NRI Housing Finance

In order to get a housing loan approved by a Housing Finance Company, a NRI borrower is required to submit several documents pertaining to the property. Financing a home through housing finance companies carries a double advantage for NRIs.

Apart from making funding easier for the investor, the HFC examines the documents before disbursing the loan, and certifies that the papers are in order. Even though all liabilities are eventually borne by the buyer, the process reassures him of the credibility of the investment.

Besides, since NRIs are allowed to repay the loan in foreign currency, the proceeds of the sale from the property are fully repatriable, in case he wishes to dispose of it at a later date.

To avail a loan, the following elements can be kept in mind:

Eligibility

• Non-resident Indians planning to return home
• Government servants stationed overseas on duty with the Indian missions or deputed abroad by foreign Governments or international agencies
• Loans are also granted for renovation of an existing property.

Persons of Indian origin, however, are not extended housing loans by housing finance companies.

Loan Limits
Housing finance companies can cover up to 85% of the cost of the residential property, with an upper limit of Rs.1 crore. The capacity to repay determines the maximum that an NRI can borrow, which in turn is determined by such factors as: income, age, qualifications, work experience, number of dependants, income of spouse, assets, liabilities, stability and continuity of occupation, employment prospects in India, and savings history.

As per a circular issued by the RBI on 31st January, 2007, if the loan is against the NRI's NRE and FCNR accounts, the maximum loan amount cannot exceed Rs. 20 lakhs.

Rate of Interest and other charges
Interest rates will range from 11.25% to 14.25% per annum, as different finance companies have an independent structure broadly guided by RBI directives.
Processing fee to be paid on the loan varies between 1 and 2% of the loan amount, depending on the financial institution.

Interest Payable
The interest is generally paid on the reducing balance, i.e. interest is paid only on the unpaid portion of the loan. Individuals must check on the calculations - whether it is being calculated on a monthly, quarterly or annual reducing balance. A monthly reducing balance, wherein interest is calculated every month is easier on the pocket, as the principal becomes lower at monthly intervals.

The shorter the period of the loan the higher the amount you pay each month. So choose your repayment capacity, and then work backwards to settle your payback period. To calculate your payment plan your dealer wi11 calculate your total liability, i.e. principal and interest, and then apportion it into EMI's (Equated Monthly Installments). Processing fees and administrative fees also have to be borne by the borrower.

An amortization schedule is a helpful tool to keep track of the loan amount, as it gives the reduced loan amount every month. It also gives the breakup of every EMI towards repayment interest and outstanding principal of the loan.

Time Span of Loan
Generally loans are disbursed for a period of 3 to 10 years, and NRIs can avail of time spans to suit their convenience.

Repayment of Loan
Loans are repaid in Equal monthly installments (EMI) comprising principal and interest Repayment starts from the month following the month in which the loan was disbursed. Pre-EMI interest is paid on the principal amount first, before the EMI starts. NRIs can make EMI payments through post dated cheques from their NRO account.
Payments for fees, charges, and pre-EMI interest should be remitted from abroad through normal banking channels or from the Non-Resident (External) Account/Non-Resident (Ordinary) account in India.

Loans can also be repaid by the borrower's close family through their account in India by crediting the borrower's loan account. Settlement of loan in foreign exchange is treated as equivalent to foreign exchange received for purchase of residential property.

Guarantee for the loan
The residential property that is being purchased is mortgaged to the financing institution, by submitting title deeds and other collateral security as may be required.

Loan Disbursal
The borrower can choose between a one-time disbursal of loan and a series of instalments to suit the payment module of the property one intends to buy. Either way, the loan can be availed as soon as the documents are processed and the individual has paid up his own contribution.

Pre-payment of Loan
The NRI can repay the loan well ahead of schedule by remittances from abroad through normal banking channels, the Non-Resident (External) Account and/or Non-Resident (Ordinary) Account in India. Most institutions do not levy a pre-payment charge.

Supporting documents to avail a Housing Loan:

1. Employment/Residency related documents

Photo copies of:

• Employment contract (if the contract is in a language other than English, an English translation of the same attested by the Embassy/Employer should be attached).
• Latest salary slip.
• Latest work permit.
• Identity card issued by current employers.
• Visa stamped on the passport.
• Continuous Discharge Certificate (CDC) - (if applicable).
• Overseas Bank Account Statement for the last four months.

2. Property Related Documents

• Receipts for payments made for purchase of the dwelling unit.
• Copy of approved drawings of proposed construction/purchase/extension.
• Agreement for sale/sale deed/detailed cost estimate from Architect/Engineer for property to be purchased/constructed/extended.
• Allotment letter from the co-operative society/association of apartment owners.

3. Power of attorney
more info : www.nrirealtynews.com

Unproductive investments will hurt growth: Economist

Increased unproductive investments in real estate and gold will hurt India's economic growth in the long run as it blocks a large amount of capital, a senior economist said Sunday.

'Gold and real estate are two popular investments in India. A large amount of capital is blocked in gold. Generally it is kept in bank lockers and has no productive use,' Gautam Ahuja, chairperson of corporate strategy and international business group at the University of Michigan Business School, said here.

Worst jobs of 2011

He said a large amount of investment in real estate is also locked in because people are scared of renting it out.

'Real estate is a productive investment. But we see many people just buy it and lock in. This is unfortunate for countries like India where millions of people don't have shelter,' Ahuja pointed out.

Speaking at the C.K. Prahalad memorial lecture at the 9th Pravasi Bharatiya Divas here, the economist called for a broad-based and deep rooted rule of law to ensure that these locked in capital are put to productive use.

Top 10 reasons why 2011 isn't 2008 for oil markets

Ahuja said the much talked-about concept of 'jugad' (quick-fix) will also hurt India in the long-run.

'Jugad is no friend to India. What is effective in the short-term may become a problem in the long-run,' he added.

source:sify.com/finance/

Mortgage Rates

Infographic by Mortgage Rates

Low-cost loans still rule home loan market

HOME loan companies are continuing to attract borrowers with ''concessional home loan'' packages despite the Reserve Bank of India (RBI) hiking the repo (at which it lends to banks) and reverse repo (at which RBI pays bank on their overnight deposits) rates and yet another rate hike evident on the horizon.

The rate war started when the country's largest lender, State Bank of India (SBI), launched the teaser scheme, which offers home loans at the rate of eight per cent per annum for the first year and then at nine per cent for the second and third years, irrespective of the market fluctuations.

According to Keki Mistry, chairman and chief executive officer (CEO), HDFC Ltd, ''There is a lot of demand for affordable homes. These loan packages will free the new customers from the worries of fluctuation of rates, at least initially.'' Ironically, HDFC was initially critical of SBI's move. But as the public sector lender's teaser rate proved a huge success, HDFC was forced to follow suit.

HDFC introduced a home loan package for new customers at an interest rate of 8.25 per cent till March, 2011 and at 9.25 per cent in 2011-12, thus providing them relief for the initial two years. Afterwards their home loans become linked to rates prevailing in the market.

Mistry added that as the cost is low, the mortgage major deemed it right to pass on the interest rate benefit to the customers.

And as sales of residential properties are picking up, the home loan market is getting increasingly competitive.

According to industry experts, the home loan segment is set to grow at a compound annual growth rate (CAGR) of 20 per cent and big lenders are aggressively looking to capture their share of this burgeoning market.

The latest one to join the bandwagon is Indiabulls Financial Services Ltd. It is offering a flat interest rate of 8.25 per cent till April, 2012.

''Introduction of this new concessional home loan scheme at 8.25 per cent augurs well for our aggressive growth plans. We have an annual target of disbursing new home loans worth Rs 6,000 crore,'' Gagan Banga, CEO, Indiabulls Financial Services Ltd said.

Indiabulls introduced the new concessional rates to beat competition as it is targeting to grow its home loans portfolio by 40 to 45 per cent. The company is eyeing to increase its market share in the home loan segment from the current four per cent to seven to eight per cent by 2014.

''It is not that suddenly all the lenders have become customerfriendly.

The banking companies are trying their best to lure home buyers. Moreover, there was hardly any growth in the last two years. As home loans are generally considered safe loans, banks will continue (with these lowcost loans) even after RBI goes for another hike,'' a senior official of LIC Housing Finance said.

LIC Housing Finance Ltd is offering home loans at 8.9 per cent interest rate up to March 31, 2012. Thereafter, the loans would attract the market rate of interest. LIC Housing has another scheme that offers nonfluctuating 9.25 per cent interest for the first five years.

These new home loan products are proving to be big hits with borrowers.

Giving another perspective, Anil Kumar Sharma, chairman and managing director (CMD), Amrapali Developers, told Mail Today, ''It is not the increase in service tax or marginal hike in home prices that deter the buyers.They are most bothered about the lending rates. If there is an increase or fluctuation in the lending rates it becomes a matter of concern for the developers (too) as it affects the sales of new homes,'' he added.

STORY SO FAR

RBI hiked repo and reverse repo rates

Home loan firms are still attracting borrowers with ''concessional home loans''

SBI was first to launch the teaser scheme

Though initially HDFC was critical of SBI's move, it was forced to follow suit. It introduced home loans at the rate of 8.25% till March, 2011 and 9.25% till 2011-12

Home loan segment is set to grow at a compound annual growth rate ( CAGR) of 20 per cent

Indiabulls Financial Services Ltd is latest entrant offering flat interest rate of 8.25 per cent till April, 2012

LIC Housing Finance offers home loans at 8.9% interest rate up to March 31, 2012

source: news.yahoo.com

Slight increase in registrations in Hyderabad district

There is a positive movement in terms of a slight increase in registrations of lands and buildings since March of this year. The pace of registrations and revenue collection is still sluggish but we are hoping that things would improve from here on, said Hyderabad District Registrar G. Q. Haqqani. The revenue collections in 2009-10 have improved and the department has managed to collect about 82 per cent of the projected target. This is mainly due to large number of registrations in the month of March, authorities pointed out.

The first three months of this year, especially March, saw a small surge in registrations, according to authorities from the Department of Stamps and Registrations.The Department of Stamps and Registrations authorities, however, have made it clear that this year too (2009-10) they have fallen short in their revenue collections. On an average, every year, the target revenue collection for Registration Department of Hyderabad district hovers between Rs. 150 to Rs. 160 crore. The department authorities maintain that the present situation, in terms of revenue collection, is far better than what it was in 2008-09.

Between 2003 and 2008, the revenue collections for the department from twin cities had exceeded 100 per cent of the overall target. In 2008-09, during the financial meltdown, revenue collection for the department from twin cities was just 58 per cent of the overall revenue target.The revenue collections in 2009-10 have improved and the department has managed to collect about 82 per cent of the projected target. This is mainly due to large number of registrations in the month of March.

“The financial meltdown and other issues seem to have had an impact in our revenue collections. Compared to last year there is a definite improvement in our revenue collection by 24 per cent. Hopefully, this trend will continue in the coming months of 2010-11,” Mr. Haqqani said.

source:Department of Stamps and Registrations, Hyderabad

Home loans to remain cheaper

Mumbai, April 30: For those looking at buying a house, its another chance for a big saving. India’s largest bank, the State Bank of India, has extended its teaser home loan rate scheme by two more months. Under this scheme, borrowers get home loans at a cheaper rate for the first few years.

“The bank decided to extend the scheme, which was to expire today, since it is very popular with customers and because the bank’s liquidity is good,” a bank official told a news agency.

Other leading home finance companies are likely to respond in the coming weeks, to preserve market share. The consumer is likely to come out ahead.

Learn with DC

Q What are teaser rates?
They are special low rates offered by banks and housing loan companies for a limited period to borrowers. The interest rate is gradually increased to the market rate over a period of time. Major lenders such as SBI, ICICI and HDFC had earlier come out with teaser rate schemes on home loans.

Q Why is the RBI against teaser rates?
It feels that it will encourage people to take loans beyond their paying capacity as the interest rates are ramped up from the second year onwards. This could result in a pile of bad loans for banks

Under the current terms and conditions, SBI charges eight per cent on all home loans for the first year. For the next two years, the interest rate is nine per cent. This means that on a Rs 20 lakh loan with a life of 20 years, your monthly instalment will work out to about Rs 16,700 for the first year. For the second year, it will Rs 17,995.

SBI had come out with these teaser rates in 2009, and the scheme has proved popular with consumers. Almost all the major home finance lenders including ICICI Bank and HDFC now have teaser rate schemes — a move to preserve market share. In early April, all the major players had extended the teaser scheme till end April. While there are some minor differences amongst the schemes offered by various players in the market, the common feature is that the effective rate in the first year is 8-8.25 per cent. It was widely expected that the teaser rate schemes may go once the Reserve Bank starts to raise policy rates. However, given the large volume of cash in the financial system, that hasn’t happened.

The Reserve Bank of India has expressed unhappiness with teaser rates in the past. The RBI thinks especially low rates on home loans may encourage buyers with insufficient means to purchase properties. One of the reasons leading to the financial crisis in the US was the so called adjustable rate mortgage — similar to teaser rates in principle.

Rate guide

SBI home loan
1st year: 8%
2nd year: 9%
3rd year: 9%
Rest of Market
loan tenure: rate

* SBI’s scheme will continue till June 30.

* ICICI Bank has allowed its teaser rate scheme to expire on April 30.

* HDFC, whose scheme has expired on April 30, is yet to make an announcement if it will extend the special rates further.

Source URL: home loans

Base rate regime will kill all special loan schemes

The introduction of the base rate may spell the death knell for special home and car loan schemes that banks had launched last year with rates as low as 8 per cent. These rates were not linked to their BPLR (benchmark prime lending rate, or the rate offered to the best customers of the bank).

The State Bank of India (SBI) was the architect of the special home loan scheme when in February they came out with a special home loan scheme of 8 per cent without any link to the bank’s BPLR. Later in the year, the bank launched a car loan scheme with the same rate. Many public sector banks followed suit offering similar rates. Private banks were also forced to come out with special schemes.

“SBI’s schemes were a response to the excess liquidity that the bank had and a response to the unusual economic events that the country is going through. The new guidelines certainly have no room for these schemes or any Diwali or Dussera schemes as the rates will have to be passed on to the existing pool of the bank’s customers,” said a senior SBI official.

The final guidelines on the base rate, which will be adopted by the banks from July 1, 2010 stated that changes in the base rate shall be applicable in respect of all existing loans linked to the base rate, in a transparent and non-discriminatory manner”.

The Banking Codes and Standards Board of India (BCSBI), backed by the RBI to implement fair practices in banks, began getting a number of complaints on the special schemes as customers alleged that banks were only reducing rates for the new customers and the falling interest rates did not have any impact on their borrowing costs.

“Banks can now have schemes only if they pass on the benefits to all the customers, which is very unlikely,” said a senior official from the BCSBI.

source: mydigitalfc