Monday, August 19, 2019

What impact does interest rate have on the state of real estate sector in India?

Author: Sachin Gupta | Find me on Twitter

18th December 2013 was keenly watched by the markets and industries alike, particularly the real estate sector in India. RBI governor was to announce the monetary policy and interest rates hike was expected because of the stubbornly high inflation prevailing in the economy. However, to the surprise of all and sundry, Raghuram Rajan refrained from rate hike and brought smiles to the market and industry.

Commenting on the policy, Real estate major DLF Group Executive Director Rajeev Talwar said: "It's a welcome step. This is the first sign of recovery. If government can release food stocks to contain food-based inflation then possibly in coming time RBI may be able to take more steps for recovery of the economy. RBI governor has taken a bold step by keeping the rates flat." Most other real estate developers and consultants welcomed the step. So, what kind of impact can interest rate have on property sector in India, let’s explore.

  • Firstly, what are interest rates?

Consider an investment portfolio having investments in all productive activities in the economy based on their respective share of the economy to the total value of all productive activity in the economy, the rate of current earnings on such a portfolio would be equivalent to the real rate of interest. Such a rate would also be the rate required by economic units to save rather than consume from current income. This is also the minimum rate of interest that any investor, be it in realty sector, would least likely expect from their investments. Therefore, when RBI announces that Repo rate would stay unchanged at 7.75%, it was welcomed by the industry.

  • Relation to inflation:

In addition to the real rate of interest, a concern that all investors have when making investment decisions is how inflation will affect investment returns. Inflation in India is particularly high; however, of all the commodities which form the basis of calculating inflation, the food inflation has been highest. And RBI was worried about curbing the inflation which eats into returns on investments or future incomes. However, RBI’s view is that most of the concern for inflation is the supply side and having had excellent monsoon would probably bring the inflation down due to bumper crops. Therefore, Rajan refrained from raising interest rates.

  • Effect of interest rate on real estate supply:

Real estate supply is the addition of new stock of housing, office spaces, retail spaces, etc. to the market. Now, when a real estate developer decides to bring that supply to the market, he/she has to justify at-least the real rate of return on his/her investment. If the returns are low, investors would rather save their money than invest in realty projects. Therefore, when interest rates are low, it encourages builders to invest in real estate projects rather than save their money. At the same time, they can borrow funds from the market at lower rates and thereby cost of building real estate projects come down. Additionally, the debt servicing for the leading real estate developers come down and there is renewed excitement for all the real estate players. Financing real estate projects involves borrowing on a long-term or short-term basis. Because large amounts are usually borrowed for property development, financing costs are significant in amount and weigh heavily in the decision to develop real estate projects. Therefore, the lower the financing costs, the better it is for builders to bring new supply to the market.

  • Effect of interest rate on real estate demand:

The demand for housing or commercial property is generally determined by the population growth, household income, household preferences for other goods and investments, and the interest rate that must be paid to finance the loan. Now, an individual who is looking to invest in a property will certainly evaluate his/her financing costs and higher the financing costs, the less likely, that individual would be to refrain from investing in property. For example, an individual buys an apartment at Rs. 30 Lacs. He procures a loan of Rs. 20 Lacs for 20 years at 11%. The EMI or monthly payment will be Rs. 20643.77. However, as we noticed today, State Bank of India has recently reduced their lending rates. And even a drop of 50 basis points or 0.5% would bring down the EMIs from Rs. 20643.77 to Rs. 19967.60. Thereby, cost of financing goes down by Rs. 676.17 a month or Rs. 8114.04 a year. Hence, bringing interest rates down encourages buyers to invest in property.

  • Desired Scenario:

Having the desired equilibrium between inflation and interest rates will lead to the growth of realty sector where both suppliers and consumers of real estate feel encouraged in participating.  And this will eventually lead to the overall growth of the Indian economy.

Have any Questions?

Tuesday, August 13, 2019

Looking to invest in real estate? Here are a few guidelines you must follow

Investing in the realty sector can be a good decision if done wisely. Most people channel all their savings and take out loans to purchase a property hoping that it will give them a good return on investment. Hence, this has to be done cautiously to make sure that the money invested bears fruit.

  • Set a budget:
Budget is the most important thing you should take into consideration before buying a property. Set a budget and make sure your finances are in order. For many, Paying EMI is not an easy option. Paying EMI empties out their pocket by the end of the month. It would be wise to ensure that the EMI does not exceed 40% of your monthly income. Make sure that you don’t overestimate your financial capabilities.

  • Research:
Once your finances are in order, the next important thing for you to do is research. You should work with the localities which match your requirement. Some of the criteria which one should consider while looking for a property are:
  1. Locality
  2. Accessibility and connectivity
  3. Presence of social and physical infrastructure
  4. Proposed infrastructure developments
  5. Safety and security
  6. Livability
It is always advisable not to invest in localities which lack basic amenities such as road, water supply and drainage system. Never get carried away with the promises of upcoming infrastructural developments and do not invest your money on those promises. Infrastructure takes time to be built and a few even fail to take off.

For guidance, you can visit as this site provides expert analysis of localities through the micro market research reports and the locality pages.

  • Check the builder’s credibility:
The real estate market is vast and the industry has both reliable and unreliable builders. Do not blindly invest your hard earned money after seeing a too good to be true offer from a small time builder. Make sure you check on the trustworthiness of the builder by visiting their previous projects. This will give you a clear idea about the credibility of the builder and then you can decide whether to invest your money or not.

  • Verify legal documents:
For any property related transactions, title deeds play a crucial role. Check whether the seller has a strong title deed, if not, do not purchase the property. Here are some legal aspects to keep in mind while purchasing a property:
  1. The title deed is an important document without which you will have legal troubles in the future.
  2. Make sure you get the original title deed verified by an attorney before buying the property.
  3. Before acquiring the property, confirm that all the clearances for the property are in place.
  4. If you are planning to buy an under-construction property, do not forget to get the allotment letter and the development agreement from the builder.
  5. The allotment letter has details about the project such as the price of the property, floor plan, delivery date and liability details if there is any delay in delivering the project, whereas the development agreement has the details of the terms and conditions under which the landowner has allowed the builder to use his property.
  6. Make sure that the taxes related to the property are cleared before you buy the asset.
  7. Never hesitate to get an expert’s help if you have doubts.

This is a guest post by Amy Anstey Seelan J

Wednesday, August 7, 2019

DIYs that can increase the value of your home

Every home once in a while has to go through some improvisations to increase the value of the house. It is more so if you are looking to rent or sell your property. Some physical changes and improvements can add to the appeal of your house and make it look more attractive. A fresh coat of paint, some new wood work inclusions etc. can be a good start to home improvisations. But if you are looking to do some value additions without spending much, you can try some of the DIYs listed below.

To make a house look more elegant and bright, light color drapes paired with white upholstery and white based furniture pieces are the key. So you can start off by changing the curtains. De-stain any old wooden pieces and re-stain them according to the color tone of the room. Few other economic changes would be to either steam vacuum the carpets or change over the carpets to lighter shades. Lighter shades of carpet make the house look big and elegant. Symmetrical patterns on the back-splash of the kitchen counter, stairway railing and verandah railing will make the house look organized and high fashioned. Keeping the kitchen counter top clear of unwanted items will make the counter seem big and attractive.

Bedrooms are the biggest appealing points when considering a home. Big beds with neatly laid white and fresh linens are biggest attractions. Symmetrical arrangements of the bed with side tables and other furniture pieces in the room gives the room a sense of space. At the same time, one must make sure that bedrooms are free from Mosquitoes and flies. That can be a real turn off for potential buyers or renters. There are variety of options such as Mosquito Net, Mosquito Killer Machine, Mosquito Repellent that can be used to eliminate mosquitoes from the bedrooms. Similarly white sheer curtains and drapes make the room seem brighter. You can customize the door and cupboard knobs by painting them all in a same tone of metallic shade. These metallic shades make the home appear custom made and add value to the property. Landscaping in the backyard or merely adding some greenery to your terrace garden will show detailed touch in the house. Every buyer or renter want to see a personalized touch in the house they are looking. Creating a specific purpose for each space in the house will show how each space can be efficiently utilized. Even if it is not utilized the same way as yours, it throws opportunities and ideas for much more use to the space.

Use of energy efficient fixtures and appliances adds as a huge advantage when trying to put the house on the market. Energy efficient incandescent light bulbs, power saving smaller appliances will be looked up as a huge saving on a long run. Adding additional storage outside of the house in the garage will also be considered a value addition. Leaving these additional storage half empty will make the storage space seem more and will help the buyer visualize how much the storage space can accommodate. Every home improvement once started must be completed to satisfaction. Refrain from taking bigger home renovation projects if the deadline seems too tight. Or hire a professional Home Renovation company which can provide you end-to-end solutions including modular kitchen, wood work, steel or iron doors, electric & bath fittings, flooring, walls, interiors, and exteriors. Consider the use of the particular update or renovation in the long run and foresee how it will add value to the house before implementing any changes to your home.

This is a guest post by A. Ramya

Wednesday, July 31, 2019

What are your Rights as a Home Buyer?

Are you planning to buy a home of your dreams? Well, buying a home is a bit tedious task. It involves many complex legal processes. Buying a home is perhaps one of your largest financial investments. Isn’t it? Particularly, if you are a first-time home buyer, your mind would be filled with hundreds of doubts and questions.

For instance, if someone is looking for flats in Calicut, he/she would be concerned with his /her rights over the property, terms and conditions offered by the builders, delays if any and other problems. As a home buyer, you might have many questions.

Before diving into what the home buyers’ rights are as per the Government norms, let us first analyse the process of buying a home in India.

  1. First analyse your financial situation and requirements.
  2. Find a property that caters to your specific requirements.
  3. Inspect the property and seek professional help if needed.
  4. Get into an agreement with the seller. Ensure that details like price and also personal details of both buyer and seller are highlighted before signing the same.
  5. Find a reliable lender. It is always recommended that you associate with reliable financial institutions like the SBI while applying for a home loan. Play it safe.
  6. Perform a thorough analysis of your property to avoid any loopholes in the agreement.
  7. At the time of closing, ask seller for all the legal documents associated with your property and get it registered in your name.

These are some of the common steps that one follows while buying a home. Now, let us shift the focus on the rights of a home buyer. As a home buyer, there are several rights granted to you that include mortgage loans, the rate of interest on loan and several others. Awareness of such rights protects you from being duped.

Here are some of the rights that you are entitled to as a home buyer:

Right to obtain information
The home buyers are eligible to know the details of sanctioned layouts and plans of the building. They can also claim for the specifications which are approved by the construction control authority.

Right to know the stages of construction
Under RERA, the home-buyers are entitled to know the stage-wise schedule of the construction of the project. It includes the provision of water, electricity, sanitation and other amenities promised by the builder.

Right to possession of the property
The home-buyer has the right to claim possession of the building, plot or apartment. It is the duty of the builder to provide all the legal documents to the buyer.

Rights to document
It is the duty of the real estate builders to handover all the legal documents related to the property to the home-buyer. Under RERA act, allotted can claim documents and plans of the common areas.

These are some of the rights one should take advantage of as a home buyer. So, if you are looking for your dream home, exercise your rights and make an informed decision. Let me know if you have any doubts or your feedback in the comment section below.

This is a guest post by Sreekanth, who is a digital marketing expert at Webdura Technology. He enjoys experimenting with new techniques in both print and the web. He also loves to explore roads less traveled. Reach him by writing in your details in the comments sections.

Monday, July 29, 2019

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:

Monday, July 22, 2019

Vaastu tips to place decorative items in home

Buying a new house is considered a monumental job in today's world. When we buy our dream home we start decorating it to make it reflect our liking and personality. While most of us follow Vaastu Shastra to design and build our house, we don’t take much care of internal arrangements and using decorative accents inside the house. Following vaastu tips in our home is believed to offer prosperity, wealth, health and happiness. Vaastu Shastra tells that placing things at right position and arranging the internal things according to Vaastu will help in creating a peaceful and happy atmosphere at home. Here are few tips to make internal arrangements inside your house.

Always have storage or console in the south and west wall and do not have storage in the eastern and northern wall. If you have heavy furnishing and other heavy items in the southern and western side of the house, Place TV and electronic items in the eastern and northern wall. Crystal decorative accents should be placed in north or east side. If the decorative items at house are heavy weighted then one should place them in the south and western walls.

Here are few tips to design your home with respect to different directions of home.

  • North-east corner:
North-east corners are always considered as a place of wealth and prosperity. Do not place any heavy statues, heavy decorative objects, and holy shrines in this corner. Also when you are constructing your house, do not have any overhead water tank or septic tank in this corner. Do not dump many things in this corner. It is very important to keep north-east corner of a house clean and tidy to have wealth and prosperity in house.
  • South-west corner:
This is the best place to store valuable things, documents, cash, and jewels. You can place cupboard in this corner as it is considered a corner of wealth. Place the cupboard in this corner facing east or north. You should open the cupboards towards north.
  • South-east corner:
If you wish to bring good luck and wealth to your house, then you can place money plants in purple pots in this corner.

Having discussed about importance of different corners of the house, let us take a look on where to place certain decorative items at home according to Vaasthu Shastra.

  • Never place the statue of lord Ganesha in the north-east corner of the house
  • To attract wealth to your house, you can keep active fishes in clean and ventilated aquariums
  • Always keep the entryway of your house clean and free from clutter
  • You can place mirror in cash drawers or incorporate mirror into the design of your cupboard and cash drawer to multiply wealth
  • Place painting depicting natural scenes, waterfalls, gardens and flowers in home
  • You can place flowering plants inside your house and avoid placing cactus and thorny plants inside your home

Following Vaasthu Shastra while constructing you home is always vital as it is believed to bring wealth, peace, prosperity and health to your home. Apart from building your home according to Vaasthu, placing certain decorative objects in proper place and directions will bring all good luck to your home and creates a harmonious balance.

This is a guest post by Pratheepa who writes for – the online portal that meets the requirement of sellers, buyers and real estate professionals in the real estate space of the country.

Monday, July 15, 2019

Codes for design and development of earthquake resistant buildings in India

Author: Sachin Gupta | Find me on Twitter

While buying an apartment in a builder project, one would have noticed the words ‘Earthquake Resistant Building’ in the ‘Specifications’ section.  This is mandated as per the codes and guidelines framed by The Bureau of Indian Standards (BIS).

As we know, a good part of North India and hilly regions have been classified as seismically sensitive zones or earthquake prone. Therefore construction of buildings in these regions has to be meticulous and as per the strict guidelines and set of rules laid down by The Bureau of Indian Standards BIS. Deviation from these guidelines may prove to be harmful in case of a severe earthquake. The buildings need to be designed in such a way that they can withstand the ground vibrations caused by earthquakes. Failure to adhere to guidelines can cause damage to human life and loss of property.

Image source:

We have seen in past, how earthquakes have proved to be disastrous. And therefore, putting in place systems and guidelines that can avoid or limit the loss are extremely useful.

Find below the codes for design and development of earthquake resistant buildings in India:

Have any Questions?

Monday, July 8, 2019

How can NRIs-PIOs-OCBs open and maintain the NRE-NRO-FCNR-bank accounts in India to buy, sell, rent out immovable property?

Author: Sachin Gupta | Find me on Twitter

Foreign exchange management act (FEMA) of 1999 allows Non Resident Indians (NRIs), Person of Indian Origins (PIO) to buy, sell, rent immovable property other than agricultural land or plantation property or farm house in India. One can invest in a piece of land and construct it or buy an under construction property directly from the real estate developer. Overseas Indians can invest in commercial or residential property of their choice. The acquisition of immovable property by person resident outside India is governed by terms of Section 6(3) of the Foreign Exchange Management Act (FEMA), 1999, as well as by the regulations contained in Notification issued by RBI vides Notification No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time.

Persons resident outside India are categorized as Non- Resident Indians (NRIs) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. A person resident in India who is not a citizen of India is also covered by the relevant Notifications.

To carry out this entire process of buying, selling, renting out the immovable property, NRIs/PIOs are allowed to repatriate an amount up to USD 1 million per financial year (April-March) out of the balances held in NRI account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement. Thus, NRIs can purchase property and transfer money earned in India to their country of residence through authorized banking channels.

How can NRIs/PIOs/OCBs open and maintain the bank accounts in India? Find below the detailed document:

Have any Questions?

Monday, July 1, 2019

List of Housing Finance Institutions of India

Author: Sachin Gupta | Find me on Twitter

Owning a House is a dream for every household in the country. The new government has also set an ambitious target of ‘Housing for all’ by 2022, a challenging yet achievable task. To fulfill this objective, providing housing finance at affordable rates is paramount. Therefore housing finance companies will play an extremely important role in this noble endeavor.

Who are the major players in this area currently? Can the list be expanded given the enormity of task? Things will unfold as we move along.

There are 2 kinds of housing finance companies, one, which accepts public deposits, and the second kind do not accept public deposits. Housing finance companies are regulated and supervised by National Housing Bank. Housing finance companies offer loans for purchase of commercial and residential properties. Find below the detailed list of Housing finance companies in India:

Have any Questions?

Monday, June 24, 2019

5 Home Projects That Are Best Left To Professionals

If you’re remodeling your house, there must be a number of things you want to change about it. And if you want your house to be a particular way, you might think that it’s always better to make these changes yourself. But remember, you are still an amateur and some things are better left to the professionals.

Professionals are called so for a reason.  They survey your house, understand your requirements, negotiate the price, and most importantly they get the work done according to your tastes and preferences. They make even the toughest work look effortless. Needless to say, for the following home improvement activities, hire a professional.

  • Plumbing

Plumbers have a lot of experience up their sleeve and they usually carry out their work flawlessly. But mind, if you ever get so adventurous and try plumbing by yourself, there is a definite chance that you might end up flooding your house. Remember plumbing is no child’s play. One wrong move and it can bring down your house, literally!

  • Electrical Work

Flipping a fuse switch and checking for faulty wiring is hardly the same thing. Electrical work is pretty serious business and there are more things that can go wrong than right, if you don’t know what you are doing. You obviously don’t want to electrocute yourself or your family members, right? That’s exactly what could happen. This work requires precision and most of all, a license.

  • Tree Removal

This is no joke. You might think that you are well-equipped to uproot a few trees, but this clearly is not your stage to rock. Even hardened pros can go wrong with this process. Tree cutting and removal is a dangerous task and professionals have a lot of training that they have racked up for majority of their life. So it’s better to stay away from this as it also requires dangling from extreme heights with dangerous tools.

  • Water Proofing Your House

Seen many water proofing home videos on YouTube or random DIY sites in your time? Think you got what it takes to go about waterproofing your house single hand? You really won’t be able to pull it off. This is another area where you should stay away from, as this process is both time consuming and confusing.

  • Flooring

How hard can laying some tiles or spreading carpet across your living room be? Pretty easy right? Wrong! You will need precision equipment to cut through the tiles or the carpets to the exact length as required. Also these things take a lot of hard work so it wouldn't help if you fizzle out while doing it.

It only takes a fair amount of cash to get this work done. As enthusiastic as you are, hiring a professional will save you so much trouble, tension, and time.

Yogendra is a content strategist at He is knowledgeable and familiar with the Indian real estate market. He blogs on Indian real estate properties, news, price trends, home decor, home loans, etc.

Monday, June 17, 2019

Power of Attorney in India

Author: Sachin Gupta | Find me on Twitter

Power of Attorney is used in many real estate transactions in India. In fact, there are instances when people opt for Power of Attorney instead of the property registration to save on exorbitant property stamp duty and registration charges.

The literal definition of Attorney is ‘a person, typically a lawyer, appointed to act for another in business or legal matters’. Therefore, in real estate transactions, a typical Power of Attorney would mean one person authorizing another person to act on his/her behalf as a legal representative to make binding legal and financial decisions. The person who gives Power of Attorney is known as donor or Principal, while the person who receives the Power of Attorney is known as Agent or holder.

In Delhi, many real estate transactions take place on ‘Power of Attorney’. Since property circle rates in Delhi are extremely high, therefore, there are people who opt for Power of Attorney to save on stamp duty and registration charges. However, there are risks attached to such transactions in case the Agent or holder does not discharge his/her duties accurately and honestly. For example, if the Agent or holder defaults on EMIs on a given property, then, the Principal’s property may be taken over by the authorized bodies by issuing a SARFAESI notice and auctioned for recovery of dues.

More on Power of Attorney can be found below:

Have any Questions?

Monday, June 10, 2019

Typical Property Registration Process in India

Author: Sachin Gupta | Find me on Twitter

Buying or leasing a property requires that one has to go to through the process of registration at district’s Registrars/Sub-registrar’s office. Under Section 28 of the Registration Act, documents relating to immovable property should be registered in the office of Sub-Registrar of sub-district within which the entire or some portion of the property is situated.  Under Section 30(1), a Registrar is empowered to accept a document which can be registered with the Sub-Registrar who is his subordinate.

Any property that is sold, bought or rented, under certain circumstances, requires to be registered inclusive of:

  1. A valuable sale or purchase of immovable property.
  2. If a property is rented for a period of more than 11 months, then the agreement needs to be registered.

Buyer and seller of a property enter into a sale agreement. This sale agreement typically defines the guidelines and conditions that govern the sale of an immovable property. The sale agreement will also include the details of buyer and seller, property details, location, price, payment structure. Once the sale agreement has been created and signed by both the parties, then this agreement is registered with the registrar according to India’s registration act of 1908.

Once the sale agreement is registered with the registrar, the buyer will also have to pay the applicable stamp duty. Find more about stamp duty and registration charges in various states across India.

Here we present the step by step procedure for registration of property. The procedure remains same whether you buy the property from an individual or from a real estate developer.

Have any Questions?

Monday, June 3, 2019

Understanding interest rates and its impact on home buying decision!

Author: Sachin Gupta | Find me on Twitter
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.


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.

Have any Questions?

Monday, May 27, 2019

Why making quick bucks in real estate is far from reality?

Author: Sachin Gupta | Find me on Twitter

Many of us invest our savings in various investment instruments such as stocks, bonds, fixed deposits, real estate, gold, etc. There is always this great desire that our investment runs smooth and yields highest possible returns. Of all the investment class, real estate has become a much bigger asset class in India. Within real estate investment, there are different categories of investors. One, who would buy a home for end-use which effectively hedges them against inflation, second category of property investors would primarily buy offices or commercial spaces to make money on rentals. There is however, the third category of investors who would indulge in property trading. These investors would invest in under construction residential projects and sometimes would book multiple apartments, hoping to sell them at higher prices to other buyers or end-users. These short-term investors would be betting that property prices will appreciate substantially as happened from 2003-2007 and they would be able to make windfall profits. However, things don’t always turn up as one imagines:

Here is why?

Liquidation issues:
Real estate is one such asset class that is always prone to liquidation risks. During our survey with some of these short term investors, we noticed that, majority of them are finding it increasingly difficult to sell these apartments within their desired time-frame. Due to this, these investors would end up selling the apartments at much lower price. In Delhi NCR, especially in Gurgaon, an apartment that is available at Rs 6000 per square feet from the developer is being sold at Rs 4400-4500 Rs per square feet in the resale market from these short term investors. Now, why would an investor sell at low prices? Most of them would book the apartment in early stages of an under-construction project as per construction linked plan. And accordingly, they would make initial payments equivalent to 10-12% of the property value. However, as construction advances and there is demand for the next installment from the builder, these investors would have no other option but to sell the apartment at much lower prices.

Capital Gains Tax:
Now, having sold the apartment within a short period (less than 3 years) of booking it would attract capital gains tax. The short term capital gains tax stands at 30% of profits booked.

For example, an investor buys an apartment at Rs 3000 per square feet in early stages of an under-construction project. And he paid the booking amount of 10%. He sells the apartment at Rs 4500 when the builder is charging Rs 6000 per square feet. In this case, the investor would be liable to pay 30% of Rs 1500 per Square feet as capital gains tax.

Now, many of you would question that who pays capital gains tax in India? Right… and all of this lead to rapid influx of black money into the real estate sector.

Transfer charges:
Having identified the next buyer, the investor would now transfer the apartment in the name of this new buyer. Transfer charges are costly and would range from Rs 50 to 100 per square feet.

Transaction charges:
Identifying the next buyer is always difficult and one would have to pay a transaction fee of about 1-2% of property value to real estate agents. Let us assume the apartment size was 1000 square feet and since it was sold at Rs 4500 per square feet, the transaction fee at 1% of property value would come out to be Rs 45000.

Here is the illustration:

Therefore, as shown in the picture above, the returns are not as expected by the short term investor. There are many factors that one should look into before jumping into the business of property flipping.

As the saying goes, invest for a long term and cherish the rewards that come along with it.


Have any Questions?

Monday, May 20, 2019

What is Land use Zoning in India? What are the uses that are permitted for various types of zones?

Author: Sachin Gupta | Find me on Twitter

While developing the master plan for a particular city, the town planning officials make use of zoning regulations. So, what are these zoning regulations? Based on the city’s geography, the land use is zoned by town planning officials. For example, in flood prone areas, the land use may be restricted to parks, gardens, playgrounds. The construction activity in these areas/zones may be restricted. Similarly, in hilly areas, construction of residential premises may be prohibited. Therefore, in essence, zoning regulations are tools used by town planning officials to clearly demarcate land use for the purposes of development, welfare, and safety.

In cities, Zoning is done to earmark residential, commercial, industrial, recreational development. Certain zones within a given city are demarcated as residential zones, some as industrial zones, and some as institutional zones. All of these zones are clearly highlighted within a master plan of a city. The town planning department then invites private developers to bid or buy the piece of land within these Zones. Some developers may buy or bid for residential land, while some may opt for institutional land.

Zoning is a complex subject because it involves the optimum usage of limited land available to city officials. Zoning regulations are in operation in all major cities and towns of India to regulate the use of property within their jurisdiction. Agricultural, industrial, residential, commercial, recreation and forest areas are clearly marked on city maps.

Find below the ‘Types of Zones’ and the uses permitted for these Zones.

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Monday, May 13, 2019

Be wary of the hidden charges while buying property in Delhi

Description: Hidden Charges increase the actual cost of the property; therefore, it’s better to keep in mind these charges while preparing the budget for a new property.

Buying a property in Delhi is one of the most important decisions for those who want to settle in the capital. The buyer goes out of his or her financial capabilities and prepares the budget to buy the property. But often, the buyer ends up paying extra which he or she does not realize. There are a number of extra charges in the form of extra taxes and other fees which comparatively makes the property much costlier than its actual price. This extra amount other than the actual cost of the property hurts the buyer’s pocket as it gets out of the buyers allocated budget for the property. Hence, the buyer needs to be aware of these hidden charges to prepare the budget accordingly, before investing in a new property.

1. Stamp duty and registration fees: 
Getting a property in Delhi registered is an important aspect in the property buying process. It is a final agreement between both the parties that indicate the change in ownership of the property. In order to get the registration done, one has to pay a certain amount to the government. The registration form costs a particular amount, depending on the total property value. Though the charges for stamp duty and registration for Property in India varies from state to state, but usually it is between 4% to 10%. Typically, in a majority of the states, this registration and stamp duty fee adds up to 5% - 14% of the cost of the property. In addition to this expense, there is another registration fee that is payable to the court which differ from state to state and varies between 1% to 2% of the value of the property.  And, above all, there are additional costs that include lawyers and notary fees, who get the agreement done in the court.

2. Service Tax and VAT:
The service tax is applicable on the purchase of any property in India that is under construction while the VAT is charged over the value of the construction of the project. The imposed service tax is 12.36% of the 25% value of the under constructed property. Whereas the imposed VAT is between 1% to 5% of the under constructed property value. Altogether, the service tax and VAT can add up to 8% to 10% of the entire property value.

3. Preferred Location Charge (PLC):
The term Preferred Location Charge, commonly known as PLC refers to the extra charge that is levied from the buyer to buy property in Delhi in their choice of location. This is applicable specifically in a housing complex, layout or residential community. Though this charge differs from builder to builder and project to project. Lavish villas, penthouses facing the sea or garden are most likely to have higher PLCs.

4. Utility Charges:
The charges referring luxury amenities or those linked with the building come under utility charges. This includes parking in open or closed space, clubhouse membership for a lifetime or yearly, firefighting provision, electrical and various other charges associated with Government utilities as well. Apart from these there are other charges involved while buying property in Delhi such as maintenance, security charges, and others also. Security charges refer to the expense for employing security personnel, installing and maintaining security arrangements like CCTVs camera, intercom among others. These extra charges add up to the initial cost of the project in a huge way and become a burden on the shoulder of the buyer.

5. External Development Charge (EDC):
EDC is usually meant for the maintenance of roads, water, sewage, electric supply, lights and development of the surrounding area. It varies from location to location and adds up to 10% of the entire cost of the project. Sometimes the government also levies development charge on the developer. These charges also are also charged in the form of maintenance fees in advance for a longer period of time. This is a great disadvantage the buyer as he has to shell out extra amounts for which he does not prepare himself.

This is a guest post by Seema Chauhan

Monday, May 6, 2019

Innovation in essentials of construction materials

Civil engineering is raving up fast with new innovations being made rapidly. From sealants to adhesives, from wall solutions to roofing, it is getting environmental or technological friendly with every invention, which is indeed need of the hour.
Innovations in construction material industry are imperative to better manage the construction process and boost efficiency as well as provide cost-effective solutions. It also minimizes construction time along with adding durability factor.
Presenting to you with such 5 mind-blowing innovations that have brought new face to buildings-

  • Dryfix, a revolution in masonry-

Dryfix is a revolutionary bond (or glue) that is a complete wall building solution and is highly superior to the traditional mortar used by masons. Unlike mortar, which is messy to work with and takes days to settle and requires loads of water for curing, Dryfix is a strong adhesive bond that requires no curation and is ready to use. With this innovative product you can build walls almost 50 percent faster. It is easy to use and leaves no debris to be dumped. It is also seasonally independent and cost-effective. Porothermdryfix drastically reduces gaps and joints, hence leaving no thermal bridges.

Image Courtesy: Wienerberger

  • Bamboo corrugated sheets, a boon for people residing in earthquake prone areas-

Bamboo is well known for its robust and versatile nature. Bamboo, one of the best substitutes for wood, which is on the verge of getting extinct, is being extensively used in constructions, especially the low-budget buildings.  Its versatility allows it to be made into different forms like mat board, mat veneer composite, etc. among which bamboo corrugated sheets for roofing has highest merits. These bamboo roof sheets are the perfect substitute for asbestos and galvanized steel sheets used for roofing, particularly in the earthquake prone areas. They are lightweight, natural, energy-efficient and cost-effective, which also falls under green construction materials.


  • ‘Green wood’, the story of rages to riches!

Green wood’, an innovation by par, a 16 years old Delhi based girl, has made these bricks out of unwanted rice husks and straw mixed with resin which are then pressed to form particleboard. They’re believed to be free from fungi and mould and can be used for construction purposes. Alternatively, it can also be used as substitute for wood for making low-cost furniture.

  • Hollow bricks, a smart innovation for fast and easy construction

Hollow bricks, yet another innovation in essentials of construction materials has successfully raised the process as well as the buildings to a whole new level. With hollow bricks the construction is fast due to uniformity in the make and pattern of the bricks. They are bigger compared to traditional solid bricks and hence reduce the joints thereby consuming less masonry, which helps to cut costs. They’re light in weight, which makes handling easy and speed-up the process that further reduces the cost. Since they’re made of natural resources like clay it helps in reducing energy consumption by providing a means for thermal insulation.

Image Courtesy: Wienerberger

  • Bricks born from ashes, all in one rural area
RHA (Rice Husk Ash) brick is the brainchild of a farmer who believes in natural farming based in Kanchipuram. In the urge to prevent farming land turning infertile due to dumping of rice husk, this genius who has won rural innovation award started making these bricks.  These bricks can be done easily by combining RHA with sand, quarry dust and some cement. They are low-cost bricks and helps conserve the environment.

  • Bagasse Particle Board as innovative laminated flooring- 
Bagasse, the leftover pulp of sugarcane after the extraction of juice can be used as a substitute for wood in particleboard. Bagasse is generated in large scale especially in sugar mills which otherwise go waste. Though bagasse is the core material used for laminated floors, it doesn't provide enough strength on its own and has poor water resistance. However, when combined with resin, which acts as bonding agent along with wax that is used as dimensional stabilizer, these particleboard can be used for laminated flooring. Further, bagasse based partial boards can also be used to make furniture which are not only Eco-friendly but also cost-effective.

All these innovative building materials have brought a wave of change not only in terms of saving environment by reducing use of concrete, wood and other traditional resources, but have also provided architects room to think creatively to inculcate green concept in their designs.   

This is a Guest Post by Wienerberger, the world leaders in Building Material solutions, present across 30 countries and 215 manufacturing units across the globe, provides complete solutions to our clients by delivering smart building materials and smart solutions. 

Monday, April 29, 2019

What are Real Estate Investment Trusts and why do we need them badly in India?

Author: Sachin Gupta | Find me on Twitter

Recently, Securities and Exchange Board of India (SEBI) has put up Real Estate Investment Trusts (REIT) for public comments in order to draft the final set of guidelines.

So, what are REITs and what benefits can they provide to small investors with 2-3 Lacs of invest-able income? Can these investors invest small amounts in REITs? We explore here.

A real estate investment trust is basically a creation of the internal revenue code. It is a real estate company or trust that has elected to qualify under certain tax provisions to become a pass-through entity that distributes to its shareholders substantially all of its earnings in addition to any capital gains generated from the sale or disposition of its properties. Because the individual investor has the opportunity to pool his/her resources with those of persons of like interests, funds are assembled to permit purchase of buildings, shopping centers, and land in whatever proportion seems to offer the most attractive returns. Investments must be approved and management activities reviewed by a board of trustees who are accountable to shareholders and are ordinarily well qualified to make such decisions.

Following are the requirements to qualify as trust in countries where REITs are in existence for years:

Asset requirements:

  1. At least 75% of the value of a REIT’s assets must consist of real estate assets, cash, and government securities.
  2. Not more than 5% of the value of the assets may consist of the securities of any one issuer if the securities are not includable under the 75% test.
  3. A REIT may not hold more than 10% of the outstanding voting securities of any one issuer if those securities are not includable under the 75% test.
  4. Not more than 20% of its assets can consist of stocks in taxable REIT subsidiaries.

Income requirements:

  1. At least 95% of the entity’s gross income must be derived from dividends, interest, rents, or gains from the sale of certain assets.
  2. Minimum of 75% of gross income must be generated from rents, interest on obligations secured by mortgages, gains from the sale of certain assets, or income attributable to investments in other REITs.

Distribution requirements:

  1. Minimum of 90% of REIT taxable income must be distributed to shareholders.

Stock and ownership requirements:

  1. Be taxable as a corporation
  2. Board of directors or trustees should manage the REIT
  3. Fully transferable shares
  4. REIT shares must be transferable and must be held by a minimum of 100 persons

REITs that are not listed on an exchange or traded over the counter are generally called private REITs.

Various types of REITs:

These REITs are further subdivided into those that own industrial, office, or a mix of office and industrial properties. Some analysts further segregate these REITs by property location (i.e., whether they are in CBD or suburban locations). For example, if REITs were to become reality in India, the REIT with focus on Office Space in Gurgaon can result in attractive returns for investors.

These REITs are further subdivided into those that own strip centers, regional malls, outlet centers, and free standing retail properties.

These REITs are further subdivided into those that own multifamily apartments and manufactured home communities. Some analysts further segregate those REITs that own student and military housing.

REITs that own a variety of property types.

REITs that primarily own hotels, motels, and resorts.

Health care: 
These REITs specialize in owning hospitals and related health care facilities that are leased back to private health care providers who operate such facilities.

Self storage: 
These REITs specialize in ownership of self storage facilities.

These REITs specialize in numerous types of properties, including prisons, theaters, golf courses, cellular towers, and timberland. Specialty REITs have been a rapidly evolving segment of the industry.

Have any Questions?

Monday, April 22, 2019

Planning to borrow home loan? Pay attention to your CIBIL Score.

Author: Sachin Gupta | Find me on Twitter

Ok, you have identified the residential property you wish to buy. Now comes the financing part of it. A residential property may cost you 50 Lacs or more. You may have arranged for the down payment cost of approximately 10 Lacs and are now looking to borrow the home loan for remainder of the property cost.

Borrowing home loan means you will be paying EMIs for several years. Therefore, one must be responsible and confident to service the debt over a period of time. Before sanctioning such a huge amount to an individual borrower, the banks carry out comprehensive due diligence that includes checking your credit history, bank statements, income statements, job or business continuity.

CIBIL score is one such parameter that banks and financial institutions look into before sanctioning loan. What is CIBIL score? Credit Information Bureau (India) Limited (CIBIL) is India’s first Credit Information Company (CIC) founded in August 2000. CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by member banks and credit institutions, on a monthly basis. This information is then used to create Credit Information Reports (CIR) and credit scores which are provided to credit institutions in order to help evaluate and approve loan applications. (Definition Source: Wikipedia)

One can check the CIBIL score here

How can you maintain good CIBIL score?

Well, in order to maintain good CIBIL score, you must pay attention to the following factors:

  • Repayment:
First thing first, what is your repayment track record? In other words, are you paying your installments on previous loans or credit cards regularly within the stipulated timeline? If yes, then your CIBIL score is going to be good. Your ability to repay previous debt has 35% weight-age in calculation of the CIBIL Score. Therefore, make sure that you stick to due dates of servicing your EMIs.

  • Credit Utilization:
Credit utilization is the ratio of the
Balance amount that you owe to your lenders / Total of your credit card limits

Therefore, if your balance amount that you owe to lenders is high then it signals riskiness. The increase in balance amount indicates increase in repayment burden and may negatively impact your CIBIL score. Credit utilization has 30% weight-age in calculation your CIBIL score. Therefore to score high CIBIL score, keep your outstanding balance to banks and financial institutions as low as possible.

  • History of Debt servicing capacity:
Are you paying EMIs and credit installments successfully for several years? If yes, then this will have a positive impact on your CIBIL scores. Banks and financial institutions prefer applicants who have taken loans earlier and have serviced the debt regularly. It sends the signal that the individual has a long history of securing debt and has been responsible in his/her repayments. This has a weight-age of 15% in calculation of CIBIL score.

  • New Credit
If you have applied for too many loans or credit cards in recent times, then it has a negative impact on your CIBIL score. Banks and financial institutions will see this increased activity of loan applications as risky because your debt burden has increased and it may affect your repayment capacity. Therefore, be prudent with your loan applications. Unless, your income has increased substantially, do not apply for too many loans or credit cards at the same time or within a short interval of time. In other words, space out your loan applications prudently. This has a weight-age of 10% in calculation of CIBIL score.

  • Credit mix
Many a times, we have noticed that people have a great propensity to apply for unsecured loans. As the name suggests, unsecured loans are not secured by any mortgage or guarantee. If you have mostly availed unsecured loans (such as personal loans) or credit cards, then it will bring down your CIBIL score. Always have a mix of both secured loans and unsecured loans. Secured loans are car loan, home loan, etc. This has a weight-age of 10% in calculation of CIBIL score.

Now that, you have a thorough understanding of CIBIL scores and its impact on your loan availing ability, we hope that you will be disciplined in your finances.

Have any Questions?

Monday, April 15, 2019

What is mortgaging and what are the Costs involved in mortgaging

Author: Sachin Gupta | Find me on Twitter

These days, buying a house has become relatively easier in India because of evolution of the housing finance sector.  While cost of buying a property has surged, the availability of housing finance has helped middle class buyers to own their dream home. In order to avail housing finance, a buyer typically mortgages his/her property with the lender. A mortgage therefore is a method of using property for the payment of debt.

The provisions relating to mortgage of property are contained under Sections 58 to 104 of the Transfer of Property Act 1882. Section 58 of the Act specifically defines the meaning of mortgage and other related terms, according to which, mortgage means the transfer of an interest in specific immovable property for the purpose of securing payment of money advanced or to be advanced, by way of loan or an existing or future debt. The transferor is called a mortgagor, the transferee a mortgagee, the principal money and interest of which payment is secured is called 'mortgage money', and the instrument by which transfer is affected is called a mortgage deed.

A property can also be mortgaged with the lender for securing a loan for the purposes other than owning a home. Therefore, mortgage is simply a loan against property. Lender charges interest rate from the borrower on the outstanding principal. Borrower is supposed to make a monthly payment to pay the interest charges as well as clear off part of principal amount. Failing to make monthly installments can lead to repossession of property by the lender.

The tenure for which loan is secured by the borrower is pre-decided by lender and borrower at the time of sanctioning of loan. Usually, the tenure of a typical home loan is 20 years because houses tend to be expensive. There are various charges that are involved in availing a home loan from the lender. Find below the list of these charges:

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Monday, April 8, 2019

What are the various way in which I can raise funds to buy house?

Author: Sachin Gupta | Find me on Twitter

Now that you have decided to buy a home, you need to determine the home affordability and sources of home finance before you actually approach the developer to buy your dream house.

First thing first, what is the value of home that you can afford? Well, home affordability is derived by taking into consideration your current household income levels, and monthly expenditures. Here is the detailed example of calculating home affordability.

Now, the crucial aspect in home buying is sources of funds.

Let’s say, based on your current income levels and monthly expenditure, it is determined that value of home that you can afford is Rs. 6000000

As per banking norms, you can avail 80% of this as home loan from banks or housing finance companies. However, check your loan eligibility from the local bank. Your loan eligibility depends on host of factors such as nature of loan, amount of loan, income of the applicant, financial status of the applicant, his/her age, qualifications, number of dependents, spouse's income, assets, liabilities, stability and continuity of occupation, income, expenditure and savings history.

Home loan = 60 lacs x 80%
                  = Rs. 48 lacs

How do you source the remaining Rs. 12 lacs?

  • Cash savings

Firstly, Pool in the cash that you and your spouse may have accumulated over a period of time. Additionally, if possible, you can borrow the money from your close relatives or friends. The benefit of borrowing from family sources is that you will be paying zero or low interest as opposed to borrowing the same amount from commercial lenders.

  • Fixed deposits

If your fixed deposits are nearing maturity, unlock them. Or one can also avail loan against fixed deposits. Banks normally lend 70-80% of the total value of fixed deposits.

  • Savings in the form of shares or mutual funds

Shares and mutual funds are highly liquid asset class. You can trade your stocks and generate the money that is needed to make the down payment for your home. Some banks also offer loan against these securities. Check with your bank about the eligibility for loan against your stocks or mutual funds. The interest rate charged (10 to 14%) will be in direct proportion to the nature of your stocks and mutual funds.

  • Personal loan

This is probably the easiest way of making down payment for your home. If you are employed, approach your company’s bank for personal loan. Your company’s official banking partner will certainly have attractive interest rates schemes for the employees. We have noticed in past when employees were given personal loan at 11-12% as against the market norm of 17-18%.

  • Loan against gold

Indians are the largest consumer of Gold. Your gold collections may be lying idle at home or in your bank locker, instead why not unlock the value of gold? It will definitely be handy towards your down payment. Gold is relatively a safe asset class and therefore, banks will charge relatively low interest rate when sanctioning loan against gold. Approach your bank for loan against gold and you will be surprised at ease with which banks will provide you loan against gold.

  • Provident funds

Provident funds can also be a reliable source of generating funds towards down payment. One can also avail loan against his/her provident funds.

Have any Questions?