Tag: Home Loan

Pradhan Mantri Awas Yojana may allow bigger home loans to many more people

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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At the peak of the election season in India, government sources tell CNBC-TV18 that the scope and size of the subsidised home loans under the Pradhan Mantri Awas Yojana (PMAY), an affordable housing programme for poor people living in cities, may be widened.

Under the PM Awas Yojana, home buyers could save a maximum of ₹2.67 lakh in interest cost over a period of 20 years (the maximum tenure for home loan allowed under the scheme).

The maximum size of these affordable homes are 200 square metres.

There are at least four changes to the PMAY benefits under government consideration, according to sources:

1. Proposal: Sources told CNBC-TV18 that the PMAY programme would soon be taken beyond blue-collar workers and people with low salaries to include self-employed people, shopkeepers, traders, and professionals, among others.Impact: More people will be eligible to apply for home loans under PMAY.
2. Currently, loans under PMAY depend on the borrowers’ income.
   
   Proposal: One proposal under consideration is to change the benchmark to the cost of the house instead of the individual’s income.Impact: Linking the loan to the cost of the house may enable eligible borrowers to get bigger home loans.
3. Proposal: Home buyers may get subsidies on home loans upto ₹30 lakh for houses that cost upto ₹35 lakh in both metro and non-metro cities.Under the existing provisions, people could get a maximum of ₹12 lakh as home loan as long as their annual income didn’t exceed ₹18 lakh. Impact: Borrowers can cover a bigger chunk of the cost with subsidised loans.
   The government estimates the average ticket size of a subsidised home loan at ₹25 lakhs under the new scheme.

    

4. Interest subsidy on these home loans is likely to be pegged around 4%. Stamp duties on registration may also be tweaked.
   
   Currently, the interest subsidy on home loans under PMAY is anywhere between 3% and 6.5%. 

These changes are in line with some of the promises made by Prime Minister Narendra Modi in his Independence Day Speech last year. “We are coming up with a new scheme in the coming years that will benefit those families that live in cities but are living in rented houses, slums, chawls, and unauthorised colonies. If they want to build their own houses, we will assist them with relief in interest rates and loans from banks that will help them save lakhs of rupees,” he had said

Fresh sanctions under the credit-linked subsidy scheme were closed in March 2021. In the five years before that, lenders had financed 2.5 million low and middle-income homes, which cost the government ₹59,000 crore in subsidy.

The Modi administration plans to subsidise the purchase or construction of 10 million homes under the changed PMAY scheme.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indian Overseas Bank loan EMIs set to rise from April 15-here’s why

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian Overseas Bank (IOB) has made changes to its benchmark Marginal Cost of Funds-Based Lending Rates (MCLR) on select tenures, effective from April 15, 2024. The upward revision in MCLR means that equated monthly installments (EMIs) of linked loans (including home, auto and personal) will go up for borrowers. Loans linked to MCLR undergo a reset period, post which the interest rates are revised for borrowers.

#JustIn | Indian Overseas Bank hikes lending rates by 5-10 bps across tenures w.e.f. April 15 pic.twitter.com/tG5sYitnuC

— CNBC-TV18 (@CNBCTV18Live) April 12, 2024

The overnight MCLR has been raised by 5 basis points from 8.00% to 8.05%. The one-month MCLR of IOB has increased by 5 basis points to 8.25% from 8.20%.

The 3-month MCLR will be at 8.45%, up by 5 basis points from the previous 8.40%. The 6-month MCLR has been increased to 8.70% from 8.65%.

The one-year MCLR, linked to many consumer loans like home and auto, has been raised to 8.85% from the previous 8.80%. The two-year and three-year MCLR is raised to 8.85% and 8.95%, respectively.

The MCLR is the minimum interest rate that financial institutions must charge for specific loans, serving as the lower limit for loan interest rates.

The rate is fixed for borrowers unless modified by the Reserve Bank of India (RBI). In its latest meeting in early April, the RBI’s Monetary Policy Committee left key rates unchanged for the seventh straight time while retaining the ‘withdrawal of accommodation’ stance.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Home prices are up over 30% in at least three Indian cities — check details

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The average rise in home prices in top Indian cities is about 20% in the last two years, according to the housing price tracker report released by the real estate lobby CREDAI and data analytics firm Liases Foras.

CREDAI stands for the Confederation of Real Estate Developers’ Associations of India.

Source: CREDAI and Liases Foras.

The national capital region around Delhi, which includes Gurugram and Noida, aside from Bengaluru and Kolkata have seen the sharpest rise in property prices, over 30% each, in the last two years. The report attributes the price rise to benign interest rates, good economic growth and attractive prices.

The demand is the most in the relatively higher-priced homes in the mid-segment and luxury properties.

Part of the price rise is also due to the rising construction cost.

Parts of Bengaluru with a high concentration of tech firms, like
Whitefield, KR Puram, and Sarjapur have seen nearly 50-60% in home prices despite the doubling of supply from new launches in 2023 compared to 2021.

A similar trend was visible in Chennai, Pune and the national capital region (NCR), where the demand for properties outpaced the new launches.

Unsold home inventory in Delhi NCR dropped 19% in the last two years.

In the Mumbai Metropolitan Region (MMR), the most expensive residential market, housing prices saw a steady 2% increase in 2023 compared to 2021.

Property prices in the country’s financial capital have seen sluggish growth since the end of the pandemic; except in some categories.

However, some areas like Panvel have seen a notable 20% rise in the last two years. The analysts attribute this surge to the development of infrastructure projects like the Mumbai Trans Harbour Link (MTHL) and the essential metro lines.

Other analysts, like the ones at consulting firm Knight Frank, believe that MTHL will have minimal impact on real estate prices in the near term.

“We expect both – housing demand and supply – to thrust forward in 2024 not only in top 8 cities but in Tier II, III regions as well,” said Boman Irani, President of CREDAI National.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Legal Digest | Refusal of paternity leave, claim of leave encashment on resignation and more

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Case 1: Refusal of paternity leave threatens right to life of the child 

On August 21, while granting relief to a State Police officer against whom a ‘desertion’ order was passed by his department on account of his absence from service (as he has to take care of his wife who was expecting a child), the Madras High Court has emphasised the need for paternity leave legislation in India.

The exhortation couldn’t have come at a better time.  With both husbands and wives working, it is all the more necessary to usher in the practice of paternity leave widely prevalent in progressive democracies in the West. The Madras High Court has done well to dovetail the case for this healthy practice with the fundamental right to life of the child guaranteed by Article 21 of the Indian Constitution.

An infant requires care both during its prenatal and postnatal days for proper nourishment and upbringing.  While India has done well to increase the maternity leave to six months, it should also bring suitable legislation to enjoin the father of the child to assume responsibilities towards the infant. 

While bearing and delivering a child is cast upon the mother by nature, a father simply cannot be let off without doing his part in the development and rearing of a child.  Incidentally, the bonding developed during the care bestowed on the child would be conducive to building family solidarity as well.

Case 2: Mortgage by conditional sale cannot be left to be inferred 

The Supreme Court recently upheld the verdict of the Karnataka High Court  that refused to come to the rescue of the supposed mortgagor of a property who naively believed that by entering into two agreements —back-to-back sale and buyback on repayment of the loan — he would wrest back his property on full repayment of the loan. 

The Supreme Court made a threadbare analysis of the relevant portions of the Transfer of Property Act and pointed out that the sale document itself must make it clear that on the repayment of loan, the buyer will have to sell it back to the original owner who had borrowed on the strength of the property or his legal heirs.  In the absence of a buyback clause in the sale agreement, such an intention cannot be inferred even by harking back to the second agreement conferring the buyback right on the mortgagor.

In this regard it would be useful to adumbrate what home loan companies and banks do. They do not insist on sale but only insist on deposit of title deeds with them during the currency of the home loan. That the title deeds have been deposited with the bank or home loan company is itself sanctified by a separate document protecting the lender so that during the currency of the mortgage, the borrower is not able to sell the mortgage property. In other words, the home loan company does not get possession of the mortgage-property but gets the possession of the documents of title to the mortgage-property.  

But when private people lend money, they are going to insist on sale followed by buyback to guard their interests more fully. The borrower must be on guard and insist upon the sale deed containing a buyback clause in his favor.

Case 3: On resignation one cannot claim leave encashment as a matter of right  

In National Insurance Co. Ltd. & Others vs S. Sudeep Kumar, the Kerala High Court recently disabused the smug notion that leave encashment is there for the asking for resignation. The High Court rightly pointed out that such a presumption cannot be made unless the terms of employment and service rules granted the resigning employee such a right. National Insurance Company rightly and successfully contented that while its retiring employees were conferred the right to cash in their privilege or earned leave, no such right was conferred on employees resigning.

The moral of the story is those intending to resign would read the service rules carefully and not go by self-serving assumptions.  If the terms of service do not give them the right to encash leave, it would be advisedly better for them to avail of the leave before resigning. It is possible that the terms of service may vest the management with the discretion to give leave encashment benefit also on resignation but experience shows that resignation often is in a huff and it creates bad blood between the employer and the employee and the former is not likely to be kindly disposed towards the resigning employee

—This column, Legal Digest, interprets various case verdicts or procedures and their implications in the current social and business scenario. The author, S Murlidharan, is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed are personal. 

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Hardeep Singh Puri says govt will unveil details of new home loan scheme for city dwellers next month

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government will announce the full details of a new home loan scheme for urban dwellers next month, Urban Affairs Minister Hardeep Singh Puri said on Thursday, August 31. The scheme was announced by Prime Minister Narendra Modi on Independence Day. Puri said the scheme is in its final stages of development.

“We are fleshing out the details of the new home loan scheme for city dwellers that was announced by the Prime Minister on Independence Day. It’s at an advanced stage; we are almost ready,” said Puri.

Prime Minister Narendra Modi, during his  Independence Day speech, mentioned the government’s commitment to aiding those residing in rented houses, slums, chawls, and unauthorised colonies in cities to realise their dream of owning a home.

The scheme is intended to complement the existing home loan provisions and comes as a response to the pressing housing needs of urban populations.

Highlighting the significance of the scheme, PM Modi stated, “The weaker sections living in the cities face a lot of problems. Middle-class families are dreaming of buying their own houses. We are coming up with a new scheme in the coming years that will benefit those families who live in cities but are living in rented houses, slums, chawls, and unauthorised colonies. If they want to build their own houses, we will assist them with relief in interest rates and loans from banks that will help them save lakhs of rupees.”

As the countdown to the General Election 2024 begins, the government is reportedly contemplating additional expenditures geared towards uplifting public sentiment. While these potential fiscal injections are yet to be outlined in detail, they mirror the government’s intent to enhance the overall well-being of citizens. Read more on this here.

Puri also said that India was aiming to become the second-largest metro system in the world and was confident of meeting the 2024 timeline for completing the smart city programme. “Work is currently on on fixing last-mile connectivity,” he said, and added, “Distribution of sops by some states will not work, what will work is what the commuter wants, like last-mile connectivity.”

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Zoomed Out | Revival of India’s real estate sector —here’s why it needs an urgent rate cut

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The real estate sector has been facing a perfect storm with the lingering effects of the COVID-19 pandemic, rising interest rates and escalating raw material costs, all together affecting an otherwise likely real estate boom in India. All India House Price Index (HPI) has surged by almost 10 percent in the past three years amidst the pandemic and elevated inflation and interest rates. 

A key factor that impacts the sales is the sentiment of the consumers; positive sentiments often lead to increased purchases, while negative sentiments deter potential buyers.

The RBI has maintained the benchmark interest rate at 6.5 percent, causing concern for the rate-sensitive real estate industry. Despite lending rates staying steady, the continuous 250 basis point hikes since May 2022 have dented the demand segment in major cities.  In light of this situation, it is imperative for the Reserve Bank of India (RBI) to take decisive action and reduce interest rates, thus reviving the real estate market and stimulating economic growth.

 Impact of RBI’s interest rate hikes on real estate 

CREDAI has cautioned RBI that another rate hike will escalate borrowing costs for developers, leading to even higher project expenses and housing prices. With prices already having increased by 5-6 percent last year, this move, combined with rising raw material costs, could squeeze already slim margins for real estate projects, rendering certain developments financially infeasible for developers.

Hiked interest rates have not only dissuaded potential homebuyers from availing loans but have also impacted developers’ cost of capital. The reduction in repo rates would improve buyer’s sentiment and fuel housing sales and help put more liquidity into the hands of consumers encouraging them to buy homes. 

Need for reducing rates 

A reduction in the repo rate is expected to facilitate robust GDP growth. Considering the period between March 2021 and March 2022, with the repo rate hovering around 4 – 4.4 percent, India had registered a GDP growth of 8.95 percent. To bring back the lost momentum in the real estate market, there is an urgent need for the RBI to reduce interest rates. Lowering the rates can infuse a renewed sense of confidence among consumers and developers, boosting the animal spirit in the market. 

Festival Season – an opportune moment

The rising interest rates have led to a surge in stalled projects, as developers struggle to secure funding amidst increasing capital costs. This has left homebuyers waiting for their dream homes to be completed. Lowering interest rates by the RBI can serve as a lifeline for stalled projects, making finance more accessible for developers to resume work and fulfill buyers’ dreams.

Moreover, as the festive season approaches, it presents a golden opportunity to reinvigorate the real estate market exercising the combination of attractive deals and reduced interest rates ahead of the festive season. The festive period is traditionally considered auspicious for buying property in India, the RBI can help builders tap into this sentiment and induce the much-needed impetus. 

— The author, Divaker Bhalla, is CEO and Co-Founder PeProp.Money. The views expressed are personal.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Affordable housing buyers face over 20% EMI increase in last 2 years

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Indian residential real estate’s affordable housing segment has endured the most significant impact of the Covid-19 pandemic, struggling to recover unlike other sectors over the past two years. A recent report by ANAROCK revealed that the share of affordable housing in overall sales during the first half of 2023 decreased to approximately 20 percent, an 11 percent drop compared to the same period in 2022.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

NBFC, insurance firms may report strong Q1 despite higher cost of funds: Kotak Institutional Equities

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Non-banking financial company (NBFC) stocks emerged as significant gainers in the stock market in the last quarter. While L&T Finance witnessed a remarkable increase of 63 percent, Cholamandalam rose by 54 percent. Can Fin Homes experienced a surge of 49 percent and Mahindra & Mahindra Financial Services (MMFSL) saw a growth of 45 percent.

Similarly, insurance company stocks have also seen notable gains, with a rise of 30 to 40 percent since June.

In an interview with CNBC-TV18, Nischint Chawathe, Director at Kotak Institutional Equities expressed optimism regarding the upcoming Q1FY24 earnings of NBFCs, housing finance firms and insurance companies too. Chawathe highlighted that despite facing higher costs of funds, these sectors are expected to report strong performances.

He said, “Cost of funding for most of the NBFCs have gone up in the range of around 50-60 to even 100 basis points. Remember, we have seen a massive rise in policy rates and a large part of it has been passed on by banks in terms of MCLR hikes. So, you will see an impact on the cost of borrowing.”

According to him, there are several factors that contribute to the positive outlook for Q1 performances in these sectors. First, despite higher costs of funds, these firms have been proactive in managing their financial strategies.

“Second, the overall economic recovery and favourable market conditions have played a role in supporting the performance of NBFCs, housing finance and insurance firms. With gradual improvements in economic indicators and consumer sentiment, these sectors have experienced a surge in demand for their services. This increased business activity has positively impacted their revenue streams and is expected to reflect in their Q1 earnings,” he said.

Furthermore, the implementation of digital transformation initiatives and the adoption of technology-driven solutions have enabled these sectors to enhance operational efficiency and expand their customer base. This strategic approach has provided a competitive edge, enabling them to capitalise on market opportunities and drive growth.

For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Home loan originations contract in Q3 amid rate hikes, low-value segment suffers the most

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Home loan originations by value declined in the December quarter amid rate hikes by the Reserve Bank, a credit information company said on Wednesday.

The low-value segment, which is supposed to be the most sensitive to the lending rate hikes, was hit the most, the data shared by Crif High Mark showed.

It can be noted that starting in May 2022, the RBI hiked rates by a cumulative 2.25 per cent till the end of December 2022 to tame the runaway inflation. The third quarter of a fiscal year also witnesses festivities, which typically increase the demand for credit.

There was a 2.6 per cent decline in home loan by origination value to Rs 2.08 lakh crore in the December quarter against Rs 2.13 lakh crore in the year-ago period and Rs 2.23 lakh crore in the preceding September quarter, as per the data.

The CIC said that there was a 14.4 per cent decline in home loan originations by value for those borrowings, which are under Rs 25 lakh, while in the Rs 25-Rs 35 lakh bracket, the decline was 9 per cent compared to the year-ago period.

However, there has been a 5.5 per cent increase in the segment, where the borrowing is more than Rs 35 lakh, the CIC said.

When looked from a volumes perspective, the overall figures declined by 7 per cent in the December quarter, the agency added.

The average ticket size has increased to Rs 24.9 lakh compared to Rs 23.9 lakh.

The state-owned lenders have gained market share when looked at both from the value as well as volume perspective, the CIC said, adding that public sector banks accounted for 43.9 per cent market share by value in the December quarter against 39.1 per cent in the year-ago period.

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Maharashtra had the highest contribution on home loans at Rs 45,120 crore in the quarter and had a wide lead over Karnataka where lenders gave out Rs 23,178 crore of home loans.

Mumbai, the capital of Maharashtra, alone accounted for Rs 25,068 crore of the home loans, making it the biggest city in home loans.

However, the financial capital lost out to Delhi on overall retail lending, courtesy of higher borrowings for auto and personal loans in the national capital region, the CIC said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

How to choose the right home loan tenure that suits your pocket

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Choosing the right home loan tenure is crucial to ensure that financial situation of the borrower remains stable throughout the repayment period. This is more important at a time when borrowers are already reeling under the pressure of lengthening loan tenures and rising interest rates due to Reserve Bank of India’s (RBI’s) repo rate hikes. Before hitting the pause button on this hike for the second time in its last policy, the central bank raised the repo rate cumulatively by 250 basis points since May 2022.

For most banks, the external benchmark to which their home loans are linked is the repo rate. So, with the hike in repo rate, all existing home loans on floating rates of interest became expensive.

Currently, the repo rate stands at 6.5 percent. This is the second incidence when the RBI paused the rate. This is good news for home loan borrowers as it signals that interest rates are stabilising. However, the best is yet to come when RBI starts cutting the rate.

So, how can borrowers choose right home loan?

Let’s look at some of the factors:

Consider income and expenses

The most important factor in determining home loan tenure is the ability to afford the monthly EMIs.

“The income will dictate how much one can afford to pay each month and the expenses will determine how much he/she will have left over after paying for necessities like food, housing and transportation. If the borrower has a high income and low expense, he/she may be able to afford a shorter tenure with higher EMIs. However, if the borrower has a lower income or higher expense, he/she may need to choose a longer tenure with lower EMIs,” said Pramod Kathuria, Founder & CEO at Easiloan.

Think about retirement goals

When borrowers take a home loan, they are essentially taking on debt that they will have to repay over time. This means that they will have less money available to save for retirement.

“If borrowers are planning to retire early, they may want to choose a shorter tenure so that they can pay off the debt sooner and start saving more for retirement,” Kathuria told CNBC-TV18.com.

Also, consider long-term financial goals 

Borrowers should check how home loan fits into their overall financial plan.

“Whether it’s early retirement or upcoming major expenses, such factors will influence the tenor they choose. To get an estimate of the monthly equated monthly installment (EMI) for different loan tenure, borrowers can utilise online home loan EMI calculators. They can adjust the tenure until they find an EMI that aligns with their budget,” said Kamaljeet Rastogi, Chief Executive Officer, SahiBnk, Powered by Manipal Business Solutions.

Factor in the interest rate

The interest rate on the home loan will also affect the amount of money borrowers pay in total over the life of the loan.

“A higher interest rate will mean that borrowers pay more in interest over time, so they may want to choose a shorter tenure to save money on interest,” Kathuria said.

Compare different loan options

There are many different home loan options available, so it is important to compare different loan terms and interest rates before making a decision.

“Borrowers can use a home loan calculator to compare different options and see how much they will have to pay in total over the life of the loan.

Plan for contingencies

Borrowers should also anticipate potential changes in their financial situation, such as job changes, future expenses, or unforeseen circumstances.

“Choose a tenure that provides flexibility and allows to handle such situations without significant stress,” Rastogi told CNBC-TV18.com.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow