Residential Market Revives After RBI Rate Cut

Real estate experts said that the residential market across India has revived after RBI cut its major rates. After the RBI rate cut; the home loans have become cheaper and this has improved the sentiments of home buyers.
Residential market started reviving after RBI cut rate.

Residential market started reviving after RBI cut rate.

RBI rate- cut have highly affected the sentiments of home buyers. With the RBI rate cut, the home loans have become cheaper. This has increased the housing demand that helped residential market to revive.

Praising the RBI rate cut, real estate developers and consultants have said that the act will improve the housing demand. As a result the residential market will see a growth. According to them, the rate cut will boost foreign investment as well.

Last week; in a much awaited decision enabling the subsidiary banks to offer loans at lower interest rates, RBI had cut short its key interest rates. The Central Bank lowered the repo rate by 0.25% and cash reserve ratio by 4%. Continue reading

Property Prices Will Remain Stable; No Chance For A Fall

The situation seems impossible for the property prices, especially in the metro cities, to fall downward in near future or ever. Will there be a price correction, sooner or ever?
Property prices will remain stable despite no takers are around.

Property prices will remain stable; despite no takers are around.

The situation in India shows that there will not be a fall of property prices, especially in the metros like Bangalore, Delhi, Mumbai or any other metros. Though everyone wishes a fall in the property prices, it is almost impossible to happen, neither in the near future nor in the longer- future.

Developers have taken loans from the banks and housing finance companies. Some of the builders have even taken loans from private equity firms which normally lend loans at 25 to 30 %. Still, builders are forced to cut down prices as many of the projects remain without any demand as buyers’ sentiment has been hurt by the sky rocketing property prices. Continue reading

Home Loans’ Interest To Fall As RBI Cuts Rates Finally

Finally, Reserve Bank of India (RBI) declared a cut in its main interest rate on Tuesday. As a result the banks will be pushed to provide home loans at lower interest rates.
Home loans will become cheaper

Home loans will become cheaper as RBI cuts rates.

Home buyers finally heard the much-awaited good news when the Reserve Bank of India cut its main interest rate (Repo Rate) and cash reserve ratio (CRR). As the central bank cut the rates the impact will be on the subsidiary banks. They will be able to provide home loans at lower interest rates.

Home loans will become cheaper. The banks will remain capable of providing easier EMI loans (Equated Monthly Installments) to the home buyers. D Subbarao, Honorable Governor of RBI, said that the act of  RBI will boost the investments. He added that the RBI rate – cut will keep inflation in a moderate level. Further, the rate cut will improve liquidity and credit flow. Continue reading

New DTC will be implemented from 2011

On June 15, the revised Direct Tax Code (DTC) was released which has got approval now. This new DTC will be implemented from 2011. The aim of this revision is to simplify the existing income tax laws. There are some changes proposed in the code for the real estate sector too which go as follows:
Taxation policy for Rental Income Originally, according to DTC, the gross rent was to be calculated at a presumptive rate of 6% of either the market value, or acquisition or the cost of construction, whichever is higher. But the revised DTC has proposed that actual rent received or receivable for the financial year should be the basis of calculation.
Home Loan Interest Policy:Originally, it had been proposed to do away with the tax deduction on the interest paid on home loans. But, as per the revised DTC, tax deduction on the interest paid on home loans up to Rs 1.5 lakhs for purchase or construction will continue.  This revision is quite encouraging for the buyers to buy residential properties.
Also, the property which has not yet been let out will be kept out of tax calculations. Thus, there will be no deduction against tax or interest.

Pre-Slowdown Observed in Realty Prices

Residential Property Goa | Royal Heritage - Axiom Estates
HDFC, one of the leading home-loans lenders has observed that the prices of residential realty which were hitting the peak levels are now undergoing pre-slowdown.

Deepak Parekh, the Chairman of HDFC said that there is an improvement in the economic condition and therefore, developers have started charging premiums. Due to the land prices touching sky, the realty prices also shot up.

As per the report, there was a downfall of 25% in residential real estate prices in October 2009, but now it’s steeping upwards again.

Parekh observe this change in the most active markets of India, for instance, suburbs of Mumbai, NOIDA in the NCR, a Bangalore suburb etc which all are experiencing price hike.

Also, he plans for having a real estate regulator in place.

DTC Revision Beneficial for Realty

income tax
On June 15, the revised draft for the Direct Tax Code was released. This code is a try by the Indian government to simplify the laws of income tax. The government is waiting for the Parliament to pass the code and plans to adopt it from April 1, 2011.

Below is the list of some must know changes proposed in the draft code with respect to realty sector.

Short-term capital gains: As per the proposals, tax will be imposed on any gain or loss made on the sale of an asset within a year.

Long-term capital gains: The proposed laws say that after an year of purchase, the taxation policy on any gain or loss made on the sale of an asset will be implemented as per the long-term capital gains tax policy.

As per the draft code, from April 1, 2011, April 1, 1981 will not be considered for calculating the discount rate; rather April 1, 2000 will be considered for the same.

Rental Income Taxation Policy: The draft code has proposed that the gross rent should be calculated on the actual rent receivable or received for the financial year.

Home loan Interest Rates: The draft DTC intends to keep on deducing tax on the interest paid on home loans up to Rs 1.5 lakh for construction or purchase of residential property.

Self Occupied House Property: Any self occupied house property (property not been let out) will be allowed for deduction on account of interest to the tune of Rs 1.5 lakh.

This revised draft code of the DTC has come up as a boom for the home buyers and home owners. The revision seems to be beneficial for all, be it is investors or developers.

Truth behind ‘Affordable Homes’

More affordable homes
Affordable home
April 21, 2010

A really interesting question rising up these days is that is affordable housing taken seriously by our policy planners and key stakeholders? Now-a-days, talking and discussing affordable homes has become a fashion, including those who were not as such associated with realty sector.

But when enters the term ‘affordable homes’, one must put up a question that affordable for whom?  Around 44% of our population comprises of people earning Rs 8,500 to Rs 40,000 as their monthly income and fall both in the formal and the informal sectors.  Are these flats for these 44% people?  Also, the banks are now backing out from providing home loans. Arun Mohan, a senior advocate and writer answered all these questions in his latest offering “Affordable Housing: How Law and Policy can make it possible” .

According to Arun Mohan, there are three areas that need urgent attention to provide affordable homes: One, availability of flats which are affordable; two, availability of bank finance; and, three, availability of land for housing. Also, crisis of confidence is one of the major problem due to which prices are so high and the market is restricted. He gave answers to these questions too.  After a keen analysis, he came to the conclusion that “certifying-cum-performance guaranteeing company” [or a regulator] is required, which would control the builders and issues a “wideguarantee certificate” to the flat buyer in order to ensure him that he will be delivered the flat he pays for. This guarantee will prove beneficial since both the flat buyer will be willing to part with his money and bank will also be willing to finance it.

Renaissance of Realty Sector

Delhi Properties - Real Estate India - Unitech Verve 1

In last few months Indian real estate has undergone a reawakening enforced by a noticeable increase in the level of construction activity of low-budget housing coupled with low home loan rates reached an all time low in the last few years.

As researched by Boston Analytics, the Indian realty sector has undergone an increased supply and pace of development activity which brought an improvement in pessimism associated with the realty prices. A low interest rate on home loans driven by Government’s impetus packages have also catalysed the Indian consumers to buy homes.

“Increased supply, improvement in pessimism related to realty sector rates, and low rates of interest on home loans seems to be encouraging Indian consumers to firm up their home purchase decisions” as said by Shirin Bagga, Economist, Boston Analytics.

The data was collected by conducting a monthly survey that targets 10,000 respondents cross 15 Indian cities—Delhi, Mumbai, Hyderabad, Kolkata, Chennai, Bangalore, Chandigarh, Nagpur , Ahmedabad , Kochi, Jaipur, Lucknow, Bhubaneswar, Patna, and Vishakhapatnam.

According to the recent reports the conviction concerned to speed of construction activity conveys more anticipation with regards to observed change in construction activity in Tier II and Tier III cities relative to Tier I cities. The real estate projects which are in different phases of completion in all levels of towns and cities appear to be introducing optimism about the expected change in construction activity among respondents across Tiers,” the report said.

As brought into light by Economic Survey of  FY 2009-10, the need of the construction and real estate sector in creation of both financial and physical assets has been amplifying over the years. The construction sector now accounts for 8 percent of GDP at constant prices, hiked from 7.7% in 2004-05.Equivalently, the share of real estate ownership of dwelling and business services in overall GDP as hiked to 9.2 percent in FY 2008-09 from 8.9 percent in 2004-05.

Interest rates on home loans decline further

An interest rate war is brewing in the home loans this festive season. Development Credit Bank (DCB) and GIC Housing offering home loans below the psychological 8%. DCB, which recently entered the segment, is offering home loans at 7.95% for loans up to Rs 5 crore at fixed interest rate for the first year and floating rates from year two.

“While affordable housing is the buzzword these days, the market would get a further boost if attractive financing options are available,” says Praveen Kutty, executive vice-president and head, retail banking, DCB.

Central Bank of India and Punjab National Bank have waived off processing fee and documentation charges on certain loans. While one would argue that there isn’t much difference between 7.95% and 8% home loans, bankers say that it is basically a psychological pricing to get more borrowers into their fold.

According to bank observers, borrowers prefer low interest bearing home loan accounts of nationalized banks over private banks. “While there has been demand for home loans in the affordable home loan segment (up to Rs 30 lakh), the activity in the upper bracket (loans above Rs 50 lakh) has mostly revolved around restructuring or takeover of such accounts by another bank,” says VS Reddy, managing director, Lakshmi Vilas Bank.

Sub-PLR rates set to go

People who borrow money from banks to buy homes at floating rates of interest are set to benefit as banks are expected to change the way they price such loans.
The Reserve Bank of India is preparing to ban lending below the prime lending rate, the benchmark rate for all floating rate bank loans.
Sub-PLR lending came into existence a decade ago after banks obtained permission from the central bank to lend below the benchmark rate.