The benefits of government’s first initiative taken to boost the realty sector in the form of special home loan package are visible. As per the latest data released by RBI there has been a growth of 353% i.e. four times growth in housing loan distribution during three months ended May 2009 in comparison to the average 53% decline in the previous three quarters.
Bank of India executive director M Narendra said, “It was a right step to introduce the stimulus package. This helped to ease out the risk of interest rate volatility for at least the initial years”. He added unless there is growth in housing, real estate and construction sectors the core sectors like steel and cement can not grow.
In December 2008 the home loan rates were around 11% therefore to boost realty sector special housing loan scheme was announced. Under this the public sector banks were given a special incentive package to offer home loans at low interest rate.
Under the scheme housing loans of up to Rs 5 lakh offered at 8.5% interest rate and for Rs 5-20 lakh the banks charged 9.25% for the first five years. Although this scheme was up till June 30, 2009. The scheme received gentle response in the initial stage. Later on in the month of April and May the demand started picking up due to which there was a growth of Rs 3,138 crore in housing loans during three months ended May 22 as against to Rs 693 crore in first three months of the scheme.
For instance Bank of India residential mortgage year-on-year (YoY) basis increased to 31% at the end of June 2009, as compared to 15% growth at the end of March 2009. Other banks also witnessed the similar growth.
IC Shetty, divisional manager of Canara Bank stated, “The response to the scheme showed the impending demand in the sector. April May and June saw the maximum loan applications”. The measure taken by the government showed the positive response of boosting housing demand which helped the homebuyers who were unable to fulfill desire of owning a house due to skyrocketing prices.
The low interest rates scheme not only attracted aspirant home buyers but also helped the developers in generating revenues. During August’08-March’09, hardly any houses were being sold but by April the demand picked up so much that almost 3-4 flats were being sold every week.
Thursday, August 13, 2009
Thursday, August 6, 2009
Can Fin Homes Ltd reduced home loan rates for fresh loans
Canara Bank subsidiary Can Fin Homes Ltd (CFHL), has reduced the home loan rates for fresh individual housing loans. The new rates have come into effect from 1 August, 2009.
According to CFHL release the company, in the current financial year has reduced the rates of second time.
As per revised interest rates on fresh loans rate will be 8.7 per cent for loans up to Rs 20 lakh, 9.00 per cent for loans above Rs 20 lakh to Rs 30 lakh and 9.75 per cent for loans above Rs 30 lakh.
The rates have been reduced under variable interest rate scheme and will be applicable for all repayment periods
For the current fiscal the company has set a target of disbursing loan of Rs 550 crore as against Rs 300 crore as of March 2009 at the growth rate of 83 per cent, the release stated.
According to CFHL release the company, in the current financial year has reduced the rates of second time.
As per revised interest rates on fresh loans rate will be 8.7 per cent for loans up to Rs 20 lakh, 9.00 per cent for loans above Rs 20 lakh to Rs 30 lakh and 9.75 per cent for loans above Rs 30 lakh.
The rates have been reduced under variable interest rate scheme and will be applicable for all repayment periods
For the current fiscal the company has set a target of disbursing loan of Rs 550 crore as against Rs 300 crore as of March 2009 at the growth rate of 83 per cent, the release stated.
Friday, July 31, 2009
FM says: Interest subsidy on home loans to be offered through banks
The interest rate subsidy for mid-segment housing loan is basically for the customers belonging to lower middle to middle income groups. Finance minister Pranab Mukherjee informed that the interest subsidy will be passed to the customers through commercial banks and housing companies which are registered with the National Housing Bank.
He added to boost the housing sector tax holiday benefit will be provided to it on the profits earned from projects which were approved between April 1, 2007 and March 31, 2008, if these projects are completed on or before March 31, 2012.
He said, ‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector’’.
On Monday while speaking on the finance bill Congress MP from Mumbai (North) Sanjay Nirupam pointed out that 42.4% of Maharashtra’s population is living in urban cities and in last few years there has been increase in the migration to cities. Moreover the home loan rates are increasing sharply therefore it would be right to provide relief to the borrowers. Also providing an interest subsidy and a targeted tax break can give some support to the stranded real estate sector.
However on its part government has asked the real estate developers to lower prices so that housing becomes more affordable for the aam aadmi.
The housing loan subsidy is attached with a slew of other concessions such as exempting road repairs and maintenance from the sphere of service tax on the other hand the sunset clause for tax holidays for industrial parks has been extended for two years up to March 2011 to increase growth in infrastructure. However the FM made it clear that the service tax on new services and any alteration in the existing services announced in the Budget 2009-2010 will come into effect from September 1, 2009.
Renu Sud Karnad, Joint MD, HDFC Ltd stated, “It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment’’.
He added to boost the housing sector tax holiday benefit will be provided to it on the profits earned from projects which were approved between April 1, 2007 and March 31, 2008, if these projects are completed on or before March 31, 2012.
He said, ‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector’’.
On Monday while speaking on the finance bill Congress MP from Mumbai (North) Sanjay Nirupam pointed out that 42.4% of Maharashtra’s population is living in urban cities and in last few years there has been increase in the migration to cities. Moreover the home loan rates are increasing sharply therefore it would be right to provide relief to the borrowers. Also providing an interest subsidy and a targeted tax break can give some support to the stranded real estate sector.
However on its part government has asked the real estate developers to lower prices so that housing becomes more affordable for the aam aadmi.
The housing loan subsidy is attached with a slew of other concessions such as exempting road repairs and maintenance from the sphere of service tax on the other hand the sunset clause for tax holidays for industrial parks has been extended for two years up to March 2011 to increase growth in infrastructure. However the FM made it clear that the service tax on new services and any alteration in the existing services announced in the Budget 2009-2010 will come into effect from September 1, 2009.
Renu Sud Karnad, Joint MD, HDFC Ltd stated, “It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment’’.
Thursday, July 9, 2009
Bankers say: “extremely unfortunate if the developers were to increase the home prices at this juncture”
Slowly the real estate market is coming up as banks have reduced lending rates and especially in home loan segment most of the banks are offering 8% interest for the first year therefore some of the big developers have started increasing prices. But on Tuesday leading bankers have warned the real estate developers against raising residential prices as any such move at this point can bring halt in the recovery market.
Mr Deepak Parekh, Chairman, HDFC, stated, “Certain top-rung developers have already started increasing prices, especially in mid-income projects, following the recent pick up in sales. Besides, with liquidity no longer a constraint, certain developers are seeking once again to increase their margins”.He stated that just now the real estate market has begun correcting itself and it will be “extremely unfortunate if the developers were to increase the home prices at this juncture.”
While speaking at Habitat Business Forum event organized by FICCI, Mr Parekh, expressed his uncertainty on whether existing developers might stay committed to affordable housing segment.
Mr S. Sridhar, Chairman and Managing Director, Central Bank of India, expressed the similar views. He said that it will be “short-sighted” in case the players think of raising prices thinking that the demand is coming back into the market.
According to Mr Sridh, “It is difficult to generalize but as a whole there is some more scope for downward adjustment in prices, or in certain places it should plateau. That will stimulate the demand. If the real estate players revise the prices upwards, it will stall the recovery process”.
He pointed out however, the demand for housing loans has picked up among the banks.
Mr Deepak Parekh, Chairman, HDFC, stated, “Certain top-rung developers have already started increasing prices, especially in mid-income projects, following the recent pick up in sales. Besides, with liquidity no longer a constraint, certain developers are seeking once again to increase their margins”.He stated that just now the real estate market has begun correcting itself and it will be “extremely unfortunate if the developers were to increase the home prices at this juncture.”
While speaking at Habitat Business Forum event organized by FICCI, Mr Parekh, expressed his uncertainty on whether existing developers might stay committed to affordable housing segment.
Mr S. Sridhar, Chairman and Managing Director, Central Bank of India, expressed the similar views. He said that it will be “short-sighted” in case the players think of raising prices thinking that the demand is coming back into the market.
According to Mr Sridh, “It is difficult to generalize but as a whole there is some more scope for downward adjustment in prices, or in certain places it should plateau. That will stimulate the demand. If the real estate players revise the prices upwards, it will stall the recovery process”.
He pointed out however, the demand for housing loans has picked up among the banks.
Friday, July 3, 2009
LIC Housing Finance launched new scheme for new customers
People who are planning to take home loan there is good news LIC Housing Finance has reduced interest rates for new customer.
A new scheme has been launched by LIC housing finance a three-year 'Fix-o-Floaty' scheme, under which the customers will get flexibility as well as protection against the volatilities of interest rate movement.
A press release issued by LIC stated in this scheme, the borrowers will have to pay a fixed interest rate of 8.9 per cent for loans up to Rs 75 lakh and 9.5 per cent for loans above of Rs 75 lakh for a period of three-years.
The release added after that, a floating rate prevailing at the end of three-years will have to be paid. This scheme will be effective from today.
The release added any time during the three-year initial period, the customer can opt for shifting to the floating interest rate without paying any additional charges.
The home loan borrowers who opt for floating rates ab-initio, the special offer rates for new customers for loans up to Rs 75 lakh will be 8.50 per cent, instead of 8.75 per cent to 9.75 per cent. While for loans above Rs 75 lakh, the rates will be 9.50 per cent as against 10.25 per cent earlier.
A new scheme has been launched by LIC housing finance a three-year 'Fix-o-Floaty' scheme, under which the customers will get flexibility as well as protection against the volatilities of interest rate movement.
A press release issued by LIC stated in this scheme, the borrowers will have to pay a fixed interest rate of 8.9 per cent for loans up to Rs 75 lakh and 9.5 per cent for loans above of Rs 75 lakh for a period of three-years.
The release added after that, a floating rate prevailing at the end of three-years will have to be paid. This scheme will be effective from today.
The release added any time during the three-year initial period, the customer can opt for shifting to the floating interest rate without paying any additional charges.
The home loan borrowers who opt for floating rates ab-initio, the special offer rates for new customers for loans up to Rs 75 lakh will be 8.50 per cent, instead of 8.75 per cent to 9.75 per cent. While for loans above Rs 75 lakh, the rates will be 9.50 per cent as against 10.25 per cent earlier.
Thursday, July 2, 2009
Home loan borrowers should ensure to get insurance policy papers
In case you have taken home loan and bank has insisted you to take an insurance cover for the outstanding loan amount, have you got the policy documents from the bank subsequently?
Most of the home loan borrowers are not aware of this or assume that the bank by itself has done it and they would not have to worry.
Although it is the duty of the bank to submit the application immediately to the insurance company should get the policy documents and hand over the same to the borrowers, but it has been noticed that some banks fail to submit the application and the policies are never taken.
Mr M. Govinda Rao, a retired bank official, quoted some instances of failure on the part of some banks in submitting the proposal. “While an additional amount is added to the home loan sanctioned amount, presumably towards insurance premium, the same is either not sent with the proposal form to the insurance company or sent very late.”
On enquiring from the District Consumer Redressal Forum President, Mr S.A. Sreeramulu, told about 6-7 cases related to deficiency in service by banks and insurance companies (with respect to housing loans) have been filed out of which he had passed orders in respect of three cases in favor of the borrowers. He added the remaining three are pending before the court.
He informed, “In one reference, the borrower had died before the bank submitted the policy proposal, almost a year after the date of sanction of the loan. The claim could not therefore be made because the policy had not materialized at the particular time. There have also been instances of banks failing to handover the policy to the borrower after receiving it from the insurance company, leaving the legal heirs in the dark about any such policy”.
Coimbatore Consumer Cause Secretary, Mr K. Kathirmathiyon explained, “Borrowers should ensure submission of the proposal form to the insurance company without delay and should demand the policy from the bank / insurance company and keep the papers along with their bank loan documents”.
He stated, “The borrower should inform his family members about the insurance policy and banks should take proactive steps in submitting the claim proposal to the insurance company in the event of the death of the borrower for liquidation of the loan”.
Mr Govinda Rao pointed out, “Some banks offer ‘Free Accident Insurance’ cover on housing loan. Unfortunately, most borrowers are not even aware of such a policy. And, in banks, except for the operating officials, many are not aware of it”.
He advised, “Borrowers should enquire about such freebies at the time of sanction of the loan and demand that it be made available to them. Further, the bank should ensure that the policy paper regarding the free accident cover is handed over to the borrower immediately on sanction of the loan and make a note of it in the sanction letter”.
“Insurance polices are normally issued against a particular loan account. In the event of a change in the account number, for whatever reason, the borrower should ensure that the cover is available to the new account also.
He should not presume the extension of the cover to the new account as automatic. Else, in the event of a claim, the insurance company might refuse to settle the claim contesting that the two accounts are different.”
Most of the home loan borrowers are not aware of this or assume that the bank by itself has done it and they would not have to worry.
Although it is the duty of the bank to submit the application immediately to the insurance company should get the policy documents and hand over the same to the borrowers, but it has been noticed that some banks fail to submit the application and the policies are never taken.
Mr M. Govinda Rao, a retired bank official, quoted some instances of failure on the part of some banks in submitting the proposal. “While an additional amount is added to the home loan sanctioned amount, presumably towards insurance premium, the same is either not sent with the proposal form to the insurance company or sent very late.”
On enquiring from the District Consumer Redressal Forum President, Mr S.A. Sreeramulu, told about 6-7 cases related to deficiency in service by banks and insurance companies (with respect to housing loans) have been filed out of which he had passed orders in respect of three cases in favor of the borrowers. He added the remaining three are pending before the court.
He informed, “In one reference, the borrower had died before the bank submitted the policy proposal, almost a year after the date of sanction of the loan. The claim could not therefore be made because the policy had not materialized at the particular time. There have also been instances of banks failing to handover the policy to the borrower after receiving it from the insurance company, leaving the legal heirs in the dark about any such policy”.
Coimbatore Consumer Cause Secretary, Mr K. Kathirmathiyon explained, “Borrowers should ensure submission of the proposal form to the insurance company without delay and should demand the policy from the bank / insurance company and keep the papers along with their bank loan documents”.
He stated, “The borrower should inform his family members about the insurance policy and banks should take proactive steps in submitting the claim proposal to the insurance company in the event of the death of the borrower for liquidation of the loan”.
Mr Govinda Rao pointed out, “Some banks offer ‘Free Accident Insurance’ cover on housing loan. Unfortunately, most borrowers are not even aware of such a policy. And, in banks, except for the operating officials, many are not aware of it”.
He advised, “Borrowers should enquire about such freebies at the time of sanction of the loan and demand that it be made available to them. Further, the bank should ensure that the policy paper regarding the free accident cover is handed over to the borrower immediately on sanction of the loan and make a note of it in the sanction letter”.
“Insurance polices are normally issued against a particular loan account. In the event of a change in the account number, for whatever reason, the borrower should ensure that the cover is available to the new account also.
He should not presume the extension of the cover to the new account as automatic. Else, in the event of a claim, the insurance company might refuse to settle the claim contesting that the two accounts are different.”
Wednesday, May 13, 2009
Banks fail to find buyers for attached properties
The number of attached immovable properties is growing fast but banks are finding difficulty to find buyers for these properties. The attached properties are the one whose owners fail to pay the dues/EMIs therefore banks attach such properties from time to time.
According to bank sources every year in Delhi and NCR region more than 125 properties are attached. It is believed this figure might increase as the world is facing a massive market downturn.
Earlier three months ago outside a big kothi in West Patel Nagar a small board used to hang on the gate inviting attention of almost all the passers-by. On the board in bold letters following slogan was written, "This property is attached by the ... bank. Trespassers will be prosecuted."
With the introduction of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) banks have got plenty of powers to take physical possession of properties that are financed by them. In case the borrowers become regular offenders and do not pay EMIs to the bank, along with interest for six months in a row, then banks act speedily.
In case the borrower continues to be the defaulter bank serves a show cause notice to pay the money within 30 days. Sunder Khatri, legal expert on property matters said if the borrower doesn’t act within next 15 days, the bank seals the property. Khatri told after the fixed time banks inform the police station that a particular owner of the property has failed to pay the loan amount to the bank, therefore they will seal his property.
A senior official of SBI told that when bank officials seal any property, they make sure that the local police officials are also present there. Although due to courtesy of securitization acts, banks are able to attach properties in certain circumstances, but the problem starts when banks try to dispose of the property in order to recover their money with interest.
According to VK Suri, an expert on banking affairs as banks have to sell the attached properties and the payment is to done in white money, more often than not, buyers evade buying such properties. More over banks accept payment only through a cheque, thus the new buyer has to pay a huge stamp duty. This creates a big difficulty for the new buyer.
Sunil Jindal, director of SVP group, says that in our country there is no controller for the realty sector so the issue of black money in this business cannot be settled and solved. Jindal added that though everybody knows that black money has a significant role in realty business, till date the government has not taken any corrective measures. In case the government takes some steps to settle the issue of black money, banks will start getting buyers for the attached properties.
A banker acknowledged due to the white money payment provision, people do not take interest in buying attached properties. Suri said therefore banks are left with very few options to deal with this situation, he added, "Attached properties only add to their growing list of non-performing assets."
Therefore, public sector companies buy the attached properties. As the companies prefer to make payments through cheques thus, they buy these properties. But generally banks fail to find any other buyer for attached properties.
According to bank sources every year in Delhi and NCR region more than 125 properties are attached. It is believed this figure might increase as the world is facing a massive market downturn.
Earlier three months ago outside a big kothi in West Patel Nagar a small board used to hang on the gate inviting attention of almost all the passers-by. On the board in bold letters following slogan was written, "This property is attached by the ... bank. Trespassers will be prosecuted."
With the introduction of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) banks have got plenty of powers to take physical possession of properties that are financed by them. In case the borrowers become regular offenders and do not pay EMIs to the bank, along with interest for six months in a row, then banks act speedily.
In case the borrower continues to be the defaulter bank serves a show cause notice to pay the money within 30 days. Sunder Khatri, legal expert on property matters said if the borrower doesn’t act within next 15 days, the bank seals the property. Khatri told after the fixed time banks inform the police station that a particular owner of the property has failed to pay the loan amount to the bank, therefore they will seal his property.
A senior official of SBI told that when bank officials seal any property, they make sure that the local police officials are also present there. Although due to courtesy of securitization acts, banks are able to attach properties in certain circumstances, but the problem starts when banks try to dispose of the property in order to recover their money with interest.
According to VK Suri, an expert on banking affairs as banks have to sell the attached properties and the payment is to done in white money, more often than not, buyers evade buying such properties. More over banks accept payment only through a cheque, thus the new buyer has to pay a huge stamp duty. This creates a big difficulty for the new buyer.
Sunil Jindal, director of SVP group, says that in our country there is no controller for the realty sector so the issue of black money in this business cannot be settled and solved. Jindal added that though everybody knows that black money has a significant role in realty business, till date the government has not taken any corrective measures. In case the government takes some steps to settle the issue of black money, banks will start getting buyers for the attached properties.
A banker acknowledged due to the white money payment provision, people do not take interest in buying attached properties. Suri said therefore banks are left with very few options to deal with this situation, he added, "Attached properties only add to their growing list of non-performing assets."
Therefore, public sector companies buy the attached properties. As the companies prefer to make payments through cheques thus, they buy these properties. But generally banks fail to find any other buyer for attached properties.
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