RBI eased norms for Home Loans

Harshil Mehta from DHFL believes that new guidelines of RBI may also get extended for middle income group (MIG) which costs around Rs 12 to 15 lacs in tier-2 and tier-3 cities. To provide a boost for affordable housing, the Reserve Bank of India (RBI) eased norms last week for home loans of up to Rs 10 lacs.

While speaking with CNBC-TV18, Harshil Mehta, CEO, DHFL stated that this is very much positive sign for his company and real estate industry. He believes that these guidelines may also get extended for Middle Income Group (MIG) that costs around Rs 12 to 15 lacs in tier-2 and tier-3 cities. As per the statement of Mehta, the new RBI guideline will largely benefit the Economically Weaker Sections (EWS) or the Low Income Group (LIG) segment where the stamp duty registration is anywhere between 12 -16 percent of the cost of unit which was earlier excluded from calculating the loan eligibility. Below is verbatim transcript of the interview:

• Could you take us through the positive side of this announcement? How it will be good announcement for your company as well as the real estate industry?
  This new RBI guideline will largely benefit the Economically Weaker Sections (EWS) or the Low Income Group (LIG) segment where the stamp duty registration typically goes up to anywhere from 12 per cent to 16 per cent of the cost of unit, earlier it was excluded from calculating the loan eligibility.
  Now, with this it for sure that it will help the borrowers to be a part of the loan so in that segment this is definitely good.

• What is your view on the other guidelines which passed with respect to disbursal of loan upfront for the government owned and backed real estate builder bodies’ such as; Maharashtra Housing and Development Authority (MHADA)?
  This is definitely good sign and has been a constant feedback to all the regulators especially for those who came to statutory housing projects either by government or by statutory housing boards as they work in a different way than the private sector so this is surely a welcome sign because when it comes from the regulator it makes things a lot simpler from process perspective when you have borrowers who apply for a loan and are looking at disbursals. So, this is a pretty good sign.

• In present, how much of your loan portfolio is sub Rs 10 lacs?
  If we look at our company’s portfolio, than more than 60 per cent of our home loans get sanctioned for loans up to the size of Rs 10 lacs and on the disbursement side we would be at 51 per cent of the loans to Rs 10 lacs.

• How do you see this benefiting your top line and subsequently the earnings for your company?
  This announcement leads to an enhancement in our disbursements because now you are including that in your loans. So, for sure it will helps us to increase your disbursements while the traction continues on the tier-2 and tier-3 cities so, this means that from a sanction perspective because you will now have more borrowers coming to you for loans and this will lead to higher sanctions. So overall, on the portfolio you can see a marginal increase on account of this.

• Do you see an extension to the ticket size of Rs. 10 lacs going forward to include the Middle Income Group (MIG) as well?
  While this new guideline of RBI is for loans up to Rs 10 lacs, we also need to keep in mind that in tier-2 and tier-3 cities even Middle Income Group (MIG) unit cost is in the range of Rs 12 to 15 lacs. So, this limit of 10 lacs may get extended to cover for the Middle Income Group (MIG) segment also which is up to Rs 15 lacs as it would surely benefit as all this falls under affordable housing but this is definitely a good move towards that.

• Can you quantify that?
  We would suspect that this would be in the range of anywhere from 2 to 6 per cent.

Housing for all by 2022

Mega housing scheme is in the process, which will offer the affordable houses to more than 5 crore subscribers of retirement fund body Employees’ Provident Fund Organization (EPFO). According to The labour ministry it will support the government’s mission ‘Housing for all by 2022′. The ministry is collaborating with housing finance companies, state-owned construction firms such as; NBCC, PSU banks and authorities like PUDA, HUDA, DDA to build affordable houses at a price to be fixed by the Central Government.

According to sources, “In present Labour ministry is preparing such schemes through affordable houses will be provided to the Employees’ Provident Fund Organization (EPFO) subscribers, especially to those who are in the low or middle bracket”. As per the records currently, there are more than 70 per cent EPFO subscribers, who are below the basic wage, which is Rs 15,000 per month. In the note from the Prime Minister’s office, He asked EPFO to promote affordable housing to only its subscribers and use its funds for that specific purpose. As per calculation EPFO can generate 70,000 crore to create 3.5 lakh additional in low cost, if EPFO will deploy 15 per cent of its funds for low cost housing.

Currently EPFO is managing the corpus of Rs 6.5 lakh crore with the annual incremental deposit of Rs 70,000 crore. The labour ministry is so much interested on a scheme under which EPFO subscribers can withdraw their PF deposits to make part-payment of the total cost of the house. Currently, EPFO subscribers can withdraw any amount of money from their PF accounts to buy houses only after contributing for a period of five years in the schemes run by the body. Ministry is also planning to provide subsidy to the EPFO subscribers who are in low-income bracket and this subsidy will help them to avail benefits of other low-cost housing schemes of the central and state government.

According to sources of Financial Institutions, “The housing loan at low interest rates will fall under priority sector lending for construction of affordable houses, whereas; these schemes will be optional for EPFO subscribers because there is no need to provide affordable houses to those who already own one home”. Under the housing schemes, there are three different income categories such as; high income, middle income and low income. Houses and other financial incentives under the upcoming scheme will be offered on the basis of the income of that particular subscriber.

The subscribers will be free to pay the equated monthly installments of their home loan through their provident fund account. As per the sources, under this scheme EPFO may use can use its funds to create a corpus for providing affordable housing loan at low interest rate to its subscribers.

Housing loans

Taking the home loan can be the biggest financial decision of life, so clear understanding of terms and conditions and as well as comparison of various home loan offers is very essential because it help to choose the best offer among different loan providers. Some factors such as; rate of interest, processing fee, faster process and few other factors one should consider before deciding on a financial institution or a bank to avail the loan from. It is recommended to do comparative analysis on every factor before selecting a particular lender or financial institution or bank. Some factors are below mentioned;

Loan amount:
All the banks or lender have different eligibility criteria for assigning the loan it can be in terms of your income or percentage funding to value of the property. In simple words if you are planning to take 40 to 50 per cent of the property value and your monthly income is far more than the required EMI, so don’t worry you can get the loan easily. But in case if you need 60 to 80 per cent of the total property cost and your income is not so more, so banks can check with your financial status. In general banks can lend up to 80 per cent of the property cost.
Compare Interest rates:
Before taking the interest rate it is recommended to compare the interest rates and processing fee of different banks or financial institutions. As an intelligent person, one should choose the bank or lender which is offering the lowest rate of interest with the track record of offering lower interest rates and processing fee in last 10-15 years.
Property listing:
As a prospective buyer, an individual should draw up a list of banks, which is approved or shortlisted by property developer. Chances of getting the loan from those banks which approve the property are more than the banks that doesn’t approved the property. Getting this list is not big task because an individual can find this list on the website of builder.
Processing fee & other charges:
This is one time fee, but still the matter of concern, before finalizing the decision it is recommended to compare the loan processing and other legal fees while comparing the interest rates. The banks, who give lowest rates, can be considered as the ideal bank for loan.
Procedure and approval time:
In India, most of the banks take 3 to 8 days for the loan approval and other formalities, customers should ask the bank about their procedure and approval time and after that you should proceed with bank according to your comfort. The banks who ask you to come to branch to complete the process should be avoided because as professional it s not good thought to take 3 to 4 days holiday for loan procedure.
Flexibility of EMI and payment dates:
Some banks have fixed dates for the payment of FMI and as customer if you are comfortable with that date, so you can go ahead. Make sure your bank gives you flexibility for choosing the right EMI date.
Real the legal documents and final agreement:
Always, real the legal documents and final agreement fully, do not make your decision in quick time, take time and decide the right thing. Be sure that there are no more hidden charges or clauses.
Before going with any particular bank compare the bank and lenders rate and other conditions on above mentioned points and at the end you will be end with right deal. It is recommended to consult with at-lest four to five banks before closing the deal. Buying a home or closing the home deal may not be big deal, but the whole process is a very big deal.

Properties in Kalyan, Dombivli

In present there are two best way to maximize you ROI is to either keep your eye on stock market or invest in real estate, But in first one you need to take a lot of risk, where as in real estate all you need to do just little research and right time for investments. Real estate market of Mumbai is driving the real estate market in all over the country. Its dream of every Mumbaikaar to own a home, where they can live, but due to high cost it was difficult. According to real estate developers if you want to have the apartment in Mumbai, so you need to have good amount of money, but still thee is chance for middle class if you are ready to take the property in other areas such as; Property in Kalyan and Property in Dombivli.

Property in Kalyan and property in Dombivli are quite affordable with other basic amenities and features. The price range of property in Dombivli and Kalyan start from Rs. 20 lakh to 75 lakh with the options of studio apartments, 1BHK, 2BHK and 3BHK apartments. In Mumbai the demand of residential property is more than the commercial and in this scenario the property in Kalyan and property in Dombivli are playing the vital role to cater the need of housing units. According to real estate developers Dombivli and Kalyan regions soon notice the price rise for real estate market.

How to deal with finance?

If you wish to own a property in Kalyan and property in Dombivli, and you are finding the budget your budget short, so you can take the loan from banks or financial institutions because they provide loan easily with fast process. In present it’s easy to get the home loan in comparison of past, so you are free to take the advantage of RBI norms and policies. Real estate market of Mumbai will soon show the more improvement because of some new policies due to housing for all campaign. Even now day’s real estate developers are launching the new project in affordable range, so that everyone can own the home in affordable price. In Mumbai real estate market the demand for luxury property is less and supply is more, whereas for demand for affordable housing is more and supply for same is less.

The property in Kalyan and property in Dombivli, are currently in development stage and is the built up areas of greater Mumbai. The neighboring areas of Dombivli and Kalyan are also some of the most sought after by investors. Some of the developers such as; Saisatyam Group, Gajra Group, Dynamic Buildtech Ltd, Nirmal Lifestyle, Ashapura Constructions and Lodha Group are offering the apartments in the range of Rs. 25 to 30 lakh, so it’s pretty good news for those who want to own a property in Kalyan and property in Dombivli.

Acquiring a house which later one becomes your home is not an easy decision and required lot of investment, time and knowledge and planning all the amenities that you are looking in your dream home. So if you want a home which not only should provide a sense of satisfaction but also  and have limited finance then probably it’s time to consider  or Mortgage Loan or Housing Loan.

Purchasing and reconstruction of house in easy for people having finance backing them up and if you don’t have that back up then probably time to resort to Home loan or housing loan. Home loan is loan which is funded by the banks against putting another home or property as security. But in this case if the borrower fails to return the loaned amount then bank has the right to sell the property to retrieve their money back. Housing loan is taken by a borrower and issued in form of loan from bank against security or property.

It is important to do a complete research when looking for options for either home loan or housing loan. Different banks have different rates and policies for each of the type’s loans. When a loan is taken against property or by any real estate, it is known as mortgage loan. In this the buyer received certain funds by entering into a contract they will be returning a certain amount of amount along with certain interest amount. The mortgage loan is mostly taken by real estate developers to buy new property or develop a new project.

Interest rates for Home Loan or Mortgage Loan or Housing Loan:

If you are looking for Home Loan or Mortgage Loan or Housing Loan more than Rs 20 Lakhs then the interest rate may vary from 10.10% 11.75 % depending on the banks as well as depending on the state in which you want the property. With the increase in the number of available properties there has been a dip seen in the interest rates of maximum 6%.

But if you are a developer and want a Mortgage Loan, then again you have different interest rates. A property between Rs 30- 75 Lakhs will have the interest rate of minimum 11.25% to maximum upto 15% (depending on the bank you will be approaching).

SBI reduced its home loan rates

India’s largest public bank, State Bank of India on Tuesday revised interest rates on home loans. Now SBI will offer uniform interest rate on home loans from effective August 26. SBI has cut interest rate by 5-15 bps on home loans.

For the home loans up to Rs 75 lakh, the interest rate will be 10 basis points above the base rate and for home loans of above Rs 75 lakh the interest rate will be15 bps above the base rate.

Earlier, on December 20, 2013 the rate of interest on SBI home loans were reduced with a separate interest rate structure that was also rolled-out for woman borrowers 10.25 per cent ((for loans above Rs 75 lakh) and 10.10 per cent (for loans up to Rs 75 lakh) too, a senior official with SBI said.

Mr. G S Sandhu, finance secretary said, the central government is planning for new interest subvention scheme, to encourage affordable housing, which will meet part of the buyer’s home loan burden. He said that according to scheme, there would be interest subvention up to 5% for loans up to Rs 5 lakh, while at present the interest subvention is available only on loans up to Rs 1 lakh. Interest subvention refers the subsidy that government provides the borrower, which makes the discount given by the lender.

Sandhu said that a blueprint on affordable housing plan is being prepared and this time the government is clear because it wants time-bound results. For affordable housing the new government had big plans and vision. The more burdens falls on public sector banks and real estate investment trusts could be a game-changer for the sector.

Senior executive with one of public sector bank said, increasing the loan limit to Rs 5 lakh will immensely increase the utility of these loans because this will enable the underprivileged to take benefit of low-cost housing schemes, which will be undertaken by state governments.

SBI officials said, it has now been decided to offer uniform interest rate on home loans, irrespective of the loan amount effective from August 26, 2014.