apart from the spill-over demand from metros and Tier-I cities, there are various advantages which Tier-II and III cities offer to the end-users (buyers as well as investors) such as:

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ECONOMIC ESTABLISHMENT

Most of the Tier-II and III cities have well-established skill-based manufacturing industries such as automobile, engineering, textile, pharmaceuticals and capital goods. In addition to these small and mid-scale industries, number of multinational corporate, especially IT/ITES majors, have started setting up their campuses in these cities due to availability of skilled labor at lower cost, reasonable real estate cost, lower cost overheads and conducive government policies. The increasing disposable income of the people has further created opportunity for corporate as well as developers to focus on these growing markets.

GOVERNMENT PROGRAMME

Programmes like Jawaharlal Nehru National Urban Renewal Mission, Housing For All and Smart City are designed to deviate the pressure from metros towards these cities by achieving total development in terms of physical infrastructure, social amenities like healthcare and educational facilities, affordable housing and employment centre.

IMPROVING INFRASTRUCTURE

Pro-active government initiatives have resulted in better infrastructural facilities in form of Greenfield airport, flyovers, bypass, industrial corridors, metros and bus rapid transport system. The improved connectivity and easy movement have made these cities more accessible and hassle free.

REAL ESTATE TRENDS

Availability of large land resources at comparatively lower rate, lower labor and raw material cost and faster pace of construction are some of the advantages offered by these cities to the end-users. Further, stable price appreciation and growing demand have resulted in stable and higher return on investments for developers as well as investors. These cities offer number of affordable and mid-segment housing options to the end-users.

In addition to the above factors, the Tier-II and III cities mitigate the disadvantages associated with metros like reduced quality of life, higher cost of living, expensive transportation, inadequate infrastructure and expensive healthcare and educational facilities. In recent times, some of emerging Tier-II and III cities are Vadodara, Surat, Nashik and Nagpur in the west; Coimbatore, Kochi, Mangalore, Thiruvanathapuram and Vizag in the south; Bhubaneswar in east and Chandigarh, Mohali, Pantnagar, Rudrapur, Lucknow, Kanpur, Indore and Jaipur in north.

According to National Housing Bank – Residex, on a two-year horizon, Tier-II and III cities have displayed steady price appreciation. Property prices in Surat grew the maximum by 20 percent, followed by Nagpur by 14.72 percent, Raipur by 10.90 percent, Guwahati by 9.80 percent and Lucknow by 9.29 percent.

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Source: www.hdfc.com