Types of housing loans that can be availed from banks and NBFCs

So finally, you got the big career break were working diligently towards and now you are financially capable of buying your own home. Good news is, in India there are so many institutions that are eager to fund your home via housing loans. Demand for home loans have risen twice over the last twenty-five years with the new age of nuclear family that India has stepped into.

While speaking about buying a home or home related requirements, housing loans are the most viable options as they are largely flexible, can be customized to a particular degree and is also affordable considering the long tenures you commit yourself to.

Banks and NBFC’s not only offer easy housing loans, there are loans available for many different purposes. Let’s take a look at all the different loans available and how one can take advantage of them:

1. Home loan

This is the simplest and most obvious choice when buying a home. You can even take housing loans if you own a piece of property and want to construct a home with it. The interest rates are generally affordable and these are long term meaning your income won’t take a big hit.

2. Home improvement loans

A home improvement loan comes handy when you want to renovate or repair your existing house, and either you don’t have the needed funds, or you don’t want to disrupt your savings. This loan comes as a blessing in disguise as it is mostly an unsecured loan, meaning you do not have to mortgage your property to avail this housing loan.

3. Loans for house construction

Usually taken for the purpose of either building your own home or any other property. These loans are generally sleeked by builders. Since the house construction loans are viewed as risky, the interest rates are high and the tenure short. Mostly just a year. The house construction loan may also be disbursed in phases. Here the terms of the loan are mostly decided by the lender.

4. NRI home loans

If you are a Non-Resident Indian and are planning to purchase a property in your home land, the banks and NBFCs will welcome you on a red carpet. Well not literally. Housing loans are the easiest to avail in terms of paperwork as you can apply for the loan online and get all the services from the comfort of your home. It is one of the most flexible housing loans where the tenure can even be extended up to 30 years, hassle free.

5. Bridge loans

Bridge loans are housing loans that involve bridging over from one phase to another. It means, it’s a loan you take to buy a new house until you can arrange your finance by selling the old or the existing one. It’s a short term secured loan where you either secure your existing home or hypothecate the new one. These loans are very popular in the real estate market, that help you cover the gap. What you should know is that the interest rate will be at least 1% higher than a general housing loan.

6. Home extension loans

This loan feature comes handy when you want to make structural changes to your existing property. When family extends you need to extend your space too.

Keep in mind that you will not be sanctioned a huge quantum of money for the extension purpose. The tenure and interest rates are almost alike to that of a regular housing loan. A very big plus point is you are still eligible for this loan while you are servicing a home buying loan.

7. Composite home loans

As the name suggests it’s a housing loan where you are clubbing two loans together, that is a loan for buying a plot and a loan for building a house on it. This is a common loan and the amount is decided upon the fixed obligation income ratio. Basically, you will get a lump sum amount that will be disbursed as and how the entire process advances.

This is a short-term loan where the creditor is expected to honor the loan amount back in approx. 5 years.

8. Home loan balance transfer

Sometimes it may so happen that the bank or an NBFC you have approached for a housing loan may increase the interest rates as per the RBI discretion. You may find yourself unable to service the loan. Or sometimes you are not happy with the facilities provided by your lender. In such a case you can request transfer of the balance to a financial institution of your liking. You can also avail a bigger quantum to the existing loan from the new bank. Make sure you transfer your case to a reputed institution.

9. Plot loans

A plot loan is for funding the purchase of a piece of land with the intention of building a house on it. You are entitled to certain tax redemptions once you actually build a house.

10. Stamp duty loans

When buying a house, you should also take into account the stamp duty and registration charges. With the real estate price sky rocketing it is obvious these amounts are enormous as well and may very much need a loan too. Hence the stamp duty loans, where the builder will mostly have a tie up with a bank whom you can approach. This will only make the process of acquiring the loan easy as against going to you own bank where you may have to do a lot of paper work.

Whatever your reason for seeking a housing loan, your best preparation is to thoroughly go through those reasons that may become a road block between you and your dream home.

We’d love to help you manage your down payment with a program that we have curated especially for first time home buyers. Click to check it out!

Can a self-employed person self-finance his first house without family borrowing?

Self-employment is when an individual works for himself/herself rather than being employed for another company. Architects, doctors, sole – proprietors and many other professions fall into this category. A self-employed individual can acquire a loan provided he/she is able to prove his/her income stability.

Self-employed individuals will have to prove their ability to repay the loan that they have borrowed with income tax returns and audited financial statements of the business they run, by preparing and submitting it to the income tax department.

Are self-employed individuals eligible for home loans?

Yes, self-employed individuals can self-finance the house they buy even without the help of family money and the obligations that come along with it. If you are a self-employed individual seeking a home loan for the first time, you need to get your documents organized.

Eligibility

Lenders include banks and NBFCs that offer ample home loan opportunities to fit the needs of a self-employed individual seeking to self-finance their first house, which is where the following factors determine whether you eligible or non-eligible for a home loan

  1. Age – The applicant must be between 21-65 years of age. However, the younger applicant has age on his/her side because he/she has more time to repay the loan, while older applicants may need to make a higher down payment.
  2. Dependants – If the applicant has a high disposable income but also a higher number of dependants, then it will affect his/her chances of applying for the loan because the assumption that a higher number of dependants will affect the disposable income and in turn tax repayment.
  3. Income tax returns – The applicant should have filed ITRs for a minimum of 2-3 years as per the government norms.
  4. Profile of the applicant – This includes the applicant’s credit score that indicates if the applicant has paid off their loan if any and any credit dues on time in the past. The applicant’s credit score must total up to at least 650.
  5. Financial standing – The lender assesses the applicant’s assets in terms of property, housing ownership, gold and other investments. The applicant has a higher chance of securing a home loan if he/she operates from their own property like an office or even his home. The lender also does a background check of current debts like personal loans or any other credit debts.
  6. Business stability – The lender examines the applicant’s capacity to generate consistent income regularly and will check the bank statements, balance sheets, assets and liabilities of the business, which makes filing IT returns a crucial factor for the applicant. The business also should be running smoothly for a minimum of 3 years to prove an assurance of repayment.
  7. Gross annual revenue (GAR) – GAR is basically the income generated without deducting any expenses during the annual accounting period. Many banks and NBFCs offer loans to doctors or professionals that have a GAR of Rs 5 lakhs minimum.

How should you repay the home loan that you take from a financial institution?

Many banks or NBFCs are flexible when it comes to loan repayment today. Some banks let you begin the EMI repayment late, while some also offer the option of taking a loan with decreasing EMIs. The Home Down Payment Assistance Program by HomeCapital also supports a self-employed individual who is planning to self-finance his first home with the necessary down payment funding. Here are a few EMI repayment options available through various banks and NBFCs:

a. Delayed home loan EMI repayment

Some banks and NBFCs offer this option where the borrower gets a grace period between 36 – 60 months where only the pre-EMI interest is to be paid. This loan is mostly preferred by young working professionals between 21 – 45 years of age with a capacity to increase their current income as this sort of a repayment increases with time.

b. Lower EMI repayment

This type of a home loan is the exact opposite of the delayed home loan EMI repayment, where the EMI decreases over time, during the tenure and is preferred by individuals at a later stage in life, nearing retirement. The interest in the initial years will be higher which means an individual must plan his finances well in advance.

c. Longer home loan repayment scheme

This type of a home loan extends the repayment tenure up to 65 years of age for a maximum loan of INR 75 lakhs and is normally granted to young working professionals up to 48 years of age. The interest in this type of a loan that requires a guarantee provided by India Mortgage Guarantee Corporation with an additional charge of 1-2 percent of the total loan.

A bank is a preferred option when it comes to home loans because the interest rates are lowered while NBFCs are equally preferred because of their flexibility but with higher interest rates. The applicant must weigh his/her pros and cons before choosing his/her loan scheme, devise a payment plan and then approach a bank or an NBFC before settling for any of the options.

Individuals savings come into play when buying a home loan. Some banks or NBFCs customize home loans according to a self-employed person’s seasonal income periods and secure repayment during that time as well. However, since savings are not sufficient for down payments today which is when you can think of alternate down payment options to self-finance your first home instead of borrowing money from family members.

HomeCapital offers you down payment assistance in the form of a personal loan which can be repaid back in 12 interest free EMI’s.

Get in touch now!

An update on the housing sales in Bengaluru

Bengaluru, a.k.a. the Silicon Valley of India, the IT hub, the capital of Karnataka, the place out of which many multinationals operate, the city of startups, lakes, age-old parks, dance villages and a land of architecturally splendid temples. The perfect weather and the vibe of the city. All these and many more make Bengaluru a very desirable destination to live in. In recent times Bengaluru has been the more preferred city to call home, over Mumbai and other metros. This not completely because of its panoramic beauty but also because of the number of opportunities available here.

What is the current housing scenario in Bengaluru?

The real estate market in Bengaluru got a much-needed relief after the implementation of RERA. It has gradually found ground and is now headed to an unfaltering demand in housing sales.

India’s IT capital has shown an 80% rise only in the first quarter of 2019 making Bengaluru one of the most active residential property markets in the country. A significant rise in the demand for affordable housing has also ensured a healthy market growth. This active housing sale phase took care of the unsold properties of the down phase and is now ready to add new projects to the market.

Why are people looking to purchase more houses in Bengaluru?

After encouraging government policies Bengaluru has seen some positive customer sentiment toward housing sales. With increasing commercial activity from the IT and the ITES sectors, and having more disposable income at hand, the immediate effect is seen on house buying.

According to the Bengaluru Innovation Report 2019, Bengaluru will be the fastest growing city in the world for the next 15 years and have a GDP growth rate of 8.5% up to 2035. The city is continually upgrading the infrastructure along with top-class health care and educational facilities. Also, the newer tech-enabled homes are attracting young IT professionals to invest in residential properties.

With the massive white-collar migration to the Silicon Valley, the house rentals have become steep and this only encouraged the millennial investor to buy a house while working in the city.

Demographics of this segment of home buyers

Traditionally speaking, in India home buying is almost related to a retirement plan whereby a man works all his life to enable house buying. But with the IT boom in the last decade and a much-globalized workforce to follow, we have seen a major shift in this trend.

Along with better jobs and the trend of affordable compact homes, buying a house has become viable. Hence the home buyer’s age bracket has gone down drastically. Bengaluru is now home to many youths and young couples who have chosen this city to settle down in.

Statistically speaking the demography of home buyers of Bengaluru is 52% in mid-thirties, 18% in mid-forties, and a noteworthy 21% below 35 years of age thanks to the launch of mid-segment homes.

Lack of savings for millenials

Today young millennials from the IT sector are hardly ever cash trapped. With big salaries that multiply each financial year, they usually have disposable income in hand. This brings a tempting proposition to forth of investing in real estate. But buying a house is a tall order that will need detailed calculations. Many a time the dream does not take off due to insufficient funds.

In such a scenario housing loans can be appropriated through banking and non-banking institutions. While banks would help you in getting a home loan for a part of the required amount, you would have to invest the remaining funds from your savings. At such times, when most home buyers face a shortage of funds, HomeCapital can help you in getting a personal loan up to 50% of your down payment which can be repaid to their partner lenders at no extra cost in EMIs.

Projects in Bengaluru

Housing Sales in Bengaluru have not only shown an upward trend but the housing realty has also made homes of all budgets possible. The world’s 24th most populous city is gearing up for more housing sales to meet the ever-increasing demand.

Some popular projects to look at:

  1. Habitat Eden Heights and Godrej Air Nxt Whitefield. Check these properties if you are looking for a residence at Whitefield
  2. Godrej 24 Bangalore is the property to check out as it offers 2 to 3 BHK apartments starting INR 60 lakhs. Find this project at Sarjapur
  3. Rohan Upavan is a prime upcoming property to check out by Rohan Developers as it offers apartments of various configurations such as 1, 1.5, 2, 2.5 and 3 BHK starting INR 32 lakhs. Find this project at Hennur Road
  4. Purva Smiling Willows for those looking for villas. This is the property to check out as it offers 3 to 4 BHK villas. Find this project at Bannerghatta Road
  5. Purva Zenium for luxury apartments and BlueNex technology-controlled houses head to Hoshalli where this property is spread across 10 acres
  6. Vaishnavi Serene in Yelahanka is beautifully designed and has shopping malls and offices nearby, making it a promising lifestyle destination

5 Advantages of Purchasing an Apartment in A Tier 2 City

When it comes to a home, India is still very traditional in this sector, where people feel a sense of pride and fulfillment in purchasing an apartment as opposed to renting one.

While the metros have reached saturation in residential real estate and buying a house has become a financial challenge, people are turning their attention to the two-tier cities.

We are now seeing a huge turn around in migration where people are choosing smart cities over metros for a number of reasons. The smaller towns or the tier 2 cities are attracting both the developers as well as the buyers. Ahmadabad, Lucknow, Indore, Chandigarh, and Jaipur are some popular choices.  Let us take a look at what makes the two and three-tier cities more appealing to a buyer.

1. The Emergence of Government Programs

Smart Cities: An initiative launched by the government in 2015, a smart city is the answer to the overpopulated metros. The government is trying to make them sustainable by providing amenities that are analogous to the big cities.

Housing for All Mission: Implemented by the Central Government this mission is about development and planned construction. These satellite towns are all about state of the art technology and business parks.

Developers and builders agree that without the help of the Central government and more so the State government the real estate boom in tier 2 cities would not have been possible. Some extremely viable initiatives and policies like RERA, Atal Mission for Rejuvenation and Urban Transformation, Prime Minister Awas Yojana, National Urban Housing Fund and National Quality Summit 2012, have been responsible for creating a positive buying sentiment of apartments outside metros.

2. Improved Infrastructure:

With the shift in industrialization, especially the IT sector, Financial Services and Consumer Goods the tier 2 cities are seeing a growth spurt in the real estate zone.

The government is creating many job opportunities along with a sound infrastructure to make sure that the small towns are on par with the bigger cities. Affordable apartments with a lower cost of living, bigger open and green spaces, better connectivity, improved roadway, upgraded civic amenities, modern lifestyle facilities, malls and airports, all of these contribute to making the smaller cities a preferred choice.

The government has promised an enormous amount only for the better infrastructure of the tier 2 cities. Various schemes from the government are making people optimistic about moving to smaller towns where they feel they are living in a better environment and without the pressure of the big cities. Purchasing an apartment in a smaller town is also much more achievable as compared to living out of a rented one in the big city.

3. Better Opportunities:

With ample land available in the smaller cities, the government is encouraging the developer as well as the buyer to see the tier 2 cities as a good opportunity for purchasing an apartment. Here not only the real estate market is cheaper but the buyer ends up with much bigger spaces for a relatively lesser price as compared to the metros. The cost of living is much lower and the infrastructure better. The NRIs see the tier 2 cities as a profitable prospect for investment whereby they purchase an apartment and put it out on rent generating a second income. The multi-nationals are also shifting to the smaller cities since resources are overall cheaper here while technology wise they are ahead and there is a multitude of skilled and unskilled labor available.

4. Good Job Opportunities and a Better Pay Scale:

The tier 2 cities of India are emerging as the new business hubs leading to excellent job opportunities. Cheaper real estate with lower operational costs is the major reason why most business sectors are shifting base.

There is also the vast talent and highly skilled labor available in small cities. While some young people choose to live closer to their families, others feel that their skills will be better valued in small towns hence they will have a better opportunity at growth and higher pay packages. According to the Monster Employment Index for June 2018, Tier 2 cities were at the top three positions in terms of year-on-year growth.

5. NBFC for Buying Apartments.

So, if you are about to make a career move and planning to relocate to a tier 2 city, do not worry about purchasing your own apartment as NBFCs is your answer. NBFC is easier to approach. Their home loan procedures are effortless. Compared to banks, NBFCs have far more relaxed rules. Their rate of interest is comparably lower than those of banks. NBFCs come across as more willing to offer loans as they will even consider cases with poor eligibility.

They do not work as per the RBI guidelines, due to which they can slash the rate of interest as per their terms. They will give loans for a larger amount of money too.

NBFC’s play a paramount role in the buying of apartments when going to a bank is a difficult proposition. With the RBI confirming that NBFC’s are outperforming banks with increasing customer satisfaction, these institutes are the way forward.

With Our Partner Financial Institutions, Let HomeCapital Help You Make Your Next Housing Move

What are the reasons to buy a home and What are the obstacles to it?

Today we do not buy a house. Rather we buy a home. Statistically speaking a whopping 73% of the world’s population desires to buy a home or a property. Yet we are witnessing a consistent drop in this rate, especially with the young generation. There are certain factors that prove highly detrimental while buying a home. These are real issues and are becoming a roadblock to purchasing a property.

High Prices

The truth is that buying a home can be an exhaustive affair in terms of finance. A buyer will exhaust most of his financial liquidity and security only trying to afford a home for himself. Most people will be able to purchase only one property in their entire lifetime. The uncanny market trend makes a buyer wary to buy a home. Inflation which makes the rupee weak also makes taking a loan less sustainable.

Not Enough Surplus

You may have planned a home buying corpus early in life but the fact is your corpus won’t be sufficient due to escalating inflation rate, global recession, and the ever upward real estate market. A housing loan is almost a must while buying a home. You may want to move into a particular neighborhood where you will have to match its lifestyle. When buying a home you will also have to calculate all the allied costs that come along with it. It is important to ask yourself if your salary will be able to support all the expenses.

Availing a home loan

While buying a home you can’t rely on your savings alone as you will mostly be tempted to overstretch your budget looking at it as a long-term investment. A loan is a must.

While banks make it easy to avail one in terms of processing of documents one should not forget that the tenure of the loan is generally high and that ensures that your interest ends up being more than the principal amount. By the time you become free from the home loan your property would have become at least 30% more expensive because of the interest.

So the reasons to dissuade one from buying a home are in its place. Yet owning a house has been a matter of priority for most. Buying a home can be a stressful affair with long term implications if not planned well. But this should not discourage you from investing in real estate as the pros are stronger than the cons.

It’s your Own Space

Having your own house is a matter of pride. It brings a sense of wellbeing. It provides you with socio-economic status. Affording your own home gives you financial stability and security. Having a property also means having the power to tide over distressing times. You are more in control of your life and do not have to deal with ever-increasing rental or worry about moving out of a premise you called your home. When you buy a home you secure your future with an asset that stands the test of time.

Better Tax Benefits

The government of India is working endlessly in bringing affordability to buying a home, for its citizens. It is offering a wide spectrum of tax deductibility on property as well as home loans. There are deductions on the rate of interest on home loans. There is a deduction in the repayment of principal amount. There is a deduction in stamp duty and registration charges too. There are multiple facilities for joint property holders where the partners are individually eligible for tax exemptions. The tax benefits on buying houses are given under Section 24, 80C and 80EE of the IT Act. Homebuyers should study these in detail to understand the benefits. There are major concessions for first-time buyers too.

More Savings

Today most properties are moving towards sustainability, which means it has all the modern facilities as well as the basic amenities. E.g. most residential complexes come with their personal gymnasium, swimming pools, clubhouses, community halls, cafeterias, amphitheaters, jogging tracks and much more. They even have ATM services, small hospitals, schools, grocery stores, etc. So basically the health, recreation, and essentials are taken care of. These save many lifestyle expenses in the short term and many recurring expenses in the long term. Buying a home may require some financial discipline in the initial stages, but it eventually reaps more benefits. The cost of living is considerably lower as compared to living in a rented house.

Price Appreciation

Statistically, a house will almost always double up in value from its original price. Real estate like any other investment has its cyclical movement when the prices are sometimes supremely high and sometimes stubbornly low. All in all, you will definitely see your investment multiply. When purchasing a property do consider some points that will help with better yields in the future like the location.

Buying a home is eventually more of a personal choice. Some people are most comfortable living in rented houses as compared to losing their financial freedom.

But if you do intend to invest in a property your research has to be strong, planning impeccable and your patience endless.

We’d love to help you manage your down payment with a program that we have curated especially for first time home buyers. Click To Check It Out!

Declining GST Rates for Residential Real Estate

Residential Real Estate to Benefit from Home Loan Subsidies and GST Rates

Understanding the annual financial budget with all its changes is vital especially if it helps you save a substantial amount of money. The Finance Ministry has most definitely made history but let us look at some of the finer points with regard to the Residential Real estate sector.

An Additional 1.5 lakh Savings Per Year

When buying a home, we need to keep in mind that the budget 2019 has added a number of tax benefits when it comes to residential real estates. As the government works towards the “housing for all” by 2022, our finance minister proposed an additional tax benefit of ₹ 1.5 lakhs on home loans taken in order to purchase an affordable house up to the value of ₹ 45 lakhs. With previous budget deductions under section 24(b) which provided benefits up to ₹ 2 lakhs, the overall tax benefits for home loans taken on affordable housing has increased to ₹ 3.5 lakhs. For the industry, this move hopes to increase property sales by encouraging people to invest their earnings into a new home.

Side Notes:

This is an additional step to ensure property security to give the borrower benefits of invested equity in case the market price of the property reduces.

This new tax benefit is available on home loans taken from a bank. The benefits are thus only valid up to 85% of the home loan, setting aside the margin money. Therefore, even though the price of the property may be around ₹45 Lakhs, the maximum home loan eligibility from the lender is ₹ 38.25 lakh.

This benefit looks great, though the reality is that with reduced lending rates the amount received in tax benefits will be less than ₹ 3.5 lakhs and further reduced yearly.

1. Attention To Housing For All By 2022

So, you have the money, where do you invest it?

Adding focus to their target of ‘Housing for all by 2022’, the government through the Pradhan Mantri Awas Yojana (PMAY) has sanctioned around 81 lakh houses in the PMAY scheme in the urban area and another 1.95 crore homes that are in the process of construction under the PMAY in the rural area. With the newly added exemption, ₹ 3.5 lakhs in income tax on home loans under affordable housing in this budget will work with a broader segment of home buyers and indirectly increase demand of residential real estates.

‘More savings means more investments’.

2. Reducing corporate tax

With a 25% cut in corporate tax on companies with turnovers more than ₹ 400 crores, the government remained mindful that such a cut would help the economy grow. 

3. Benefits for Non-Banking Financial Institutions

The budget outlined measures especially for the revival of NBFC. Because of the ongoing debt crisis and liquidity crunch, a one-time, 6 – month credit guarantee for the purchase of pooled assets. This includes only highly rated NBFCs and up to ₹ 1 lakh crore.

This nudge from the government will help with the revival of lending activity and also provide a sustained flow of capital. A much-needed boost to the liquidity of NBFCs by the government allows FIIs and FPIs to invest in debt papers of NBFCs.

4. Reduced GST Rates as per the GST Council

In March, the GST council propelled the real estate players to adopt 5% GST for residential buildings and 1% GST for affordable housing without any benefits of input tax credit (ITC). This move has helped boost the residential real estate sector, offering buyers a cleaner and more pleasing set of numbers when they purchase their new homes.

Other Benefits For The Residential Real Estate Sector:

1. The Development of Infrastructure

The Finance Minister stated that an investment of ₹ 100 lakh crores in infrastructure over the next 5 years will help improve connectivity throughout the country, with better roads, metros, railways and airports on the line; the proposal of ‘One Nation- One Grid’ will help in new residential projects in all major metropolitan cities around the country in improving the residential real estate sector.

2. Development of Skills in the Residential Real Estate Sector and Others

It is important for real estate agents and brokers to have a vivid understanding of the schemes, projects and benefits that the government has developed for the growth of the sector. The vision is to train a total of 10 million young employees in the industry-oriented training. Acquiring skill sets in AI, big data, VR, 3-D printing, etc, will not just add meaning to the life of the youth but also to the growth of the country and will give them the salary to invest in the residential real estate sector.

For more details on how you can get started on your down payment, Contact Home Capital

5 tips for Home loans

5 Ways real estate investing will help you in your 50s

When you’re 50, what do you imagine your life to look like? A family, a Tesla or booking that amazing home stay on Airbnb? All these are bucket-list must-haves but haven’t you forgotten you need a place to live? A roof above your head?

Investing in real estate early in life can help set you up for life. Taking the risk at twenty may seem like a difficult task and a risk for many. There is however one rule of successful investments, that is to start as young as you can. And who knows, by the time you turn 50, a home will be all you need. This will also give you the opportunity to further invest in a rental property and help you establish a steady flow of income once you have retired.

So we mapped out a few reasons to consider investing in property both commercial and residential from an early age. It is never too early to start!

You Can Avail Home Loans Easily

The trick of controlling home loans is paying them off, one at a time. Whether you buy a home now at the age of 30 or at 50, you may take a loan to purchase the home. However, you have a reduced time frame and may end up eating into your savings at a later period. As you work your way up the job food chain, your salary increases, you can pay off the loan in lump sums and also have the benefit of a healthy CIBIL score.

Learn How To Be Financially Independent

You learn to work with the salary you are currently earning and as that increases over time, the loan disappears but you have learnt to save money. This helps you invest in other ventures, working on creating a good CIBIL score. By the time you turn 50, you will be providing for a family, children, your parents and having a home at this point will be beneficial for a stress-free retirement.

It isn’t about taking a risk anymore but more of planning a constant cash flow for you and your family through either rental or commercial real investments.

A lesson in credit management

It is easier to handle credit at a younger age. Nobody expects you to be successful at the snap of your fingers, and you are given the benefit of the doubt. Dabbling in property investments will help you acquire the knowledge needed to manage future investment risks or even personal risks. It is even lighter on your mind when you have no family to care for but yourself. Take that leap of faith now! You can turn back if it doesn’t work out. To invest or not to invest? That is the question at stake. Investing in either an SIP or mutual funds or the stock market will not be new to you when you grow older. You will learn to decipher between a good investment and what wasn’t and why. Learning from such experiences make real estate investing a great idea at a young age. Real estate investing requires time, the ability to adapt and of course the ambition to make it work well.

You can personalize your real estate investing pattern

You set your rules for your investment. You can pick what type of real estate investing pattern you want to look at. You set it up at your pace and change as you go along. You can even pair up with a partner and together work towards a greater goal. Rental properties are an awesome investment. They allow you to retire early. It may not make you rich instantly, but it will help you grow and maintain constant income overtime.

You Have The Advantage Of Time

Your greatest advantage is the fact that you have time. Time to build your credit. Time to make bad investments. Time to re-sell your apartment for a bigger one or smaller one. The possibilities with real estate investing opportunities are limitless and as you grow in your career, you will earn more and save more. Let’s say you start to invest in your early 30’s. You will have 30+ years to repay your loans. The time frame also makes you eligible for long loan repayment periods with low interest rates.

Over time we see real estate owners both commercial and residential gain equity. The younger you start investing, the more equity builds up. This also adds to your net worth.

Have we convinced you to take the plunge? Let us also help you with your down payment.

home

The Subvention Scheme: What Home Buyers Need To Know

Every respected family man is looking for the perfect home loan. As potential home buyers, we must be aware of the advantages and disadvantages of the various options available in the market. At the time of purchasing a new home, the developer suggests different schemes to the home buyer as well. One of these in the past few years has been the subvention scheme.

What does the subvention scheme entail?

The home buyer pays a margin of the amount to the developer. This is around 10-20% of the price of the property purchased. After that, he does not have to pay anything until the property is complete and he has full possession of his new home.

During the time from purchase of the home up until its completion, the balance amount is paid by the bank to the builder. This is a loan with a three-way agreement including the developer, the home buyer and the bank.

During the period of construction, it is the developer who pays the interest on the home loan to the bank, which provides the developer with the necessary money as the project progresses.

Does the subvention scheme work?

To a new home buyer, this scheme sounds like a dream come true. You need not worry about EMI payment until you’ve received the developed property.

But do not builders already have various schemes to help them in their projects? As a business, a developer already has the option of loans at lower interest rates. As a real estate business, the developer also has access to assets to be mortgaged. This will help unlock credit, all at a lower interest rate.

The sad truth that remains is that as a builder there is already a large debt that must still be repaid. While banks will opt to charge higher interest on new loans taken by the builder they approve when an individual with a good credit score opts for a home loan.

So while banks are under the impression that the real estate industry may be a bad investment, the new home buyer still needs a good place to live.

What home buyers need to know about the subvention scheme

Though the scheme seems like a perfect plan for property investors, we need to be made aware of the shortcomings that it possesses. In the subvention scheme, builders receive the installments from the bank in a specific period. They also opt to pay interest on the loan for the same amount of time. Once that period is complete regardless of whether the home buyer has received possession of the home, the builder has the option to stop payments. He can also divert funds to other projects. It may take years for the project to be completed and the home buyer is left to fend for themselves until then.

As payments are halted on the home loan, it is the home buyer that suffers. This delay harms the CIBIL score and lowers the buyer’s ability to acquire good future loans. Waiting until the project is complete proves harmful to the buyer’s financial health.

The recent developments in the Subvention scheme

In the past few months, after numerous frauds committed by developers, the National Housing Bank has requested lending institutions to refrain from the subvention scheme. This will definitely harm the two main bodies of the real estate industry i.e the home buyer and the developer. With an increase in interest rates for home buyers, developers will be forced to face a liquidity crunch in cash flow. Many developers believe that the government should be in support of such schemes to help the growth of the real estate industry but there are those who want what is best for the home buyer.

Are there other schemes like this?

There are other schemes available in the industry to help home buyers favour construction linked payment plans. These plans ensure that the developer receives fixed sums of cash flow when certain milestones are completed. These milestones or slabs make sure of completion of the home and assist the home buyer. It keeps builders in check. 25% of the total amount is given only after possession is acquired by the home buyer.

Key Takeaways

In order to boost the economy of the real estate industry, the government is constantly working on such schemes. But however many have loopholes and in the end prove harmful to the home buyer. Find out about past incidents with the developers before you step into these options. We all love a good bargain, but be sure to research well before you take the plunge.

Check Out Our Down Payment Program To Help You With Your Home Buying Process!

Saving for Home Down Payment

7 Smart Income Tax Benefits To Take Advantage Of With Your Home Loan

The word taxes has always been associated with what benefits you can gain from them. So when it comes to buying your dream home, the Indian government has especially with the last budget is encouraging citizens to invest more into buying their first home.

Did you know that your Home Loan is eligible for tax deduction under section 80C? So while you may be paying interest on the money you’ve borrowed from your bank or NBFC, you also have the option of multiple tax benefits to reduce your outgo on your taxes. Schemes like Pradhan Mantri Jan Dhan Yojana are helping develop the housing sector in India. These schemes strive to reduce the problems of affordability and accessibility. Let’s map out the different sections that you can apply for a deductions.

Interest Deductions

These are one of the tax benefits that one can avail on their home loan. These yearly deductions are related to interest paid on a property loan. If the property under question self-occupied, an individual is allowed to claim a maximum deduction of Rs.2 lakh under Section 24. This Rs.2 lakh deduction is applicable only when the property is completed for construction within 5 years from the Financial year in which it was started.

If the construction on the property is not finished within the mentioned 5 years, your claim is reduced to only Rs.30,000. So, if your loan was taken on 30th April 2016, the construction of the property should be completed by 31st March 2022. If the property is being let out on rent, the buyer has the ability to claim a limitless amount that was paid to the bank as interest.

An individual can claim the amount spent as interest if the property is given out on rent. However, This doesn’t take into consideration a completed project or an under-construction one. But, the overall loss that is claimed is restricted to Rs 2 lakh under the head of House Property. This Deduction can be claimed from the year in which the construction of the house is completed.

Interest Paid Towards Home Loans During Pre-Construction Period

If you have invested in an under-construction property and have not resided in the home as yet, you continue to pay the EMIs. Your ability to claim deductions start only when the property is fully constructed or you invest in a recently constructed home.

You can still enjoy deductions before the completion of your home. Pre-construction interest helps out in situations like these. The income tax law states that interest paid during the pre-construction time can be claimed as a tax deduction in five equal instalments. This is from the year in which the construction of the property is completed. The maximum amount, however, remains capped at Rs 2 lakh.

Repayment On Principal

In tax benefits under Section 80C, the principal portion paid as the EMIs for the financial year is deductible. The maximum amount that one can claim goes up to Rs 1.5 lakh. One setback with this structure is that the house should not be sold within 5 years of its possession, otherwise, the amount that was deducted is added back to your income in the financial year that the house was sold.

Repayment On Stamp Duty and Registration Charges

Under section 80C, a deduction on stamp duty and registration charges can be claimed within a limit of Rs 1.5 lakhs. But can be claimed in the year that the expenses happened.

Under section 80EE

Under Section 80EE there are additional deductions that are allowed for home buyers up to a maximum of Rs 50,000. To claim this deduction, the amount of loan should be Rs 35 lakhs or less and the value of the property should not exceed Rs 50 lakhs. The loan should be sanctioned between the period of 1st April 2016 to 31st March 2017. The individual does not own any other house at the time the loan is granted. Section 80EE was reintroduced effectively from the Financial Year 2016-17 and the earlier deduction was allowed under Sec 80EE and was made available for 2 years, namely the financial year 2013-14 and the financial year 2014-15.

Under section 80EEA

The budget 2019, further introduced an additional deduction. Under Section 80EEA, home buyers are allowed a claim upto a maximum of Rs 1,50,000. The stamp value of the property should not exceed Rs 45 lakhs. The loan should be sanctioned between 1 April 2019 to 31 March 2020. The individual should not own any other house at the time of sanction of the loan. The individual must also not be eligible to claim deductions under section 80EE.

Joint Home Loan

A home loan that is taken jointly, the co-holder of the loan can claim a deduction on interest up to Rs 2 lakh each. Principal repayment in this case under section 80C can be claimed up to Rs 1.5 lakh each individually. They must also be co-owners of the home that the loan is taken on. So a loan taken jointly by a family can help claim a bigger tax benefit. Let’s say you are a co-borrower as well as the co-owner of the house, you can each claim up to the maximum deductible amount under this section.

Understanding these tax benefits will make the home buying a much easier decision. So if you are ready to buy a home, we’ve got your down payment covered.

5 tips for Home loans

5 Easy Ways To Manage Your Home Loan

If you’ve taken a Home Loan or plan to take one, here are a couple of tricks up your sleeve to manage it better. Stay ahead of your home loan EMI with these 5 simple tips.

Make repayment a priority

Paying EMIs on time boosts your creditworthiness. It may be difficult at first, but you must remember that a good credit history is an essential part of your financial journey. Future lenders judge your credibility based on your Credit Score. Failure to pay your Home Loan EMIs on time take a major blow on your Credit Score. As a result, the chances of your loan and Credit Card applications getting rejected in future increase significantly.

Bonus EMI Tip to make sure you maintain your creditworthiness: Schedule the EMI close to your salary date. This ensures sufficient funds in your account and minimize chances of default due to lack of funds.

Try not to skip any home loan EMI, maintain your credit score to avoid any penalties from your lender.

Use lump sums to prepay

Paying off your Home Loan as soon as you can is the one thing every homeowner dreams of. So, opting for a high monthly payment can help you reduce the loan tenure. As a result, the total interest that you’re supposed to pay to the lender also goes down. By opting to pay more every month, you reduce your own financial burden. This helps an individual invest in other projects of life like retirement planning, a car loan or even a second home.

Pay an extra EMI every year

Paying an extra EMI every year can be tough initially. But it helps put to rest your home loan. There is usually no prepayment charge for floating rate term loans. By paying an extra EMI every year, you can reduce your overall outstanding principal amount. Lenders are unlikely to complain if you repay a little extra every year. Over a 10-12 year period you find your loan paid off soon, erasing the stress of the loan.

Switch to a lower interest rate

Be aware of market fluctuations and updated with reduced loan interest rates available by different banks. Switching to a lower interest rate than your existing one will shave a few years off your loan.

P.S. – But be careful. Don’t jump too many times at low-interest rate differences. If you’re getting a good dip in the rate of interest, you should definitely consider switching. But in case the difference isn’t much, it might be a bad idea to opt for that switch.

Get the math right

There are tools available online by banks and NBFCs that help you determine your financials when you repay a Home loan. For example: The Home Loan EMI calculator gives a clear understanding of monthly EMIs when you enter the details of your loan amount, tenure, interest rate, and processing fee calculation.

Loan amount: You have decided on a property and are aware of its price. After you have acquired your down payment, you will have a better idea of what loan amount you need to apply for. You then have an idea of the amount of your EMI’s.

Tenure Of Home Loan: Decided the loan amount, choose the tenure you would like to opt for, starting from 6 months to 30 years. Keep in mind, the longer the tenure of your loan, the higher the total amount to be paid back will be.

Interest Rate And Processing Fee: The next thing you need to enter is the interest rate offered by your preferred bank. Generally, banks have a 2% processing fee on Home Loans which needs to be accounted for as well when calculating your monthly EMI.

Prepayment Option: Some people prefer to prepay a certain amount of their loan. The Home Loan EMI calculator gives you an option to specify whether you wish to prepay your loan amount. Your monthly Home Loan EMI amount is calculated based on whether you choose a Yes or No on the prepayment option.

The Home Loan EMI calculator is a simple, fast and reliable source of information to calculate your Home Loan EMI’s.

Do A Quick Rain Check Before You Apply For A Loan For A Quicker Procedure

Step 1: You can also use our loan calculators to check your eligibility and you’ll get an assurance of your current capacity.

Step 2: Let HomeCapital take care of your down payment requirements