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.

SBI Home Loan New Scheme 2014

State Bank of India is one of the most trusted banks in India. Owing to its nationalized status, it has a loyal customer base. Along with this, it has been voted in AWAAZ Consumer Awards as “The most preferred home loan provider” and “Most preferred bank award” in a survey conducted by TV 18.

SBI home loans are considered a solid foundation of transparency and trust, which are some of the main aims of this bank.

Advantages of SBI home loan

Customers always prefer SBI compared to other banks for home loans, owing to its advantages. Some of them are:

• There are many benefits for a customer as SBI home loans are a package of different facilities.
• SBI home loan interest rates are very low, which initiates savings at the borrower’s end.
• The interest rate for SBI home loans is charged on daily reducing balance.
• There are no hidden costs or administrative charges for any SBI home loan.
• In case the customer wants to prepay the home loan before term expiry, there is no prepayment penalty charged.
• The customer can avail the loan from any of the 15,350 branches of SBI across India.

Different SBI schemes for home loan

In order to fulfill the diverse needs of a customer, many SBI schemes have been formulated for home loans. Some of the main SBI home loans available are:

SBI Yuva Home Loan

This home loan is tailor made especially for youths.

Eligibility	Repayment	Interest rate
Age: 21 years to 45 years Income: Minimum net income should be Rs. 30,000	The interest applied on the SBI home loan is payable during the first 36 months. The actual monthly EMI starts after 36 months.	Upto Rs. 75 Lakhs - 15 bps above the Base Rate (Spread over the Base Rate that is 10%) and 10.15 % p.a (Effective rate) Above Rs. 75 Lakhs - 30 bps above the Base Rate (Spread over the Base Rate that is 10%) and  10.30% p.a (Effective rate)

Her Ghar

This SBI home loan is especially meant for the women.

Eligibility	Loan amount	Interest rate
The woman should be the sole applicant or first co-applicant of Home Loan. The property proposed to be financed should be either in the sole name of the woman borrower or she should be the first owner in case of joint ownership.	Maximum 30 years or to the age of 70, whichever is early.	Upto Rs. 75 Lakhs - 10 bps above the Base Rate (Spread over the Base Rate that is 10%) and 10.10 % p.a. (Effective rate) Above Rs. 75 Lakhs - 25 bps above the Base Rate (Spread over the Base Rate that is 10%) and  10.25% p.a. (Effective rate)

SBI Realty

This SBI home loan is meant for the construction of a house or purchase of a plot.

Loan amount	Repayment	Interest rate
Rs. 10 Crores	Up to 15 years	Upto Rs. 75 Lakhs - 15 bps above the Base Rate (Spread over the Base Rate that is 10%) and 10.15% p.a (Effective rate) Above Rs. 75 Lakhs - 30 bps above the Base Rate (Spread over the Base Rate that is 10%) and  10.30% p.a (Effective rate)

The above mentioned SBI home loans are the primary ones; however, apart from these, you will also find SBI home loans for NRIs, tribal areas and many others. 

Why you must thank RBI for ending penalties on pre-paying home loans

The Reserve Bank of India has given millions of loan borrowers respite from pre-payment penalties.It had done away with pre-payment penalty on home loans long ago. This time, the apex bank has instructed all banks to abolishpre-payment penalty on all floating interest loans. The ruling applies to home loans, corporate, vehicle and personal loans, auto loans, personal and education loans that are repaid with a floating rate of interest.

RBI’s new regulations, especially on prepayment penalties, have brought a lot of cheer for the common man.In its first bi-monthly monetary policy statement for 2014-15, the RBI has directed banks to consider allowing their borrowers the facility of prepaying floating rate term loans without any penalty."...it is advised that banks will not be permitted to charge foreclosure charges or pre-payment penalties on all floating rate term loans sanctioned to individual borrowers, with immediate effect," RBI said in its notification.

Prepayment penalty has been a demotivating factor to all loan customers, whenever they are in a position to pre-pay their loans. Especially, home loans are usually in lakhs and even a pre-payment penalty of 2 per cent of the total loan amount causes a big dent on your pockets – on a 20 lakh loan, it would comet Rs 40,000. Thanks to the RBI, you don't have to pay such huge sums of money to repay your loan. 

Many of you tend to go for pre-payment of loans when you find that interest rates show a continuous upward movement. Some of the customers opt for switch-over of their loans with existing banks to the lenders offering lower interest rates on loans.

Banks and other lending institutions have been very reluctant to part with the extra interest charge on the pre-payment charges on loans as it is their main source of income. The expansion plans of these institutions usually hinge upon their income on loan repayments. So, if you pre-repay your loan, in part or in totality, they lose a lot of their future income. So, customers are discouraged by banks to close off loans by way of levying-these penalties with considerable monetary implications.

As the prepayment penalties now-stand annulled, lending institutions would have to explore channels of raising their funds from alternative resources. But it is not that much of your concern as borrower.

As mentioned earlier, the RBI had forbidden foreclosure charges or pre-payment penalties on home loans on floating interest rate basis. The move aimed at ending the discrimination between existing and new borrowers and bringing uniformity across the banking system in the home loan segment, which was a logical course. Now the benefit same has been extended to floating rate term loans, which will help small and medium enterprises as well. Banks will no more be allowed to deny the benefit of lower loan liability to all their customers.

So, you have every reason to profusely thank the RBI for ending penalties on pre-paying all debts taken on floating interest rates, including home loans.

Financial institutions offering special home loan rates for women

As women are getting economically independent, they are increasing participation in financial decisions and planning, whether it concerns themselves or their family. Financial awareness is no longer a male bastion. Not surprisingly, home financiers have come up with special schemes for woman borrowers of home loan products. Prominent among them are State Bank of India (SBI), LIC Home Finance, Tata Capital Housing Finance (TCHF) and Dewan Housing finance Corporation Ltd (DHFL).  

The country's largest bank, SBI has launched a special home loan scheme offering concessional rate to women borrowers. Under this scheme, it offers women borrowers loan at 10.10 per cent for loan up to Rs 75 lakh and 10.25 per cent for loan above Rs 25 lakh. These rates are 5 basis points lower than other customers. In simple terms, if loans up to Rs 75 lakh are offered to new borrowers at 10.15 per cent, for women borrowers, the concessional rate would be 10.10 per cent. This scheme is valid for women borrowers in a number of ways: as sole applicants; the first of the co-applicants; the sole or the first of the co-owners of the property.

The TCHF has a discount scheme, under which it offers women home loans of up to Rs 40 lakh at a discounted rate of 10.15 per cent vis-a-vis its present rate of 10.50 per cent for other borrowers. Thus, women borrowers can save as much as Rs 864 a month on a 15-year loan and Rs 935 a month on a 20-year loan. To avail this facility, the property must be in the single/joint name of the borrower and the borrower must have sufficient income to service the EMIs.

As woman borrower, your choice should not be limited to a few housing finance institutions. Home loan is a very competitive market these days, so enquire about home loan interest rates of all financial institutions for women, and you may end up getting the lowest rate.

Similarly, LIC Housing Finance has a special scheme ‘Bhagya Lakshmi’ forwomen borrowers where it offers them a fixed rate of 10.10 per cent for loan up to Rs 75 lakh.

Dewan Housing finance Corporation Ltd (DHFL) also offers a home loan product exclusively for women customers, the ‘DHFL Home Loan for Women’. Under the scheme, all single/first woman applicants who are also the sole/co-owners in the property are eligible for a 25 bps (0.25 per cent) waiver on the rate of interest. As Rakesh Makkar, president, DHFL, puts it, the special loan for women is a part of the company’s endeavour to empower women by encouraging them to invest/buy a home.                                                                                           

Going by the above trends, it is clear that it helps to be a woman. Already, in several states, the stamp duty for registration of property is lower for women. For a male property-buyer too, it makes sense to register the property in his wife’s name as well as make her first co-applicant in the home loan.

What are the eligibility conditions for a home loan?

Home Loans are generally given to three categories of individuals by banks - salaried individuals, self employed professionals and self employed non professionals. The eligibility conditions vary for these three categories in most banks. The repayment capacity and eligibility of the borrower is determined based on several factors like age, tenure of loan, income, employment type and status, spouse's income, stability and continuity of occupation etc.

Let’s look at the main eligibility conditions:

Age of Borrower: Banks prescribe a minimum and maximum age of the borrower. The minimum age is usually 21 years of age. The age of the co-applicant is also specified by banks. The maximum age is given in terms of the age of the borrower at the time the loan ends. So while ICICI specifies this to be 65 years of age or retirement age, Axis Bank is more stringent for salaried borrowers at 60 years on loan maturity. Self employed individuals and professionals in Axis Bank have the maximum age at loan expiry criteria to be 65 years. Some banks like HSBC give different age limits for salaried individuals in private companies, government companies and self employed individuals.

Employment: Generally, all borrowers are expected to be either salaried with private or government companies, self employed professionals or self employed non professionals. As a home loan is a large liability, banks would want to make sure of the stability and continuity of employment while granting the loan. It is for this reason that in some cases, the eligible loan amount is lower, as the job may be viewed to be more risky compared to others.

Income criteria: Banks determine eligibility criteria based on the income of the individual. Although many public sector and private sector banks do not specify this amount in black and white, some banks like HSBC do so. For example, HSBC has minimum net income criteria of Rs. 5 lakhs per annum for salaried borrowers and Rs. 7.5 lakhs per annum for self employed borrowers. Some banks look at income on gross basis, while others consider the net take home salary for determining eligibility.

Spouse’s income: Most often, borrowers take a joint home loan along with the spouse to enhance loan eligibility. Banks also suggest this option. In this case, both the applicants’ incomes are considered. As the income base is increased, the repayment capacity is higher and therefore the amount of loan you are eligible to borrow increases.

Other loan commitments: When you borrow a home loan, the repayment capacity is of paramount concern for the bank. Therefore, the loan eligibility is worked out by calculating backwards on the Equated Monthly Installment (EMI) amount. This is compared with your monthly outflows, most important of which are payment of other loan commitments like car loan, education loan, etc. and the ability to pay is determined. This is a major determinant of the loan eligibility.

Other factors: Banks have internal stipulations on minimum and maximum loan amount, maximum tenure etc. Although these do not determine your eligibility directly, they have an indirect effect. For instance, the tenure you choose will determine your EMI, which in turn will be checked to determine the repayment capacity and hence the eligible loan amount.

BankBazaar.com online eligibility calculator can be used to check the eligibility for a home loan. This calculator would ask for details such as the monthly income, current loan obligations, loan tenure, interest rate, age of borrower and employment type, based on which the borrower’s loan eligibility is calculated and given instantly.

State Bank of India to Hold Home Loan Rates

Among the several loans offered by banks and housing finance companies in India, SBI home loan products are the most preferred options among home buyers. Being the apex financial institution in India, State Bank of India disburses a wide range of standard as well as personalized home loans to interested customers. With a range lying in between Rs.5 Lakh to over Rs.5 Crores, SBI aims at catering to the housing finance needs of people from all walks of life. All it takes is a little homework and one can easily secure ideal home finances at the best SBI home loan interest rates.

With several lenders revising their interest rates, while keeping the interests of their valued customers in mind, the mortgage market is experiencing a gradual growth lately. However, when it comes to SBI home loan deals, customers might be a bit disappointed by the recent decision taken by the topmost public sector financier in India. In a recent public meet, a senior official of the bank announced that SBI will retain its home loan interest rates for an undisclosed period of time.

The Reserve Bank of India (RBI), the Indian banking watchdog, lately kept its policy rates stable. However, in a recent announcement, the RBI lowered the borrowing limit for banks from the overnight facility. The lowering of the borrowing limit is generally followed by a rapid rise in the cost of funds for the lenders. Though the cost of funds is likely to go up in the near future, there will certainly be no change in the SBI home loan interest rates. However, there are some banks that have raised their lending rates, following the reduction in the borrowing limits, which is likely to increase the demand of SBI home loan deals in the market.

Being the most preferred lender in India, SBI still aims at providing maximum benefits to the customers by offering stable interest rates, personalized tenure, flexible repayment terms and superior customer service. As of now, the State Bank of India is charging an interest rate of 10.10% p.a. for a SBI bank home loan up to Rs.75 Lakhs from woman borrowers. However, for the amount of home loan exceeding Rs.75 Lakhs, the bank is now charging an interest rate of 10.25% p.a. Last month, SBI also decided to extend its special home loan scheme for women for an indefinite time period (earlier valid till 31st March), seeing the tremendous response it received all across the nation. On the other hand, from the regular borrowers, SBI demands an interest charge equivalent to 10.15% p.a. of the SBI bank home loan amount to Rs.75 Lakhs and 10.30% p.a. for amount above Rs.75 Lakhs.

Being categorized on the basis of the amount borrowed by an individual, home loan SBI can serve every distinct purpose of the borrower, ranging from new home/plot purchase or constructing a new home, to renovating or expanding a current residential property. One just needs to be careful while comparing the SBI bank home loan products with personal need and wants for making a wise selection to fulfill the long cherished dream of owning a house.

Documents List for HDFC Housing Loan

The evolution of home loan market in recent times has meant that a large number of people have been able to relive their dream of owning a house. If it was not for easy availability of home loans, the rising real estate prices would have meant, buying a home out of bounds for the average Indian citizen with limited income. A number of public banks, private sector banks and non banking financial companies offer home loans subject to minimum eligibility criteria. Any individual with a well oriented financial health capable of repaying his or her home loan obligation can avail the advantage of housing loans.

Let us take a look at home loan eligibility criteria and documents required for home loans from HDFC home finance limited.

Home Loans from HDFC Home Finance: 

HDFC home finance limited is a leading non banking financial company offering home loans to a large number of projects across the country. HDFC limited offers housing loans for existing freehold properties as well as on flats, bungalows and row houses from developers including properties in existing or proposed co-operative housing societies. HDFC home finance is one of the most popular non banking financial companies for housing loans offering easy repayment options. HDFC home finance limited has collaborated with Bankbazaar.com offering lucrative interest rates for housing loans with instant approval and quick online submission.

Home Loan Eligibility:  

Home loans from HDFC home finance limited and Bankbazaar.com are available for both salaried and self employed individuals having a decent loan repayment capacity. Housing loans are available for both Indian citizens as well as NRIs between the ages of 21 years to 65 years. The individual filling for a housing loan must have a good credit score from CIBIL. BankBazaar.com offers a housing loan eligibility calculator tool allowing users to check for their eligibility criteria for home loans.  The amount of home loan that can be availed depends on the cost of the property. HDFC home finance offers a home loan to the tune of 80% of property value in case of loans less than Rs. 20 Lakhs and up to 85% of the property value in case of loans higher than Rs. 20 Lakhs.

Documents Required for HDFC Home Loan: 

HDFC home finance requires basic documentation check before housing loan approval. The documents required for HDFC home loans include the following:

·         Duly application form with latest photograph,

·         Address and identity proof,

·         Latest salary slip for salaried individuals

·         Proof of business for self employed individuals.

·         Salaried persons also need to submit form 16 with their latest salary slip.

·         Self employed individuals must submit their business profile for housing loan approval.

·         Self-employed individuals would be required to submit income tax returns both for self and business for the last three years.

·         Both salaried and self employed home loan borrowers need to submit their last six months bank statement. 

·         Self employed individuals must attach bank statement for both self and business.

·         Processing fee is taken through cheque that must be submitted along with the home loan application form.