Real Estate News on Home Loans

The formation of a new central government brought back a positive momentum in the real estate segment. With plans to increase the LTV ratio as high as 90% by the National Housing Board and discounted interest rates being offered by top lenders ICICI Bank and State Bank of India, the home loan market has witnessed a good month. The Reserve Bank of India kept the repo rates unchanged helping in continuation of home loan interest rates devoid of any hike. Now with the annual budget just a few weeks away, the real estate industry and home loan seekers are bracing for positive announcement in the budget that can bring back the buzz in the home loan segment and the real estate sector as a whole.

RBI keeps repo rates untouched:

In a positive development announced in the beginning of the month of June, the Reserve Bank of India kept key rates unchanged. The repo rate was unchanged at 8% while the reserve repo rate was fixed at 7%. The SLR however was cut by 50 basis points. The announcements were largely as per market expectations and meant little or no change in home loan interest rates for new or existing borrowers.

High expectations from Union Budget 2014-15:

With the new central government likely to present its annual budget on the 10th of July, there are high expectation from both real estate developers and potential buyers. A vast majority of people expect the Narendra Modi government to announce a real estate regulatory or watchdog much on the lines of TRAI for the telecom sector. While developers expect change in laws for easier clearances, home loan borrowers are expecting deduction on home loan interest rates making buying a home more affordable to the common man.

NHB to allow up to 90% LTV:

Earlier the national housing bank NHB announced its plans to increase the LTV ratio for home loans above Rs. 20 Lakhs to 90% of the property value. If approved the NHB plan would allow more users to avail home loans as it would reduce the margin money required by individuals seeking home loans. With the sluggish gains in the real estate sector in the past year, NHB plans to increase LTV ratio is likely to trigger a positive impetus in the domestic housing real estate market. 

ICICI Bank cuts home loan rates:

ICICI Bank, India’s largest private bank and also the biggest home loan provider in the private sector announced a 0.10 percent cut in home loan interest rates. The limited period offer ending on June 30th brings ICICI Bank home loan interest rates at par with the discounted home loan rates of State Bank of India, the country's largest home loan lender. ICICI Bank offers home loans up to Rs. 75 Lakhs 10 10.15% while women borrowers would be given a further 0.05% discount with loans available at 10,10%.

SBI extends discount scheme for women borrowers:

The State Bank of India extended its home loan interest scheme especially designed for women borrowers. The scheme which was originally to expire on March 31, 2014 has been extended for an indefinite period allowing women borrowers a discounted interest rate of 10.10% for home loans above Rs. 75 Lakhs. For home loans above Rs. 75 Lakhs, women borrowers are eligible for home loans at 10.25% compared to 10.30% for other borrowers.

Developers want Home Loan Interest Exemption to be upped

The real estate market in India exhibits a practical example of demand and supply – basic law of economics. The soaring prices of property depict its excess demand which is making investment more expensive with each passing day. The high appreciation in property prices, ranging up to 50%, has not only caught the common man’s attention, but has even tempted NRIs to invest their funds. At this point, the government has to play a crucial role in the revival of residential real estate prices with new policies, increased tax exemption, and reduced interest rates, etc.

Home Loans in India

The boom in the real estate sector has given home loan business a new dimension by attracting various investors to build their dream house. Though home loans have always been the best choice for the end customers, but in the recent times, constant home loan tax exemption of Rs 1.5 Lakhs has failed to match the inflation. The middle income groups, especially the salaried individuals’ feel prohibitive prices and a few incentives make their dream beyond reach. Furthermore, the current tax benefits are too less to fuel the demand and propel growth in infrastructure.

Need for Increase in Tax Exemption on Home Loan

With the entry of a stable government, everyone is expecting the upcoming budget to provide the required policy incentives, stability and tax concessions for promoting the investments and economic growth of the country. The new government should primarily focus on continuing stimulus measures, seeing the delicate situation of economic recovery.

Specifically, in the context of real estate, developers feel a strong need for tax exemption in order to make home loan finance sector affordable. Few of the key recommendations for the upcoming budget are listed below:

·          Infrastructure status to be given for affordable housing: In this scenario, once the infrastructure will fall under priority sector lending of banks, it will provide funds at less rates.

·         Increase in exemption limit for home loan interest: The tax benefit for home loan interest has been the same at Rs 1.5 Lakhs since 2001. Since, the real estate prices have increased manifolds; the amount of loan required by an investor has also been directly affected. Developers are of the opinion that if this limit is increased to Rs 3 Lakhs, it might help in bringing back the boom in the real estate industry. This would surely be quite lucrative for the investors as it would imply additional tax savings as well.

·         Revision of home loan limit for PSL: The housing loan limit should be revised from Rs 25 Lakhs to Rs 35 Lakhs under PSL as this move would help buyers who are struggling to buy property due to soaring prices.

·         Income tax rebate should be extended to the private sector for the development of affordable housing

To sum up, the raised expectations of developers should be considered in order to review the benefits that housing loans provide under the various sections of income tax act. This move will definitely help people at all levels to borrow in order to fulfil their dream of owning a property.

How Profitable is it to Invest in Real Estate?

Since the beginning of time, real estate has been a high paid investment. Not only does it double the value of money, but also keeps it secure. The trend in India for different real estate investments have been on the rise, owing to its immense potential.

How is home loan connected to real estate?

When it comes to real estate, thae first thing that comes into our mind is the amount of money required. With the growing inflation rate, it is not possible for everybody to arrange and accumulate huge sums in a short time. The common man is bounded by different money constraints, which propel him not to think about real estate investment. This is where the concept of home loan comes into the picture.

A home loan gives you the facility of investing in property that will reap benefits in the future. There are many banks, which have initiated different home loan schemes for the common man. Some of them are:

• ICICI: Being one of the pioneers in the banking sector, ICICI bank helps you build your home or invest in a feasible real estate option. With longer tenures, lower EMIs and low home loan interest rates, this bank has been able to fulfill the investment needs of many customers. The simplified documentation and flexible repayment procedure has captured the attention of many people.

• SBI: State Bank of India has been voted “The most preferred home loan provider” in AWAAZ Consumer Awards along with “Most preferred bank award” in a survey conducted by TV 18 in 21 cities across India. With its low home loan interest rates that are calculated on a daily reducing balance, the bank is able to save a lot for the customer. Also, its huge network of branches in the country has enabled many people to opt for home loans from SBI.

Benefits of real estate investments

There are many benefits of investing in real estate. Some of them are:

Ø  Ability to enhance value: When it comes to real estate, an investor can build or rebuild his or her asset in order to raise its value in the market. Being a tangible asset, property investment gives you more control over your investment compared to other forms.

Ø  Yield: The main reason why you should invest in real estate is the high yield value. Your investment portfolio would have some investments, which do not have regular or healthy returns. Invest in property compensates for losses incurred in stocks or bonds.

Ø  Effect of inflation: The real estate business does not get influenced by the inflationary conditions in the economy. You will find many rent leases that get renewed with new rent rates. Being directly linked to the rents paid by the tenants, the returns keep on increasing during inflation.

Ø  Diversification: When making your investment portfolio, always look into diversification in order to ensure better asset allocation. Real estate returns are not at all co-related to any other investment in your portfolio. This not only diversifies your investments, but also take care of the risk involves in it.

You should have investments that will reap benefits and monetary gains in the future. To ensure the proper circulation of the hard earned money, real estate is the safest option for any investor.