What are the benefits of applying for a home loan in Joint name?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Sumit Sharma had planned to buy his home from a reputed developer in the locality that he was satisfied with. The cost of home was rupees 75 Lacs. Sumit had arranged for the 20% payment (Rupees 15 Lacs) from his pocket. For rest of the payment, he approached the bank to avail home loan.

Before sanctioning Rupees 60 Lacs, bank asked Sumit for following documents:

1. Salary slip/Form 16 A
2. A copy of the first and last pages of the ration card or a copy of PAN/Telephone/Electricity bills as a proof of residence
3. Details of investments (FD certificates, shares, any fixed asset, etc. or any other documents supporting the financial background of the borrower)
4. A photocopy of LIC policies with the latest premium payment receipts (if any)
5. Passport size photographs (as applicable)
6. A copy of bank statement for the last six months
7. Age proof
8. Financial details of guarantor, wherever guaranty is required

Having produced the above documents, Sumit was confident that his loan application will be approved. However, to his surprise, bank rejected his loan application on account of low monthly salary.

As a thumb rule normally most of the banks/HFCs (Housing Finance Companies) have a provision that one should be left with at least 50% to 60% of income after repayment of monthly loan installment, to take care of the family expenditures.

Sumit’s monthly salary was Rupees 80,000. For which he was eligible to avail about 40 Lacs Rupees as loan amount from his bank.

Cost of home: 75 Lacs Rupees
Upfront money arranged by Sumit: 15 Lacs Rupees
Loan eligibility: 40 Lacs Rupees
Remaining amount: (75-15-40) = 20 Lacs Rupees

Now, how will Sumit arrange for the remaining 20 lacs rupees?

To this, Sumit’s bank manager suggested that he can make his spouse as joint applicant for the home loan. Sumit’s wife was employed for last 3 years. Her net monthly income was Rupees 60,000. By combining the monthly income of both Sumit and his wife, bank was willing to sanction the loan amount of Rupees 60 Lacs. Finally, Sumit was able to buy his dream home jointly with his wife.

So, what are the benefits of applying for home loan in joint name?

1. As can be seen from Sumit’s case above, applying jointly for home loan increases the amount of loan that bank can sanction for people to buy home.
2. Moreover, banks or HFCs feel comfortable to sanction the loan in joint name because of greater security for the lender in view of the option to take recourse to either of borrowers.
3. Besides improving your loan eligibility and enabling you to get a larger amount of loan, co-borrowers are eligible for deductions under the Income Tax Act. Both the borrowers can claim deduction, to the extent of their share in the loan, under Section 80C of the Income Tax Act 1961 for repayment of loan, subject to the condition that they are joint owners as well.
4. Section 24(b) grants deduction for interest up to Rs 150,000 per year on a loan for acquiring a residential house. This deduction is available individually to both the co-borrowers. To be eligible for the deduction, the home loan needs to be taken in joint names, property be owned and financed jointly in equal shares, with both spouses being joint owners.

All the co-borrowers or joint-borrowers are jointly and severally liable to repay the loan availed from the bank/HFC, subject of course to the terms and conditions stipulated in the loan agreement. Thus, before volunteering to become co-applicant in a loan transaction, it is advisable to properly understand the implications of such decision.

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Must-ask Questions Before You Finalize on a Luxury Apartment

Now, that you have decided to buy a luxury apartment, it’s important to invest your time and carry out the necessary homework around the luxury real-estate market. Firstly, the easiest way to do research is using the internet. There are many real-estate discussion forums and groups in social-networking sites such as Facebook or Quora, where you can post questions related to the luxury home market. All you need is basic networking skills, and you can easily evoke informative answers from “virtual” friends.

Apart from posting online queries, it’s important for you to have in-person interactions with people in real estate. For example, you can set appointments with sales people from various real-estate companies and get a quick view of the prices and deals.

Besides, it’s important to draw impartial advice from people who are experts in the market. In that respect, you may meet real-estate advisers, brokers and agents who are known to enlighten many on the market and share a few tips on finding the best deals in the city.

All the interactions, be they virtual or in person, will help you to avoid apprehensions about the big investments you’re about to make. However, there are ways in which you can prepare yourself and ask better questions to understand the market of luxury apartments.

Before the final plunge, let's quickly run through some common questions that come to everyone's mind…

1. Is the project title clear? 
2. Has the project got the required approval? 
3. What is the total cost of ownership? What is the monthly maintenance cost?
4. Which other costs are included along with the registration fee?  
5. What are the highlights of the project? 
6. How great is the aesthetic value of the building? Is the building design in sync with your concept of a luxury building? 
7. What are the key amenities showcased by the builder? 
8. According to you, what are the most desirable amenities of a luxury apartment?
9. How good are the views from balcony and living room?
10. Are concierge services available? 
11. How far are the conveniences?
12. Is the price affordable for you? 
13. What’s the overall reputation of the builder in terms of deliverability, quality and finish?
14. What’s the actual size of the house? 
15. Is there a model apartment or an occupied flat that you can visit?  
16. What is the compensation offered if the possession gets delayed?
17. Is there an option to customize the interiors when the building is in construction phase?
18. What are the luxury amenities provided by the builder? Are they at par with amenities in luxury projects being built by other builders?
19. What is the overall prospect of the price trends in the given locality?
20. What is the probable return on investment for the given project?
21. If the apartment is already occupied, can you check the opinion of current owners about the property?
22. How is the locality connected to other parts of the city? 
23. Is there easy access to public transport facilities?
24. Apart from the main features, what are subtle aspects of the project which make it unique? For example, the floor-to-ceiling height, common wall sharing, number of apartments in each floor or block, number of elevators in each block, fire safety precautions, etc.

Closing note...

Here is one suggestion to prospective luxury home buyers – don’t believe everything that sales reps say. Try to go beyond their words and the glossy brochures. Carry out a good research on your future home as the pay-out is big and it’s an important decision in your life.

This is a Guest post by Seema Mohta, who has over 7 years of experience within Real Estate Industry. She has worked with Various Real estate companies and has Good knowledge about property trends, Investment, Apartments in Sarjapur

What are the things one should notice before taking possession of the property or new flat in India?

Sumit was finally relieved that he will be getting the possession of his flat in Noida. Sumit had bought this under construction flat in 2009. After many delays due to environmental clearances and slow progress by the developer, the flats were finally ready for possession for flat owners. Sumit and other flat buyers in this group housing project had several rounds of discussions with the builder and environment ministry for speedy delivery of flats. Because on one hand, many of these flat buyers including Sumit were paying monthly rent and on the other hand, EMIs on these flats had started. That was double whammy for Sumit and others.

Now that, flats are ready for possession, what shall Sumit and other home buyers like him verify in order to make sure possession of flats is legal? Before handing over the final payment and taking possession of the property, Sumit and other flat buyers in this group housing project shall ensure that:

1. Property is vacant
2. Title certificate to be handed over by seller to buyer
3. Buildings plans, approved layouts, and other supporting documents (original) to be handed over by seller to buyer
4. In case of new group housing project (as is the case with Sumit), it shall be verified that building has been given the occupancy/completion certificate by the concerned authority
5. Mutation is done to reflect the name of the purchaser

Find below detailed document highlighting what needs to be checked before taking over the possession:

What is Property Tax / House Tax in India?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Municipalities across all cities in India charge a levy from local residents to maintain the city’s infrastructure such as sewerage, park, roads, other civic amenities, lighting, etc. The property tax shall not be confused with income tax payable on income generated from the property. While income generated from the property by renting it out comes under the ambit of income tax authorities and is calculated as per the income tax guidelines, the property tax is a municipal level subject. Income generated from the property is a central subject whereas property tax is a local subject. Property tax is also sometimes referred to as ‘house tax’.

Some municipalities do not charge property tax and instead bill separately for the services rendered to the residents. There are municipal bodies who charge residents for water and drainage facilities, maintenance charges. Moreover, MLA (Member of Legislative Assembly) and MP (Member of Parliament) funds are also utilized for the upkeep of the city.

How is property tax calculated? The tax is computed on the basis of rental income that the property under consideration may generate by way of letting it out. Usually, the property tax or house tax is a small percentage of the yearly rental income that the property can generate if it is rented-out. And it varies from state to state and from city to city. The property tax / house tax in India is to be paid once every year or every 6 months.

Below are the types of properties that are liable to be taxed under property tax / house tax provision in India:

• Residential house (self-occupied or let out)
• Office Building
• Factory Building
• Godowns
• Flats
• Shops

More details about property tax in India:

Property tax or house tax in india from Green Realtech Projects Pvt. Ltd

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Four Financial Issues to Resolve Before You Settle Down

When the time comes to finally settling down, we often get so caught up in all the emotional and operational aspects that we forget to take the practical course of considering the financial aspects, before embarking upon this new phase in our lives.

It thus comes as no surprise that financial incompatibility can often cause situations of conflict in a marriage. This includes factors like budgeting, current debts, and current and proposed investments.

Here are a number of crucial financial issues that one needs to delve into, before settling down –

Review current debts –If you have a loan on a car or an education loan, or a credit card bill, you ought to put a number to the debt in terms of the value of your liabilities. It is also important to factor in how long it is going to take to pay back the amount, given the new expenses that are bound to crop in post-marriage. You should also review your partner’s financial liabilities and make a joint decision on whether to individually clear all debts, or pool in resources. This way, budgeting becomes much easier and the fact that there are debts to pay comes as no surprise or a cause for concern later in the marriage – full disclosure is mandatory.

List out assets and ongoing investments –Once you have identified the financial liabilities in terms of current debt, it’s important to look into current assets, investments and income, so as to be able to set a financial plan in place. While most of your investments till now were defined by your individual goals, marriage entails deciding what goals remain individual to a person and which goals, two individuals can combine and work towards achieving together. Make a list of your current and ongoing investments, approximate returns, stock investments and current assets like jewellery and real estate. Once you do this, you can decide the financial responsibility to be borne for each investment, post marriage.

Also, if need be, you might want to make future investments in your spouse’s name, or change the nominee in current investments, and while listing assets. These are aspects that need to be taken into account before settling down so that there are no conflicts or misunderstandings later on.

Financial planning and budgeting – A critical factor you need to take into consideration when getting married, is that your attitude towards money and those of your future spouse, might be different. You should thus have a discussion with your partner, about their spending habits, goals, and future expectations vis à vis those of your own. What you might consider a frivolous expense, might be a priority spending area, in the eyes of your future spouse.

You should also factor in financial responsibilities like monthly maintenance bills or looking after parents, and future plans like buying a house or having children. At this point, you ought to have your individual as well as joint priorities set, so that you can put a number to your short and long term finances.

An additional area of conflict could be actually spending on the wedding, which you should factor in into the financial-planning process as well.

Defining financial responsibility and demarcation of money – Often, conflicts arise depending on who manages the money, or who’s paying the bills. It thus becomes important to plan whether one or both the individuals have access to the funds, whether there are joint accounts or individual accounts or both, and each person’s role in making investments, bill payments and household expenses.


This is a guest post by Paisa Bazaar

What are the landlord’s rights and what precautions a landlord shall take before renting out a property?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Real estate is a lucrative investment class. Not only it gives you capital appreciation gains but at the same time one can earn rental income from his/her property. Whether the property you own is commercial or residential, one can rent the property to earn stable monthly income. However, as easy as it may sound, there are always issues when it comes to renting out a property. What if the tenant does not pay the rent on time? What if the tenant mishandles the property? What if the tenant doesn't pay the utility bills on time? These are some of the questions a property owner is confronted with and therefore taking precautions at the beginning of renting out a property will make sure that the property is rented out to good quality tenant.

At the same time, a landlord enjoys legal rights as laid down by the Transfer of Property Act, 1882. These are ‘Right to timely accrual of lease amount’, ‘Right to know about the condition his property is in’, ‘Right to know of any changes that the tenant might want to make’, ‘Right to notify the tenant of an intention to increase the rent’, ‘Right to be informed of any disclosures’, ‘Right to get back his property on repossession’, ‘Right to repossess the property complete with all fittings and furnishings’, ‘Right to claim all the charges for supplies’.

Therefore, before one rents out or leases his/her property to a prospective tenant, make sure to go through the following document about ‘Precautions before renting out’ and ‘landlord's rights’.

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Why You Don’t Need to Leave Your Home to Find a New One

House hunting isn’t for the faint of heart.

No matter how structured your city is or well paying your job might be, you might still be short of a decent place to live in. A house hunt takes seemingly countless hours of neighborhood tours and location drive-by to finalize that decision on ideal property. If your weekdays are packed, chances are that you would also have to compromise on your weekends to go property hunting with your broker.

As if putting up with your broker isn’t enough, these incessant trips to different localities will also leave you physically and financially drained. Opting for an online realty search, you get to check out countless listings, be it rental or lease apartments, without even having to step out of your home.

Image: Pixabay

Here’s how taking your house hunt online can take a load off your shoulders.

• Saves Time and Energy 

Visiting each flat for rent personally would take up a lot of your time and energy. Additionally, you’d have to cough up parking and fuel charges if you plan on taking your own vehicle to new localities. Getting stuck in traffic for hours can also leave you frustrated.

When you search for properties online, you save yourself from all these unnecessary hassles. You can simply surf through numerous sites that give you a virtual tour of the property. You can make a list of a couple of properties that you want to check out personally, and pre-book a visit before you zero in on a particular piece of property.

• Eases The Documentation Process

Unlike conventional processes where the broker would be in charge of the situation while you were in the dark, you would take the lead here. You’d be aware of the proper pricing and wouldn’t be taken advantage of. Some of the real estate sites even help you understand the documentation process.

• No Brokerage Fee

When you opt to search for flats without brokers online, you directly interact with the owner and avoid having to go through any intermediate. This helps you in getting to know the owner and learning more about the property first-hand. You also free yourself from paying a brokerage fee and all that unnecessary running around.

• Refines Your Search

One of the best parts of searching for a property online is not having to go through hundreds of random properties to get what you want. Filtering your search according to the locality, specification, amenities, or the budget you are going for will help you streamline your search.

You can get your hands on the best deals when you compare different properties and their rates online. Doing your homework on the current real estate scenario across different neighbourhoods also helps you build confidence in your ultimate decision.  

• 24/7 Availability

Round-the-clock realty portals let you access different properties throughout the day. With just a PC and phone at hand, you can check out properties online without the even needing to get out of bed. You can get all the contacts and listings you need within the comforts of your home.

This means that you don’t have to compromise on your leisure time. Using this method, you can shortlist a few prospects before you shift into a new home in a different city.

You can now find the home of your dreams without giving up on daily activity. Comment below to let us know how online realty portals have helped you find the right place, and/or if you have a better suggestion!


This is a guest post by Sudarshan Purohit

Cyclical nature of commercial real estate

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

This post deals with commercial real estate in India. For the last 2 years, one would have noticed that most real estate developers and private equity funds have focused their energies on development of residential real estate across India.

Why did this happen? Why did real estate developers in last 2 years solely focus on residential real estate? Well, the answer lies in global economic slowdown. Due to global economic slowdown, companies started to lay off employees and there was freeze on investment in new projects. And all of this resulted in lack of demand for commercial office space by companies. Due to lack of demand of office space, developers ignored the commercial real estate and that has resulted in tight supply of office space.

And now that, economy is starting to show signs of recovery, there is again demand for office space and therefore it is pushing up the prices of commercial real estate. So, the situation now is – demand is increasing but supply is tight. And in this condition, rentals are bound to go up.

Why does this happen? Why do we sometimes see oversupply of commercial real estate and sometimes tight supply? It is because of the cyclical nature of the real estate industry. Some underlying facts regarding the commercial real estate are:

1. It is a very large market and it is highly competitive
2. Ownership of commercial real estate is highly fragmented across the country

Why does commercial real estate development follow a cyclical pattern? During the boom time, when local real estate developers and investors sense that vacancy rates are declining and rents are rising, they believe more development may be feasible. Consequently, developers begin to analyze markets to determine if additional space, if developed, can be leased profitably. Because many competing developers may sense this opportunity simultaneously, they may all begin to develop at once in order to satisfy the demand. Even though there may be a definite need for additional space, the potential for over-development will exist as each developer rushes to deliver additional space to the market before competitors. There is no way to determine exactly how much space should be developed because the depth and extent of demand are difficult to predict. As a result, commercial real estate is sometimes said to be prone to periodic cycles of over-development.

One would have seen during the 2004-2008 boom time in India, when plethora of shopping malls came up in Mumbai, Delhi NCR, Bangalore, Chennai, and other economic centers in India. Because there was demand for retail space, developers jumped up and created an oversupply of malls across India. The important point to notice is that it is very difficult to predict the exact demand and therefore oversupply will happen in commercial real estate.

On the other hand, when economy is going down and growth is shrinking, developers may ignore the development of commercial real estate because of lack of demand from companies. However, as soon as, economy picks up, the tight supply of commercial real estate again pushes up the rentals and vacancy rates starts to fall.

And the cycle continues like this. There will be periods of oversupply and there will be periods of tight supply.

Let’s analyze this diagram above.

1. When economy is in recovery phase, the demand for commercial real estate increases which reduces the vacancy rates and rentals go up. 
2. Seeing the fall in vacancy rates and improving rentals, developers start developing the additional space. Rentals start to cool off because there is supply of additional space. 
3. However, because it is difficult to predict the actual demand, the oversupply of space is seen in the market. Rentals fall.
4. Increasing vacancy rates and falling rentals drive away the developers from developing the commercial real estate and supply is tightened.

One full cycle takes 5-6 years and all the 4 steps mentioned above repeat themselves.

With this in mind, can you time the market as far as investment is concerned??

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Growth of Housing Finance in India

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

In order to provide housing for all by 2022, the government needs to develop the housing finance sector. In its current avatar, the housing finance sector is able to provide loans to borrowers working in the formal sector with proof of income and banking transactions. However, about 99% of the total shortage of housing in urban areas belongs to the Economic Weaker Section and Low Income Groups of the society.  (Overall housing shortage in urban areas - 18.78 million units till 2012).

Over a period of time, housing finance has evolved considerably. In the initial days, people either self funded their housing needs or participated in schemes launched by government owned institutions in the real estate sector like state housing boards and development authorities. Launch of HUDCO in 1970 represented a paradigm shift and for the first time housing finance was formalized. However, private sector participation in housing finance took shape only when HDFC was setup in 1977. In the late 1990s, commercial banks also got involved in housing finance.

On August 28, 2014, Prime minister launched the ‘Pradhan Mantri Jan Dhan Yojna’. The objective of the program is financial inclusion for all. Can this program cater to the housing finance needs of the BPL or marginalized Population in future? There is possibility of directly transferring interest subsidies on housing loans to the EWS and LIG categories.

In this section, we highlight the various steps taken by the successive governments to facilitate the need for housing and housing finance in India.

Growth of housing finance in india from Green Realtech Projects Pvt. Ltd

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How to check for legalities, cost, penalty clauses, and available financing options for a real estate project in India?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Are you looking to buy property in India? Have you decided on the location, or choice of builder? Are you satisfied with your research of similar offerings available in the market? If you answered ‘YES’ to these questions, then there is all the likelihood that you may be about to make the booking amount to the real estate developer. But, hang on; despite making all the efforts to research for the right property, right builder, location, and budget, there is still a possibility of things going wrong. What else can you do to minimize such risks? Well, conduct a thorough due-diligence including verifying the legalities of the residential project of your choice, It’s pricing, penalty clauses to the developer, and available financing options for the project.

It’s not that difficult a task, just be more open and ask a set of questions from the developer, and bank. This is to make sure all bases are covered in case something goes wrong with the project. We have put together a detailed list of “TO DO” things for you to verify before you pay the booking amount for a property of your choice.

Here it is:

Process to check for legalities, costs, penalty clauses, and financing of a real estate project in india from Green Realtech Projects Pvt. Ltd

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How to Select a Real Estate Agent

Whether you are a property owner who wishes to sell real estate or whether you are a prospective buyer who wants to buy a property, you will need to hire a real estate agent to help you in your endeavor. When it comes to hiring property agents, not all home buyers and sellers are as informed as they should be about these service professionals. The following tips will help you analyze a real estate agent's credentials, his work and success stories so that you can conveniently achieve your goal.

Here are some useful ways by which you can find out more about the agent before you decide to get him on board.

• Get in touch with the agent’s recent clients

Ask the potential agents to bring with them a list of their previous clients along with what they have listed or sold in the past one year. Now before you pick up the phone and start calling up the clients, ask your agent if you should expect any specific client to be particularly satisfied or particularly upset. You can also ask the other clients about the asking price and sale price. If you happen to be the seller, find out if the properties sold by this agent are similar to yours in terms of price, amenities and features. One should hire an agent who has a specialization in the type of property you are looking for or wish to offload. You may also ask the clients as to how long their property been on the market?

• Check the license

Real estate dealers must hold a license that is authorized by a board of a particular state. You should check with your state's regulatory body to find out if the agent is licensed and whether there has been any sort of complaint or disciplinary action taken against him. You may be able to find information related to certain states on databases available online, which the consumers can access.

• Opt for the best

Check out the peer-given awards held by the agents. Look for felicitations that actually mean something, for instance, ‘Realtor of the Year’ award conferred by the state or an association of realtors. Real estate agents are best judged by contemporaries and peers and if an agent has been honored by his allies then that is a huge endorsement.

• Look for the right credentials

Just like doctors specialize and have a niche, real estate agents also excel in a niche. Even professionals working in the general sphere will seek special training in a particular area. So make sure you go through the name and look for any indication that the agent has made extra effort and taken specialized training in a specific sub-domain of property sales. Here is what the designations imply –

1. Accredited Buyer's Representative or ABR – The agent has added education in representing shoppers in a transaction.
2. Certified Residential Specialist or CRS – This implies that the person holds extra training in managing residential real estate.
3. Seniors Real Estate Specialist or SRES – This means that the agent has completed training for helping both sellers and buyers who are over 50 years of age.

• Find out how much experience the agent holds

You can find out facts like how long a particular agent has been dealing in real estate. Such information can be obtained from the state licensing authority. Or you may simply inquire the details from the agent himself. If the agent has been out of business for over five years, they could now be learning on you which is definitely not good. You should always hire a professional who has been actively engaged in a specific sub-domain and price category. You should gauge the magnitude of knowledge of through these two parameters and check the agent’s market presence.

• Check the current listings

Go through the agent's listings shown online. Check out the agent’s official website or other portals with Multiple Listing Service as a searchable online database. Nowadays, most buyers begin their search over the Internet. Thus, you should hire an agent who uses the web effectively. Presentation is everything and so the agent must be able to show his work through pictures of properties and establish credibility through listings. 

Your responsibility is to see how close the listings come to the type of property you wish to sell or buy. You should also check whether the agent operates in the area where you would like to invest and whether he has dealt with homes in the same price range. The person must be able to have sufficient listings to portray a steady business. However, the list should not be extremely long either because then you will just be a mere number in it. 

You can also assess the agent’s proficiency by mentioning about a recent deal in the area. If he knows about it and can give some details, this means that he knows his job and you can hire him immediately.

Lastly, don't forget to check the various fees charged by the real estate agent. And compare these fees with other real estate agents in the locality.

This is a guest post by Devika Arora who is a professional writer dedicated to following the current real estate trends and writing guest posts and blog posts for the benefit of potential home buyers and investors. The above article talks about how to choose a property agent.

5 Investment Tips for Commercial Real Estate

An investment in commercial real estate is a great way of increasing your market worth. Also, by acquiring the asset you add a steady source of earnings to your portfolio. Commercial property that is strategically located can appreciate dramatically over a period of time, while rented commercial properties can procure a regular cash flow for other financial pursuits like investment or for comfortable retirement. The following are five useful tips that will help you while purchasing a commercial property.

• Learn from experiences 

It is always good to go with your instincts. Make use of personal knowledge as the best ideas for investment come from the investor's prior investment experiences and know-how. You should search for real estate in an area located close to your home or some place that is known to you. Investing in familiar markets is always a safer option and you can trust your instincts about what to buy where. Start going through blueprints and get a potential property evaluated. Remember to park your hard-earned money in a well-established locality, rather than an upcoming one even though it would cost more. It is going to be a more profitable investment eventually.

• Wait for the right opportunity 

If you have just seen the property once and have decided to seal the deal, probably you are rushing in a bit too soon. Do not make such a blunder just because you have the purchasing power or like the look of the place. That does not mean the property is ready to be acquired. You should be comfortable with the area and the property. Visit the real estate during all times of the day to see the amount of lighting and the noise in the vicinity. Recce of the real estate may probably even bring out a few flaws in the property that can later be used to negotiate the price.

• Build a real estate circle

An investor seeking to buy a commercial property cannot strike the best deal without a few suggestions and strategies from friends or experts from the real estate network. If you have a business associate from the legal, banking, contracting or property sales profession whose opinion you can trust, you should probably get some professional advice before taking the plunge. The person may also help you find a better deal.

• Plan for both short and long term prospects

As an investor of commercial property, you should be able to gauge the immediate outcome from your investment, while also understanding its long term effects. Cities and their suburbs consist of several run down properties that were once buzzing. Draw your plans and cross-check what you want with what is available. Sometimes, changes in infrastructure, transportation routes and arrival of big organizations in the vicinity can instantly boost the worth of real estate. If something like that is on the cards for the property you are considering, you may be in for success in the near future.

• Diversify your portfolio

Do not risk your money by parking all your funds at one place. You may be taking a huge risk by putting all your investment into a single commercial property. While buying commercial real estate and renting it out will ensure decent cash flow at a later stage, a market slowdown during retirement would be ruinous. Commercial property must not be the only one holding for an investor. To avoid getting stuck with a fruitless investment, it is advisable that you diversify by purchasing residential real estate or stock. If you are only inclined towards venturing into the realty sector, you can branch out by acquiring space in retail or office buildings, apartment buildings, condominiums, studio flats or by buying raw land.


This is a guest post by Devika Arora. The above piece of work talks about commercial properties in India.

The two options for the soon-to-be landlord

Around the globe there are just two options for everyone looking for the ideal tenant match for their house: One is easy but expensive and another is comparatively difficult but cost effective and fully autonomous.The easy but expensive one is where you appoint a property management service to find and then manage the tenant and rent respectively in return of which they charge an amount. The second and only one left now is where you do all the hard work in finding a tenant and manage them in your space. While the level of guarantee as to the right tenant is less in either case but the moment you take things in your control, things become a hell lot easier both on your pocket and also provide peace of mind.

The takers for both these options are many but let us look at both the options for the first clueless timers’ sake.

For those comfortable with property management service

The choice to go for property management services is not bad, it not only saves time and effort in finding the ideal tenant but also do a clear background check to ensure that the tenants are genuine. If you are planning to opt for this mode, there are just two things for you to consider: where to find the right service provider and being comfortable with the expenses that you will have to incur.

• Where to find the right property management service provider?

Depending on where your property is, you can either go for the traditional word of mouth medium or use reliable real estate portals available on the internet. The latter is much easier for all you have to do is put in your location and search, for example, if your property is in Bangalore, just put in ‘property dealers in Bangalore’ and you will get a number of results on time.

• Be comfortable with the expenses

In order to be comfortable with the expense, you will first need to get an idea of the exact amount. Confirm and research the going service rate in the market and also ask your provider if the cost of managing the property is recurring or one time. Doing this will prepare you for the coming expenses.

 

For the 'do it yourself' counterparts

Doing all the tasks on your own definitely makes you a Brave-heart. Although it may look impossible, but it takes less time to get it

• Advertise your house

Begin online. For nominal fees and sometimes even free, you can now advertise your property on renowned websites. Like the last Bangalore example, what you can do is post a ‘Flat for rent in Bangalore’ ad that will eventually take the prospects to the hyperlinked image. For those who want a more advanced result for less money, they should try YouTube or Vine. Upload a simulated tour of the property, then share the links on different classified websites such as Craigslist, also add them in your various social media platforms. After listing your property, do not forget to put in the necessary "For Rent" signage in front yard.

• Tidy it up

Strangely, some landlords do not even bother to tidy up their houses and apartments before putting it up for rent. Normally, the nicer and cleaner your house is at times when the prospect comes,the nicer it looks when they both stay and leave.

• Repair structural shortcomings

Replacing the busted appliances, chucking out left-behind scrap, pests and termites spray and by simply adding new paint coat will take you far in attracting the ideal renter. Also the probability of getting a higher charge increases, big time.

• A ready rental policy

Have a document that clearly specifies the various lease’s TnCs, such as if pets are allowed, if you need security deposit and/or expect the tenants to bear their renters insurance. Make sure you have it ready even before you start shortlisting tenants.


We all know how difficult it can be to find the right tenant for your property. There is no right or wrong option here, everything depends on the efforts you can take and the money you have. Now that you know what it takes to go in either of them, make a sound decision.



This is a guest post by Tripti Rai. She writes about real estate sector, she keeps her readers informed about latest developments in real time through her writing.

Tips for landowners before they enter into a joint venture agreement with real estate developers

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Recently, our team was interacting with some of the landowners who have entered into a joint venture agreement with real estate developers in Delhi NCR region. Now, believe it or not, most of these landowners are inheritors of ancestral property and have no clue about the legalities of a joint venture. They go as per the words of their confidants and sometimes find themselves into trouble. Take this, a landowner who entered into a joint venture agreement with a real estate developer in 2006 still finds that his land has been locked by the developer and there are no signs of the proposed group housing project taking off. What can you as the owner of land do before entering into a joint venture with a property developer?

1. First of all, what is a joint venture between a landowner and a real estate developer?
Joint ventures are formed by at least two parties with the objective of achieving a specific investment return. Unlike many other business agreements, when the objective is achieved, the joint venture is usually terminated. Following are the attributes of a joint venture.

• Risk sharing: A single investor may be unwilling to undertake a real estate venture because of its size, location, capital requirements, and/or duration. However, by sharing the risk, two or more parties may be willing to undertake the venture.
• Combining expertise with capital: Joint ventures are frequently formed as a way to pool equity capital from one or more sources, as well as a means of bringing parties with different expertise to the venture. A joint venture could also involve purchasing existing properties and operating them. In this case, one of the parties may be responsible for acquisition, leasing, and management, and others may provide capital.
• Speculative objectives

2. Organizational forms

Participants in joint ventures may include any combination of individual investors, partnerships, corporations, or trusts. However, a joint venture in and of itself is not a legal form of organization. In order to specify capital contributions, rights, duties, profit sharing, and the like, a joint venture agreement or a business entity must be created. The choice of organizational form used to accommodate those various groups of investors could be a partnership, corporation, Pvt. Ltd, or trust. Partnerships are frequently the vehicle of choice in real estate joint venture.

3. Profit sharing

Because the parties to a joint venture may contribute different things, and possibly in different proportions, a partnership must be structured such that it provides economic incentives for all parties. Differences in tax status of investors also may affect the way partnerships are structured.

A joint venture can take on a number of different partnership forms. The most common is the limited partnership. As is the case with all partnerships, there must be at least one general partner and any number of limited partners. Generally, in real estate, limited partners are the investors that provide most of the equity capital, while general partners are usually responsible for managing the partnership assets and may contribute a relatively small portion of the required equity capital.

4. Following factors are considered by potential investors for structuring a joint venture.

• How much initial capital will the parties contribute and how will the parties contribute additional capital if needed in the future?
• How will the parties share in the annual cash flows to be produced from operating the property?
• How will the parties share in the cash flow received from sale of the property?
• Will some of the parties receive a preferred return? Will the preferred return be paid from annual cash flows and/or from sale?
• Will taxable income (or losses) and capital gain (or loss) be shared in the same proportion that operating cash flow to be distributed?
• Who will have control over the operation of the property and decisions involving capital improvements, approving leases to tenants, financing and possibly refinancing the property, and when to sell the property?

5. Points you as the owner of the land must keep in mind:

• Check the credentials of the developer. His past record and success in achieving targets.
• Before entering into a joint venture agreement with a builder, register your company and transfer the land on the book of this new entity. You can hold 100% of shares of this new entity or shares can be held by various promoters depending on their claim in the land. The new entity formed should ideally be registered as private limited company under the company’s law act of India.
• Now, enter a joint venture agreement with a builder’s company. Therefore, the agreement is between two companies. One providing land for the development of the project and other providing capital and expertise to develop the project.
• How do you decide on profit sharing? Well, we have defined it above. However, Recent trends in India indicates a 1/3rd – 2/3rd rule. 1/3rd of the project outflows going to the landowner and 2/3rd of the project outflows going to the real estate developer.
• As a landowner, make sure that the number of housing units or the developed area of the project is assigned to you and is clearly mentioned in the joint venture agreement. For example, in case of housing project, you should have the housing unit number, size, and floor in the joint venture agreement.
• As an example, a landowner enters into a joint venture agreement with a ABC real estate developer Pvt. Ltd. The plot of land measures 20 acres and about 600 housing units would be developed. As a thumb of rule, 200 units should be assigned to landowner and remaining 400 to the builder. For a landowner, this kind of agreement is safe and can result better returns for his/her land as opposed to the agreement wherein builder pays the 1/3rd of the cash inflows to the landowner on the sale of housing units.
• Hire a professional legal company with expertise in real estate joint agreements, and due-diligence.

Find the sample Joint Venture agreement between a landowner and the real estate developer.

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Indians Buying Property Overseas

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Post 2008 financial crisis and sovereign debt problems in various European countries, the property prices fell down. Speaking to one person familiar with Spanish market, one get the sense that there is huge property overhang in the country and therefore government has relaxed norms for foreign nationals to buy property. Similarly, in Switzerland, one can easily buy a holiday home in upcoming projects in Andermatt or in other picturesque locations. Fall in property prices in US, EU, and Dubai make these places attractive for NRIs as well as resident Indians.

There could be various reasons for buying property in these countries from settling there later in life, or sending kids for education, pure investment, holiday destination, etc. "Dubai, London, New York and Singapore are the most popular property destinations for Indians. In 2013, Indians topped the list of foreign nationals who invested in Dubai Property market.

However, buying property overseas has its fair share of glitches and therefore one should adhere to following tips and RBI guidelines in order to make sure that process is legal and hassle free.

Indians buying property abroad from Green Realtech Projects Pvt. Ltd

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What is the process of securing a home loan in India? What are the things I should check before opting for a home loan provider? And what are the various kinds of home loan schemes available in the Indian market?

Author: Sachin Gupta | Find me on Twitter  Follow @sach_gupta

In the previous post, we discussed about the dilemma of renting versus owning. However, after an in depth analysis of various elements described in the post, Sumit Sharma decided to go ahead with the purchase of the apartment. Now, the next step for him was to arrange for the mortgage loan to finance his purchase. Without a doubt, there are numerous lenders (mostly banks) in the market willing to lend money at competitive prices. Which lender (bank) to choose? What type of home loan to avail? And what are the things to remember during the loan process? These are some of the serious questions Sumit Sharma was confronted with. Lets Break It Down to smaller elements (L BID) and hope Sumit Sharma makes an informed decision based on the understanding of following elements:

Things to check during a mortgage loan process:
Interest Rates:
As per the RBI guidelines, home loan interest rates are linked to bank's base rate. Base rate tends to move up and down depending upon the interest rate movement in the economy. As a buyer, check the interest rates from various banks that are offering the similar mortgage loans. Usually premium charged by banks can be negotiated with the chosen bank; however, it depends on your credit history. Since, banks are in the business of lending money, therefore being a customer one must exercise the customer power and negotiate a best possible interest rate with the bank.

Processing fee:
Normally processing fees include statutory costs, third party charges, and additional finance charges. Because of problems involving loan fees and the potential abuse by some lenders of charging high fees to borrowers, a legislation requires lenders to show annual percentage rate (APR) being charged on the loan to the borrower. For example, if the fixed interest rate charged by a bank is 12% and processing fee is 2%, then normally APR would be 12.25%. Processing fee charges can also be negotiated with the bank.

Prepayment penalties:
Many borrowers mistakenly take for granted that a loan can be prepaid in part or in full anytime before the maturity date. This is not the case; if the mortgage note is silent on this matter, the borrower may have to negotiate the privilege of early repayment with the lender. However, many mortgages provide explicitly that the borrower can pay a prepayment penalty should the borrower desire to prepay the loan. Prepayment penalties are not included in APR.

Types of mortgage loan:
Fixed Rate Mortgages - Constant Amortization Mortgage Loan (CAM):
In this type of loan, the interest rate remains fixed during the tenure of the loan. Here, constant principal amount is amortized (reduced) in each installment. The user has to pay the sum of constant principal amount and interest that is charged on the principal. For example, on a loan of say 12 lacs rupees for 10 years at an interest rate of 12% per year, the constant principal amount that will be reduced every month is 12000 rupees (12lacs/120). In addition, for the first month, interest will be 12000 rupees. However, the interest charge will keep on reducing as the principal is amortized every month by constant amount. Therefore, in constant amortized mortgage loan (CAM), the monthly installment keeps on reducing.

Fixed Rate Mortgages - Constant Payment Mortgage Loan (CPM):
In this type of loan, the interest rate remains fixed during the tenure of loan. In this type of loan, monthly installments are constant. Here, principal amount reduced (amortized) in the starting months is less as compared to the principal amount in later months. However, the interest payment is more during the starting months and then reduces in later months. For example, on a loan of say 12 lacs rupees for 10 years at an interest rate of 12% per year, the monthly constant installment will be 17216.51 rupees.

Fixed Rate Mortgages – Graduated Payment Mortgages (GPM):
Some individuals have less income in starting years of their careers; those individuals are not considered for loan. To overcome this effect, lenders have designed a mortgage loan that retains a fixed rate of interest but includes a series of stepped up payments that are lower in earlier years, thereby better matching borrower’s incomes, and then rising over time. These loans are known as graduated payment mortgages (GPMs)

Adjustable (Floating) Rate Mortgages (ARM):
These mortgages provide an alternative method of financing through which lenders and borrowers share the risk of interest rate changes. In this type of loan, since interest rates are adjustable, they are indexed to say wholesale price index (WPI) or other market interest rates. For example, someone who applied for ARM indexed to WPI in year 1 at 5% interest rate might be paying 12% interest rate in 2nd year because inflation has increased by 7%.

Hybrid Adjustable Rate Mortgages:
This is the most common type of mortgage loan used these days. Hybrid ARMs combines elements of fixed rate mortgages for periods of 3, 5, or 7 years, after which interest rates are reset and the loan becomes an ARM. Subsequent payments are usually reset every year for the remaining maturity period. For example, a 3/1 hybrid would mean a three year fixed rate after which the interest rate would become adjustable, tied to an index, and would be reset each year thereafter.

So friends, before going to a bank for home loan, take a look at this blog or even take a print because even if one saves or negotiates .25% on interest rates, processing fee, or prepayment penalties, then it’s worth the effort. Don’t overlook that :)

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Understanding interest rates and its impact on home buying decision!

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta
 

Buying a home has always been a cherished dream for an individual. The very thought of staying within the four walls that belong to you is very enthralling. The home that one owns provides not only the physical comfort but also emotional and psychological security which, in turn facilitate peace in life.

The dream of purchasing a home has remained intact; what has changed over the years though is age profile of buyers. Not long ago, purchasing a home would be a reality when a middle class man is on the verge of retirement. His life- long saving could be barely enough to finance the coveted asset. The balance could be pooled in by relatives and friends.  However, the time has changed now. Thanks to the wave of financial reforms and robust banking sector today. A young man out from the college and grabbing a promising job will soon be found to survey the real estate market to book a house.

The relationship between the financial sector and real estate today is complementary in nature even though the banks may be viewed as having upper hand in terms of being fund providers. It would not be an exaggeration to assume that majority of the transactions in the real estate market in India is being financed by bank loans. In such situations where bank loans have gained so much of importance in our lives, it becomes a necessity to understand the nuances attached with them.

Interest Rate:

A home loan seeker is confronted with a myriad of jargon. The most common and yet the most critical among them all is interest rate. Understanding interest rate and impact of its movement on the loan amount is crucial in making an informed decision.

Interest, to put it simply, is a kind of fee charged by lender of funds from the borrower. This fee or the interest may be computed at a “fixed” or “variable/floating” rate. So, if Rahul takes a loan of Rs. One Lac from a bank for period of one year at a rate of interest of 10%, it means he needs to refund Rs.1, 10,000/- at the expiry of one year (Rs. One Lac is the principal amount and Rs.10, 000/- is the interest).

Eligibility to avail home loans:

Banks and Housing Finance Companies are cautious when they lend. There are certain prudential norms which they follow while sanctioning a home loan. One of them is that the bank would restrict its exposure up to 80% of the value of the asset in respect of residential house property subject to the eligibility of the buyer. How the eligibility is determined and what role level of interest rate plays are interesting aspects to discuss.

In a typical home loan application, a bank would consider the following while determining the maximum amount of loan that can be sanctioned:

1. Gross Salary/month
2. Net Salary/month
3. Value of property 

An example:

Let’s take an illustration. Amit, a young software engineer in his mid twenties wishes to buy a house in Delhi NCR. He zeroes in on a property in Noida. The description of property is as follows:

• Builder: Sky Builder
• Area of Flat: 1000 Sq. Feet
• Rate/Sq. Feet (All inclusive): Rs.5000/-
• Payment Plan: Construction linked 
• Construction Period: 2 years 

Equipped with such information, the bank would put a threshold limit of Rs.40 Lac (Rs.50 Lac X 80%) on the loan amount that can be sanctioned against the property. Now it needs to evaluate eligibility of Amit based on his income profile. Banks make such evaluation on the basis of their own criteria which may differ from bank to bank. However, as a general rule, banks consider around 40-45% of net salary of an individual to be needed to service EMI.

The following example shows eligibility of Amit in three interest rates scenarios.  It has been assumed that in all three situations, Amit’s salary remains same and there is no change in any variable except in interest rate. In situation-I, where the interest rate is 10.50%p.a., Amit’s loan eligibility works out to be Rs.40 Lac. This is a perfect situation for him as he needs Rs.40 lac only and the maximum amount that the bank is ready to disburse is also Rs.40 lac. However, the situation is not so comfortable when there is a spike in the interest rate from 10.50% to 11.50% p.a. (situation-III).  Keeping the EMI amount almost at same level, there is a decline in the loan eligibility amount to the extent of Rs.2.55 Lac. The reason is simple. Given the hike in the interest rates and no corresponding increase in the income level of the individual, the banks would like to maintain their risk exposure at existing level. Hence, there is a reduction in the loan amount. A decline in the interest rates would be a spurt for the banks to increase the loan eligibility. This however is subject to overall ceiling with respect to asset value.

EMI:

Interest rate movements also cause substantial variability in the EMI that we pay. The table below is quite self-explanatory:

Hope this time when news channels flash the story of how RBI Governor is contemplating to tinker with the interest rates in its monetary policy review, you would not be so clueless about its probable impact on your home loan.  So watch out for it with the analyst in you.

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Tips To Make Your House Look Spacious

Some things cannot be easily changed, one of them being your home, of course most of us do not have the luxury of changing residences periodically at the whims and fancy of our bored existence, but there are quite a few interesting ways, you can employ to give your home a complete makeover in surprisingly low budget…

Let us have detailed look at some of the pointers, which you can use for the purpose:

• The clutter has to go – 

The first and foremost step in this regard is to clear out all the mess and clutter which takes up most of the extra space in your house. There is in fact a very logically approach to this activity. It is said that if you have not used an item in your home for over six months, then in all probability, you’ll never use it in your life (excluding winter wears). Hence, take a good look around and identify such items…the kitchen is a good place to start…keep your OLX app handy…The next important area to de-clutter is the entry hallway of your house. If you enter into a clean and open area every day, you will automatically feel that your house is more spacious.

• Make do without too many fancy items – 

This is another thing, which needs to be carefully edited. Get rid of all those fancy items, which are not really necessary for your house either by gifting, selling or by just by throwing away. You will be surprised at how much space opens up after you are done gifting!

• Redesign your furniture – 

Another great step towards making space in your house is to change the shape and size of your furniture. For instance, you can replace your shoe rack with a hanging shoe organizer, which will not only save a lot of floor space, but will also keep your house cleaner. Another example can be that of a shelving unit, which can be built into a wall or the back of a door.

• Repaint your walls – 

Another trick, which can be used to make your house look bigger, is to lighten the shade of color of the walls of your house. The lighter the color of the walls, the bigger the house would look. Dark paints make rooms look cozy and comfortable, but they also make them look smaller and cramped.

• Decorate the ceiling – 

This is one of the most frequently used tricks to increase the height of the house. If the ceiling of your house is painted or has wallpaper, your house will automatically get more height. So if the height of your house is your main concern, consider this option to be a perfect solution for your problem.

• Re-arrange the furniture – 

Avoid putting the furniture close to the walls, as it makes the place to look cramped and closed. Pull the furniture away from the walls and you will automatically add more space in your house. You can also build your own vertical shelves and make it more fun!

• More vertical furniture – 

Instead of expanding your furniture horizontally, try to expand it vertically. Bunk beds are a good option instead of double beds in your children’s bedroom.

• Stripes go a long way – 

Try to put out rugs and wallpapers, which have stripes on them. This will give you an illusion of more width and height. Hence your house will appear far bigger than it actually is. Arrange the stripes in the direction of the longest length of the room for best results.

• Mirrors, more mirrors – 

As you must have seen in many shops, there are many strategically placed mirrors, which create an illusion that the shop is bigger and more spacious. You can use the same concept for your house as well. Place mirrors in the entryway and room entries to double the width of the room by a large margin.

• No overhead stuff – 

The more things you will hang from the ceiling, the more cluttered that room will look. Avoid hanging lights and decorative items in your house if it is already very cramped up. Instead of hanging a light bulb, try to put on a decorative lampshade instead!

• Uncover the windows – 

Remove those bulky curtains from your windows and bless your house with some sunlight. Leaving the windows uncovered automatically makes the room to look bigger and brighter. It would also have the right energy and create a positive vibe; if the windows are left open and off-course some cool breeze would be good too.

• Remove some doors – 

If this is feasible to you, you can try this unconventional method to literally open up some space. You can remove some doors, which connect rooms together and leave those particular areas open. This will not only increase the size of your house, but would lead to good ventilation too.

• Color code – 

To make things appear more organized and cleaner, one should try to keep them in accordance with their color tones. If you keep all the colors together in one place, separated by even and thin margins, your room will open up by ten folds and also it is a visual treat!

• Large scale flooring – 

The floor pattern, which you choose for your house must have large blocks. The larger the pattern, the more spacious your house will look. Also, try to arrange the floor tiles in a diagonal fashion to give the illusion of more space. Tiling is a crucial and costly step, so try to do this in the beginning itself.

So now that you are well equipped with these easy tricks on how to create more space in your house and make it look bigger, what are you waiting for? Choose your top 5 and start with them right away! These tricks are so simple and cost effective that you will be really happy after you are done revamping your house.After all a bigger place is so much better to live in!


This is a guest post by Anasua Mitra, Associate  Manager - Marketing, Wienerberger India Private Limited

What are the various payment plans currently being offered for real estate residential projects in India?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Booking an apartment with a real estate developer is not easy. While on one hand there is this question of finding the right property developer with sound track record and on another hand there is this nagging question about housing prices and payment plans. In last few years, real estate projects and in particular residential projects have been launched with attractive payment plans in order to attract end-users and investors to book an apartment. The creative and financial engineering skills of real estate developers and banks are showcased with every new type of payment plan.

At the end of the day each payment plan which is designed reflects the existing market sentiment. If market sentiment is good and there is growth in the sector, then existing payment plans can prove to be sufficient. However, in times of bad market sentiments, there is much more pressure on real estate developers and bankers to sit and devise new attractive payment plans. In recent months, some of the new payment plans which have been introduced in the market are 80-20 scheme, rent on home buy, etc.

In this section, we analyze the various payment plans on offer and their implications for customers.

Down payment plan

A typical down payment plan looks like this:

Down Payment Plan [(8 % Rebate on Base Selling Price (BSP)]

• At the time of Registration / Booking - 10% of BSP
• Within 45 Days From date of Registration / Booking - 85% of BSP + Car Parking + DC +Club Membership + PLC (if any)
• On Possession - 5% of BSP + Other Additional Charges etc.

In a typical down payment plan, one can get a discount on market Base Selling Price. The discount offered can be negotiated with the developer and generally ranges between 8-10%. Now, the question to be asked is, why would a developer offer this 8-10% of discount? Well, if a developer borrows money from bank or other financial institutions, then in that case, the developer ends up paying 12-15% yearly interest. And in down payment plan, a customer is willing to pay the entire apartment cost within 2 months at a discount of 10%. It’s a plan which suits the real estate developer most. However, investors with large amount of cash do also take considerable interest in down payment plans. Because where else can they park their unreported income but for real estate.

For end-users, this plan can prove to be risky in case the project is delayed unexpectedly.

Construction linked plan

A typical construction linked plan looks like this:

Construction/Time Linked Installment Plan

• At the time of Registration / Booking* Rs. 3.0 Lac
• On Allotment of Unit / within 45 days of booking* Completion of 15% of BSP
• On Start of excavation / within 90 days of booking* Completion of 25% of BSP
• Completion of basement roof slab / within 120 days of booking* 7 . 5 % o f B S P + 50% of DC
• Completion of 1st Floor roof slab / within 5 months of booking* 7 . 5 % of BSP + 50% of DC
• Completion of 4th Floor roof slab / within 7 months of booking* 7 . 5 % o f BSP + Car Parking
• Completion of 6th Floor roof slab / within 9 months of booking* 7 . 5 % o f BSP + PLC
• Completion of 8th Floor roof slab / within 11 months of booking* 7 . 5 % o f BSP
• Completion of 10th Floor roof slab / within 13 months of booking* 7 . 5 % o f BSP
• Completion of 12th Floor roof slab / within 15 months of booking* 5 % o f B SP
• Completion of 14th Floor roof slab / within 17 months of booking* 5 % o f B SP
• Completion of Top Floor roof slab / within 18 months of booking* 5 % o f BSP
• On Completion of Brick Work in Apartment 5 % o f BSP
• On Completion of Plaster Work 5 % o f B SP
• On Possession 5 % o f B S P + IFMS + Club Membership + Other Charges

In a typical construction linked payment plan, one pays a booking amount of 3 to 5 lacs and the apartment is booked. Thereafter, installments are paid as per the construction of the project. This plan safeguards buyer’s interest in case the project is delayed since installments are paid as per the construction schedule of the project. Most banks also offer home loan to individual home buyers on this payment plan in order to make sure that funds which are provided to developer as part of installment actually go in the development of the project. This is by far the most prevalent plan in the industry today.

Flexi payment plan

A typical flexi payment plan looks like this:

• At the time of Registration / Booking 10% of BSP
• Within 30 Days From date of Registration / Booking - 30% of BSP + Car Parking + DC +Club Membership + PLC (if any)
• Within 90 days from date of registration/booking – 30% of BSP
• Within 180 days from date of registration/booking – 25% of BSP
• On Possession - 5% of BSP + Other Additional Charges etc.

Just like down payment plan, flexi plan offers discount on base selling price usually in the range of 5%. As the name suggests, this plan provides flexibility to investor in paying the apartment cost over a period of time. Again, it is not suited to end-users who normally opt for construction linked plan. Most banks also do not offer loan on flexi payment plan.

20-80 payment plans

20-80 schemes are a new phenomenon. What it means is that one can pay 20% now and remaining 80% at the time of possession. However, the price per square feet for 20-80 schemes is much higher than the usual construction linked plan. As a buyer, it might look attractive on the surface, but one must be careful in understanding the price differential between a 20-80 scheme and a construction linked plan scheme. 

Even though, in 20-80 schemes, the pressure is on the developer to complete the project on time but there is all the likelihood that prices for 20-80 schemes will be much higher. The hidden point to understand is who is the paying the 80% of apartment cost during the construction period? It will certainly not be a bank, or the developer. Ultimately, the amount is passed on to the customer in the form of higher base selling price. Therefore, before, one jumps on to these schemes, check the price differential.

According to some media reports, Reserve Bank of India (RBI) has banned the 20-80 schemes.

Rent on home buy plan

Recently, some developers have launched rent on home buy. What it means is that if you book an apartment in the under-construction project with a particular developer, then developer agrees to pay the rent for your current accommodation if the project is delayed and in some cases the developer agrees to pay the rent for the entire construction period of the project. The idea is to ease the financial crunch a buyer faces when he/she pays equated monthly installments (EMIs) and rent during the period of construction.

Experts believe that such assurances come with a cost, but the builder is unlikely to disclose two sets of rate cards to potential customers — one that includes the rental offer and the other without it. Just like the 20-80 schemes, one must be careful in opting for these schemes as the pricing will be much higher than the usual construction linked plan.

At the same time, direct discount is far better as it is simpler to understand. Then, there is the time value of money you are committing over the period of construction.

Which payment plan one needs to choose?

For an investor with huge cash pile, it may make sense to go for down payment or flexi payment plans. But for, end-users, it is always advisable to stick to construction linked plans because of transparency and ease in availing home loans.

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