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!

5 Ways to identify the right house at a suitable location during your home buying process

When we start our house hunt, its generally like searching for a needle in a haystack kind of an affair. There are too many options and equal amount of confusion. But finding the right abode may not be as difficult as it may seem. Just remember to look into a few key factors that will help you make an informed decision. Most important of all, do not rush into anything on impulse. Your R&D is what will score high on decision making.

1. Budget Vs. locality

First, zero down on the locality. Are you the one who wants to live in the quite suburb away from the noise? Or are you the one to thrive in the vibrancy of a city. Can you handle the traffic? Do you like it laid back? Is a popular neighborhood important to you? Ask yourself a lot of questions. Home buying is such a life impacting decision that it is wise to spend some time looking within yourself.

Once you have concluded on the locality, the next big factor into play will be your budget. Generally, people have a budget and that is what mostly determines one’s home buying decision. But that’s not the right way forward. Do not let your budget be the decisive factor in home buying. Once you have concluded on the area, you may get a home in your budget. There will be ample choice so do not worry.

2. Proximity

Proximity is a very important factor in home buying. How close are you to the nearest railway station? How effective is the public transport in your choice of area. Can you survive without your own vehicle? Is the said area easily accessible? The distance and the connectivity from your work place or the school of your children.  All these questions will also play an important role in your decision making.

3. Social infrastructure

When we refer to social infrastructure, we not only mean the basic amenities. Yes, during the home buying process, these come first, but we also have to look into facilities that may give us a better lifestyle. So do make this checklist. Is there a school, hospital, bank, ATM, departmental store etc. located in the vicinity? Is there a police station close by? Besides the day to day requirements, are there other facilities that may upgrade your lifestyle e.g. gymnasium, swimming pool, track and field, cinemas, shopping malls, parks etc. Is it a place where you will get most of your requirement within the range without having the stress of driving down? These again, are some intrinsic question to ask. How easy your life will be will depend a lot on this checklist.

4. Resale value

Always consider the resale value while home buying. It’s a tough call to take before selling a property while you are thinking about purchasing one. But it is prudent to look into this factor. Do consider this. Are you purchasing a property in an area that seems growth oriented? Is there an airport close by? Look out for big connectivity network either by rail or road. Are any business parks that seem to be coming up in near future? Is it a planned city? Few years down the line is the vicinity going to look upmarket or it is going to be thronging with more people and a growing population? Why are these questions important? Because you don’t want to investment in a property just to start regretting it a few years down the line.

5. Research

Do exhaustive research for a good amount of time. Do not make hasty decisions in the process of home buying. Be patient. Check out as many property options as you can and check up on the builder along with conducting a background check on any property disputes. You will get all the information regarding the builder and the ongoing project on internet and on RERA. Get the hidden facts. Understand the taxation as you will be surprised that the taxes can change from area to area. When you are narrowing down on a property, drive by it at different hours of the day. You will get the real picture of the traffic and how peaceful it actually is. Check the safety bit of the locality since it is of prime importance for your family. The stronger your research before zeroing on a home the lesser the regret.

And a final parting word. While home buying remember, a perfect home is when your need to check another property finally ends. While you have to take into consideration many aspects, it’s not always about the affordability and market risk. Home buying is as much about your instinct. When you have found your dream home you will know it. Before you plunge into the decision, take the time to understand that this home is going to fulfill your socio-economic and your emotional needs. Hence it always makes sense to never exceed your budget as it may impact those very spheres of your life.

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

A guide to the issues faced by first time home buyers and the solutions to them

Buying your first home is a special experience that can hardly be matched by any other. But with the sky-high real estate prices, it is a daunting exercise, especially for a first-time homebuyer. Even with aggressive saving and careful planning, we get nowhere close to gathering enough even for the initial down payment on a new house. Even if you’re eligible for a home loan, it serves to be futile if you cannot come up with the initial down payment. And the expenses don’t end here.

Stamp duty and registration charges for a new home are quite high, but these are rarely taken into consideration by a first-time homebuyer. Then there are the documents that need to be submitted to the bank for a home loan, on time and with proper signatures wherever necessary; all the while ensuring that the down payment is done on time. It seems like you have to jump through a lot of hoops to buy your own home. And yet, the down payment remains the biggest issue. How do you come up with enough down payment to fund your new home?

With down payment assistance of course! HomeCapital understands this crucial issue and steps up with up to 50% of your down payment as an unsecured interest-free personal loan. Add that to your savings and suddenly you have enough to make that all-important down payment! Before we find out what that is, let us take a deeper look at the potential issues that plague first-time home buyers and how they can be possibly avoided.

Issue 1: Not Saving Enough

This is a common issue that arises due to 3 main reasons:

  1. An ever-changing property market
  2. Changing and evolving buyer expectations
  3. Not accounting for the high stamp duty and registration charges

The property market almost always appreciates and real-estate prices steadily increase. This also inflates the stamp duty and registration charges. Most first-time homebuyers do not have the foresight to plan for this while saving for their homes. Add to this the possibility of home buyers’ changing expectations, and the savings will fall short. Always do your research and factor in various eventualities before you start saving for your home.

Issue 2: Unhealthy CIBIL Score

Most people are not even aware that something like a CIBIL score exists. It scores your creditworthiness and is the first thing banks and financial institutions check before granting you any loan. Whenever you take a loan or use a credit card and not repay them back in time, you end up degrading your CIBIL score. If your score gets really bad, you might not be able to take a new loan, which includes a home loan. To maintain a healthy CIBIL score, always pay back your loan and credit card EMIs on time. Preferably, try not to have any other loan running while applying for your home loan. It will increase your chances of getting your home loan sanctioned by manifold.

Issue 3: Not Doing Enough Due Diligence

When buying a home and applying for a home loan, there are a couple of due diligence that needs to be done, especially for a first-time home buyer. The first thing to check is the builder’s reputation and their track record of completing projects on time. If your builder promises you the delivery and possession on a certain date, hold them to it. Many-a-times, it so happens that your home loan repayments start and the project gets stalled. This is one of the worst-case scenarios for any home buyer. The second thing you need to check is the reputation of your lending institution. If an offer seems too good to be true, more often than not, it turns out to be a dud.

Issue 4: Not Comparing Offers from Different Lenders

This is another classic issue faced by first-time home buyers. In their anxiety to close the deal as quickly as possible, most people simply do not do enough research. Often going with the first offer loan offer they receive; they potentially miss out on some great which could’ve been availed with a little bit of research. Make sure that you check with as many lending institutions as you can before settling on the one that offers you the best repayment terms. You can even compare home loans with easy-to-use online tools that lay it all out in front of you in the simplest possible terms.

Issue 5: Making a Small Down Payment

Most people tend to pay the least amount of down payment as far as possible because it seems like a big upfront cost. In a way this makes sense, but it is far from ideal. In reality, the bigger the down payment you make, the lesser is your long-term financial load. Try to minimise the amount of loan as much as you can and your finances will thank you in the long run. But what if it is simply not possible for you to come up with a substantially large down payment? Which brings us back to down payment assistance.

What is Down Payment Assistance?

At its core, a down payment assistance program addresses a critical issue faced by a first-time home buyer, coming up with the maximum down payment. What it does is it simply finances a part of your down payment with an unsecured loan. As of now, HomeCapital is the first and the only company offering down payment assistance with interest-free credit. With this assistance, you can save money upfront to use it later while furnishing your home. What’s more, HomeCapital has partnered with lending institutions as well as builders to streamline the entire process for you. So, when you visit a builder to book your home, all the necessary formalities are taken care of in one visit.

Features of HomeCapital’s Down Payment Assistance Program

  • HomeCapital provides the down payment assistance in the form of an unsecured, interest-free personal loan.
  • The tenure of your HomeCapital loan is 18 months regardless of the amounts involved.
  • You repay the down payment assistance loan before your home loan EMIs start, which does not over-burden you financially.
  • HomeCapital’s repayment plan does not affect your home loan eligibility.
  • There are no hidden charges or lien on the property.

Benefits of HomeCapital’s Down Payment Assistance Program

  • With HomeCapital’s down payment assistance, you get to hold on to a big chunk of your money, which is then repaid in installments.
  • When you receive down payment assistance, you can buy your house earlier, without having to wait any further.
  • You can buy the home of your choice when your upfront payment is bolstered by the down payment assistance program.
  • With HomeCapital’s Down Payment Assistance Program, you can actually save the money that you would’ve had to pay as interest on any other loan.

Eligibility Criteria

There are certain criteria you need to fulfill in order to be a part of this program. You need to hold a steady job with a reputed company and you must satisfy all the credit standards of partnering financial institutions. In addition to your existing financial obligations, financial track record, income levels also play an important role in determining your eligibility criteria. Also, you must have a healthy credit score as it ultimately determines your eligibility for the Down Payment Assistance Program.

So now be hassle-free and buy your dream home, and let us also help you with your down payment requirement.

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!

residential real estate

5 Myths of Purchasing Residential Real Estate

It was the year 2016 that can be called the ice breaker for Indian real estate, but especially for Residential Real Estate. The RERA Act (Regulation and Development Act) in 2016 and the introduction of GST (Goods and Service Tax) in 2017 proved to be a boon after a very disheartening lull. India is finally seeing a happy phase in the housing sector.

The government responsible for some path-breaking work has developed policies that are very encouraging for the serious buyer as well as the seller. For e.g. The GST brought in some much-needed transparency in accounts. The GST council also eliminated the Input Tax Credit leading to a positive sentiment.

But what looks so green may not be, just yet. The buyer is vary of the unstable market and has doubts regarding investing in a home. Let’s take a quick look at what seems, and what may be.

1.   Buying a house in a tier 2 city is not the correct decision.

Well, it is actually the other way around. From an investor’s point of view, it makes sense to invest in Residential Real Estate in a tier 2 city as the market is cheaper than the metros hence the rental yields are better. The government is making a paramount effort to bring these cities at par with the metros to prevent migration. The mall culture, overall better infrastructure and many more job opportunities ensure a better lifestyle compared to the competitive and stressful lives of the metros.

2.  Buying a property in India is a cumbersome process.

The RERA has chalked out specific rules and regulations especially for the Residential Real Estate buyer, to secure him and help him understand his rights better. It has stringent and clearly explained mandates for the builders. Registration of project completion and occupational certificate are also covered under RERA. It has even created the Real Estate Authority where a buyer can go and complain about his grievance. Overall RERA has looked into cushioning the buyer well and ensuring buying property is a better experience for him. 

Also, the government, as well as the private sector, has facilitated easy housing loans and EMI schemes so as to promote Residential Real Estate Investment.

3.   One should not buy a house in the current market situation.

According to common sense yes one should not invest in Residential Real Estate during a slowdown. But if you think about it, it is most lucrative to invest in a property during a slump for obvious reasons. Prices of houses and the rate of interest are significantly down. 

Real estate over the years has always shown capital growth, besides it doubles in value as compared to other investment plans. It is one of the most tangible assets to own. Investing in Residential Real Estate also has an added advantage to it which most other investment schemes don’t offer and that is you can lease out your investment and earn good rent. 

The most important aspect is that your property can also be leveraged or hypothecated in stressful times or you can even have a tenant and not lose your property.

4.  Renting a property is better than purchasing.

Yes, buying a house can be a massive expense where you end up putting all you have earned and saved over a long time. But there are innumerable benefits of buying a house vis-à-vis living in a rented one.

  • Investment in Residential Real Estate means lifelong security.
  • In distressing times, it is one of the most bankable assets. 
  • The returns are higher than the investment always. 
  • You will never have to surrender a premise you made your home out of. 
  • You will not have to deal with the ever-inflating rentals. 
  • A property can become your second source of income and can be your retirement plan. 
  • When you live in your own home you are more in control of your life. Rented premises always come with interference frill. 
  • Buying a home can be very expensive but in the long term, it turns out to be cheaper than renting one.

5.  You will have to spend from your contingency funds even after you avail of a home loan from your bank.

If you are planning to buy a house and are looking for a home loan then you are obviously calculating the high rate of interest you will be paying to the banks, which sometimes ends up being more than the principal amount. 

Well not anymore. The government is offering excellent down payment and EMI schemes for Residential Real Estate investments especially with the middle segment in mind. The interest rates are incredibly low and real estate is tax-deductible which will help you save a lot eventually.

You can also consider going to Non-Banking Housing Finance Companies which have far more relaxed interest rates and also offer a higher quantum of loan. There are many nonprofit making organizations and house finance companies that help you secure a housing loan at almost zero percent interest. Do your research well and you are good to buy your very own home… stress-free.

We Take Care Of Your Down Payment Needs And Would Love To Help You Fulfill Your Dream Of Buying Your First House! 

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

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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.