Home loan india

With housing loan rates hitting the roof and no respite in site, walking away from property mortgages may seem to be a good idea. After all, the northward movement in home loan rates in the last 3-4 years has already sent the monthly budgets of middle-class consumers for a toss, forcing many to even sell their properties to clear the dues. Just check out home loans to choose the right bank suits your pocket!

However, walking away from property mortgages right away involves clearing of entire dues in one go and won't be feasible for many of us. Another option is pre-payment. In fact, those of us who cannot prepay the whole loan immediately can consider making a lump-sum part pre-payment.

"In pre-payment of a property loan, the borrower pays all or a large part of his loan with a lump-sum. The objective is either to close the loan or to reduce the number of installments, usually to negate the impact of rising interest rates. The bank adjusts the lump-sum amount against the outstanding balance of the loan, and depending on the bank, charges a pre-payment penalty," says Pankaj Renjhen, MD (Mumbai), Jones Lang LaSalle Meghraj.

Pre-payment, thus, brings down the principal amount and in turn the EMI or the tenure of the loan. Depending on what your concern is - paying a higher EMI or having a longer tenure - you can ask the bank to recalculate your loan.

If the consumer has surplus cash (after keeping a reserve for contingencies) or if his/her fiscal situation has improved, one can consider repayment of a portion of his loan so as to keep the EMI burden at an affordable level.

"In consultation with his personal financial adviser, one can also consider liquidating some fixed income investments (such as fixed deposits) to repay a portion of the home loan," advises Harsh Vardhan Roongta, CEO of apnaloan.com.

Another option is to leverage 'surplus' such as a bonus or maturing fixed deposits/life insurance policies or national savings certificates etc, and prepay.

"There are some investments which are 'locked up' for a time period and liquidating these right then might entail losses - so this might result in a delay before the investment can be 'liquidated' and then, pre-paying the home loan on that future date makes sense," says Kapil Wadhawan, VC and MD of Dewan Housing Finance.

Part-prepaying should, however, be done "if the consumer is absolutely sure that the finances available will not be required keeping a 3-5 year horizon in mind," says Ashish Mehrotra, business manager - mortgages, Citibank India.

However, in the first place, one should decide whether the benefits of closing one's home loan early outweigh the income tax benefits of keeping it live. Before one makes the actual prepayment of one's loan, one needs to keep sufficient cash reserves to pay the pre-payment penalty, if any, and to address any unforseen charges that the bank may levy.

The number of people pre-paying their home loans to avoid higher EMIs has risen by 15% says India's largest private sector bank.

ICICI Bank, the country's second-largest mortgage lender, says it has witnessed a 15% jump in foreclosures following interest rate hikes, as more borrowers want to pre-pay home loans to avoid higher interest burden. The bank feels there has been a 35% decline in home sales in the past 18 months. This drop does not take into account the impact of the latest round of rate hikes. So check out the updated interest rates of icici home loan to choose the best tenure.

"Unlike in the US, where foreclosure would mean borrowers sending keys to the banks, here it's complete payment of loan before schedule. As interest rates rise, borrowers tend to go in for pre-payment," says ICICI Bank retail asset head Rajiv Sabharwal.

ICICI Bank has hiked home loan rates twice in a little over past two months by 75 basis points. The bank is offering a floating home loan rate of 12.25% at present.

Mr Sabharwal says the bank hasn't seen a significant rise in home loan defaults, but has turned cautious towards lending as risk has risen. "We made our loan disbursal norms stringent as home prices went up earlier. With rates going up now, we are naturally being more cautious," he says. In order to ensure that the EMI burden doesn't rise so much as to force a home buyer to default, banks restructure loans, generally increasing the loan tenure.

The average tenure at ICICI Bank has increased from 13-14 years to 16 years in a year's time.

Meanwhile, a higher mortgage rate has also reduced a home buyer's eligibility to borrow. At ICICI Bank, a home buyer is now able to borrow 5-10% less than what he could have a year ago with same level of income. So while home prices have gone up in a year, a person's ability to buy a home has actually gone down. Thus, one could now afford only a smaller home than what he could have got a year ago.

Besides, ICICI Bank is now focusing on lending to end-users and not investors. "If you have bought a house to live in, you are more likely to continue paying EMIs even though interest rates go up," says Mr Sabharwal, indicating that investors were more likely to default.

Much of the investors have already exited or are on their way out from the real estate sector given the downturn, which is unlikely to give them any significant return.

Even banks are bracing for a possible correction in the real estate market and it's the prospective home loan borrowers who will be hit. Expecting a fall in property rates, lenders have either increased or are planning to increase the borrower's share in the actual cost of a home - generally referred to as down payment. Increasing demands for housing loan india has hiked up the interest rates which could really make hard to get a home loan for common person.

Until recently, some banks had been financing up to 90-95% of the home purchase value while the conservative ones had been giving out 85-90% of the actual price as loan. But a DNA survey has found that some banks have now started increasing margins on home loans, which means borrowers will have to shell out more while buying that dream house.

Margin is a cushion that a bank leaves between the actual value of the house and the amount of loan granted. In effect, the bank doesn't give out 100% of the price a buyer would have to pay. This is done to ensure that the bank is protected in case the value of the house turns out to be wrong or falls significantly.

Banks usually recover the loan amount by auctioning flats of the borrowers who default on repayment. When the price of a house falls below the amount the borrower is yet to repay, the bank might fetch a low value in the auction and suffer losses. Higher margins ensure minimal losses for lenders.

Kamlesh Rao, vice-president and business head of personal finance at Kotak Mahindra Bank, says, "The instances where 85-90% of the price of the property was given as loan have drastically reduced and the average is around 75-80% now for home loans. We have always been keeping our LTV's (loan to value) below these current average levels." Now Kotak home loan offering many great schemes which would really give long term benefits.

Even the public sector banks, which are already stricter with their margins, are also likely to increase the borrower's share. An Indian Bank official told DNA, "We had been financing 85% [of the actual value] and continue to do so. But we may look at increasing the margin levels."

Sujan Sinha, senior vice-president of retail assets at Axis Bank, says, "We try to maintain our margin higher at about 15-25% of the house value.

"In some good cases we have been financing up to 90%. But people do not want to borrow more. Our average loan to value is less than 60%." Want to check Axis bank home loan just try to get the detailed information about interest rates first then apply for a loan.

There was a time when banks used to finance 115% of the home value to also provide for furnishings, etc. If the property prices fall, such banks would be hit badly, say bankers.

However, the largest home financer in the country, ICICI Bank, which provides loans under its subsidiary ICICI Home Finance, plans to stick to current margin levels. Rajiv Sabharwal, senior general manager, retail assets at ICICI Bank, says: "We have been giving out 85% of the value for the past two years. We have never given 90-97%. As long as the valuation is done well, 85% is a good figure. We have an in-house valuation expert and we are comfortable with 85%. A genuine buyer would need that kind of financing to buy a house."

Already hit by spiralling prices of household items, those who have already taken home loans face the prospect of having to cough up higher equated monthly instalments (EMIs).

The Reserve Bank of India Tuesday increased its repo rate (the rate at which it lends to commercial banks) by 0.5 per cent, and the cash credit ratio (the minimum cash a bank has to set aside against deposits) by 0.25 per cent.

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This is bound to goad banks to raise the interest rates, including those imposed on floating home loans. Already, Punjab National Bank, Axis Bank, Yes Bank, HDFC Bank, IDBI Bank and ICICI Bank have increased their lending rates, and other banks are expected to follow suit. Now all these Indian banks which are offering home loan india here with all the necessary eligibility criteria.

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Said Rajesh Sharma, a senior executive with HDFC Bank: "What this means is that in the case of a 20-year loan, a 25-bps (basis points) hike will mean the EMI going up by Rs.17 for every Rs.1 lakh (Rs.100,000) loan amount, in case of a 50-bps hike, it will be Rs.34 and in case of 75 bps, the EMI will rise by Rs.51." here's all important information available for hdfc home loan without any hassles or registration needed.

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"Similarly, if it is a 15-year loan, a 25-bps hike will push up EMI by Rs.16 a month, a 50-bps hike by Rs.33, and a 75-bps hike by Rs.50," he added.

While those planning to buy a house will merely have to postpone their purchase, those who are already repaying an existing home loan will be the hardest hit.

Borrowers can absorb up to 200 bps increase, says Parekh

The country's largest home loan player HDFC today said that it may have to raise lending rates further if the Reserve Bank of India (RBI) increases key policy rates in the forthcoming monetary policy review on July 29. You can get the updated HDFC Home Loan rates here and also the general eligibility criteria to get approved faster.

But HDFC Chairman Deepak Parekh is hopeful that higher rates will not deter individuals from borrowing to finance home purchase. "The overall demand for home loans is unlikely to display any slowdown, and the borrowers can still afford another 100-200 basis point hike in loan rates," he said on the sidelines of the company's annual general meeting. "Higher interest rates are always painful. About 87 per cent of our borrowers are on floating rate," he said while advising borrowers to opt for fixed rate loans.

HDFC has been arguing that the effective borrowing cost is a little over 5 per cent if the tax benefits are included. The mortgage player has seen its sanctions grow 30 per cent during the first quarter to reach nearly Rs 10,000 crore, while disbursals were 28 per cent higher at 7,400 crore. It raised lending rates from July 1.

"We expect RBI to raise interst rates considering the prevailing condition. As the cost of funds will go up, we may have to increase the rates accordingly," Parekh said. Many bankers belive that the central bank, which has already raised the repo rate by 75 basis poitns and the cash reserve ratio by 125 basis points during the current financial year will resort to more monetary tightening with inflation estimated at a 13-year high of 11.89 per cent at the end of June.

The corporation said the average size of individual loans went up to Rs 14 lakhs during 2007-08 as income levels went up and individuals could buy more expensive houses.

While projecting a growth of 25-30 per cent in lending business for the financial year 2008-09, Parekh pointed out that the overall growth in home loan segment is unlikely to be affected by soaring interest rates, as there is a spurt in demand among the residents based in smaller towns.

Despite rising costs, Parekh said HDFC has not witnessed any default from the developers, although the company is now more cautious.

After the inflation crossed the 11% mark, it is possible that the commercial banks might increase the home loan interest rates.

Navin Jaiswal, a senior executive in a private company, had taken a loan of Rs 20 lakh with 8% floating interest rate and started paying EMI of Rs 19,000 per month two year ago. But now when the interest rates are closing near 11%, his EMI has gone up to Rs 22,000.

Thus the inflation has ruined the budget planning of his home and Jaiswal is apprehending worst days as home loan interest rate might go up.

"Whenever the inflation gets out of control, the Reserve Bank of India (RBI) is supposed to pump out the liquidity from the market by increasing the bank interest rate," YB Verma, a retired assistant general manager of SBI, said. "Today the prime landing rate (PLR) of RBI is floating between 12.75% and 13.25%. There is a strong possibility that RBI will soon raise the PLR which will push the home loan rates up," he said.

Rising home loan interest rates have affected the real estate industry. The property prices in Jaipur are stable for the past one-year. Many of the major projects in the city have not got buyers during this period. "If the home loan interest rates continue to increase, then it will drive the investors out of the real estate market," Atma Ram Gupta, a top builder, said.

Due to increased price of steel and cement, the construction cost has gone up by almost 30% and now if the home loan interest rates go up, there will be serious threats to the real estate industry, he said.

Although he declined to comment on whether the property market in Jaipur was facing a downturn, but he accepted that there was urgent need of steps which could revitalise the real estate market in the city.

The crude oil prices have gone up quite sharply over the last few months in the international markets. Currently, it is trading at around USD 130 per barrel which is around 70 percent higher than pervious year's levels.

India imports more than 75 percent of its crude requirements from the oil producing nations and therefore, any rise in the crude oil prices in international markets has a direct and immediate affect on the domestic oil marketing companies.

The governments in most emerging markets have some mechanism to moderate the oil price rise. The central government here also keeps a check on the rise in prices of petroleum products by sharing the subsidy burden through state-owned oil marketing companies, cutting the customs and excise duty, and floating oil bonds.

However, with the recent sharp rise in crude oil prices in international markets, it is getting difficult to hold prices through these mechanisms. Therefore, the government has decided to hike the prices of petroleum products.

In the recent hike, the government announced that prices of petrol will go up by Rs 5 per litre, prices of diesel will go up by Rs 3 per litre and cooking gas will go up by Rs 50 per LPG cylinder.

The government has also announced some customs and excise duty cuts to provide a cushion against the sharp rise in global crude oil prices. Analysts believe that this recent fuel hike is expected to increase the inflation rate by 0.5 to 0.6 percent.

Inflation is already ruling at very high levels (above eight percent) here. There is a fear and speculation in the market that the Reserve Bank of India (RBI) and the government do not have many options but to raise the cash reserve ratio (CRR) or interest rates to contain the rising inflation rate.

A rise in the CRR will mean that banks will have to park more funds with the RBI. Similarly, a rate hike will also mean higher cost of funds for the banks.

However, bankers and home loan analysts believe home loan interest rates will remain stable in the short to medium term as the liquidity position in the market is quite good. The next few months are crucial and borrowers should keep a close watch on various developments in the market.

The RBI increased the CRR by 75 basis points in one month from April to May this year. Since the liquidity situation in the system is good, banks managed to keep the home loan rates constant and in some cases reduced the home loan rates slightly too.

However, most banks feel that if the RBI continues to tighten the monetary policy further by raising the CRR again or raising the repo/reverse repo rates, it's possible that banks will respond by raising interest rates on various loans.

Banks fear that a rate hike will reduce the rate of growth in the housing loan sector. The Finance Minister and the RBI have increased their focus on the middle income home loan borrowers.

Recently, the RBI has reduced the risk weightage on home loans up to Rs 30 lakhs to 50 percent for capital adequacy purposes. As a result, some large banks have recently reduced the interest rates by 0.25 percent on smaller loans.

HDFC has launched 'home loan solutions in 30 minutes at your doorstep' an extensive campaign aimed at maximising customer convenience in the State by providing doorstep assistance on home loans.

With a distribution set-up spanning 12 offices and strong team of over 300 HDFC sales personnel, it would simultaneously cater to the housing needs of the home-seekers spread over 300 locations in the State within the shortest possible time by connecting with them.

The Reserve Bank of India's recent credit policy has no indications for a rate hike and home loan borrowers can thus expect the status quo to be maintained on the interest rate front. The Reserve Bank's annual statement on the monetary policy for 2008-09 has kept the key rates unchanged, including the bank rate unchanged at 6.0 per cent while the reverse repo and repo rate at 6.00 per cent and 7.75 per cent respectively.

The central bank has, however, effected a 25 basis point hike in Cash Reserve Ratio (CRR) whereby scheduled banks would now be required to maintain CRR of 8.25 per cent beginning May 24, 2008. This would mean a drain of Rs 9,000 crore from the system. The policy projects GDP growth for 2008-09 in the range of 8.0-8.5 per cent and endeavours to bring inflation to around 5.5 per cent in 2008-09 from the current level of 7 per cent.

RV Verma, Executive Director, National Housing Bank describes it as a neutral and positive policy which recognises the need for growth. The CRR hike will not have a direct impact on interest rates, he says. He adds that the RBI recognises that the supply side is more important at this point and any increase in interest rates would hurt supply and bring cost push inflation. The cost push factor is predominant here rather than demand pull which means the policy is trying to ensure that supply does not get restricted because of want of credit. Another welcome feature is that priority sector lending for home loans has been increased from Rs 20 lakh to Rs 30 lakh and the risk-weight reduced for home loans up to Rs 30 lakh. The policy has thus balanced growth and inflation while recognising the role of supply management in determining growth.

Canara Bank chairman MBN Rao says home loan rates are unlikely to increase and borrowers can expect finer pricing for loans upto Rs 30 lakh, given the reduced risk-weight and lower requirements of capital adequacy to be maintained by banks for such loans. The move would also encourage more loans to this segment which will specially help the middle class. Describing the policy as good and justifiably hawkish, Canara Bank Chief economist Manoranjan Sharma says paramount concern was to address inflationary tendencies. Credit growth has been at about 30 per cent in the last three years.

V K Khanna, MD PNB Housing Finance says it would be good for home loan borrowers, specially the middle class, which may be given preferential treatment in case of loans up to Rs 30 lakh. There will be a moderate liquidity curb through the CRR hike, which will not have much impact. "I don't personally see any increase in rates," he adds. The CRR hike will be offset by the reduced risk weights on loans below Rs 30 lakh, he says. According to Punjab National Bank GM Arun Kaul the policy does not indicate any change in interest rates. The RBI wants to maintain the money supply at 17%, as against the actual money supply at around 22%. The entire focus is to continue growth momentum by not tinkering with interest rates. It is still premature to say anything about interest rates on home loans. Banks will wait and watch and depending on the incremental cost of deposits and liquidity, decide on interest rates.

The Congress on Wednesday made a strong plea for a cut in the interest rates on home loans.

The plea was made by party spokesman Manish Tewari who asked the banks to follow the example of Central Bank of India and Allahabad Bank, which have reduced interest rates on home loans.

Following Finance Minister P Chidambaram's advice, other banks, including SBI and UCO Bank, had already reduced interest rates on home loans. However, some banks, especially private lenders, are still holding the interest rate stating that they would wait till the Reserve Bank cuts bank rate.

Tewari said the Indian Banking Association (IBA) should immediately call a meeting of its members and ask them to reduce housing loan rates.

Despite a marginal cut, interest rates on home loans are hovering around 11-12.5 per cent as against 8-8.5 per cent two years ago.

A cut in interest rates can provide relief to millions of people across the country, he said.

Tewari expressed the hope that the measures being initiated by the government and the RBI to contain inflation will have a salutary effect.

His statement on the issue came a day after the AICC told the government that price rise is "not a good thing" and asked it to take urgent steps to check the price rise.

The government is planning to provide an interest-rate subsidy on home loan for the economically weaker section and low-income group in urban areas.

''A proposal to provide interest subsidy on housing loans for the economically weaker sections and the low-income group in urban areas is under consideration of the government of India,'' minister of state for finance Pawan Kumar Bansal said. Details of the scheme are being worked out, he added.

As the interest rate on home loan rose from 7% in 2004 to 12% by March 2007, affordability of weaker sector to buy houses has gone down sharply. Because of the rise in interest rates, the equated monthly instalment (EMI) on a 20-year home loan went up by almost 50%. At the same time, as the real estate prices also rose sharply during the same period, houses become almost out of reach for the low-income group people.

The country could face a shortage of 2.65 crore houses by 2012. Government has been asking banks to lower lending rates to encourage spending and prevent growth from slowing down. FM P Chidambaram had suggested that banks should cut rates on home loans up to Rs 20 lakh.

You can argue that all farmers are facing difficult times, and, to support your argument, you can point out that a large number of farmers committing suicides are big farmers. Why then give only partial relief to them while waiving loans extended to marginal, small farmers completely?
The finance minister's waiver package has failed to address an important vote bank, i.e., artisans, mostly comprising the other backward classes (OBCs), who have been as badly hit as the farmers during the last few years of agrarian crisis.
Artisans in general and weavers in particular are dependent on meagre incomes from traditional occupations and are in dire need of a helping hand from the government. They do not stand to benefit from the largesse of the UPA government. The OBCs constitute a natural voter constituency for many of the regional parties among you and hence your demands and promises will help in consolidating your vote bank. You may promise that you will waive all loans taken by artisans, whenever you are elected to power.
The UPA government has repeatedly declared that it is gender-sensitive. You may, for instance, demand that the UPA government waive all loans extended to self-help groups of women by banks as per the government's directives.
With the mega loan waiver, the Congress party has attempted to grab the support the large vote bank of farmers. Why don't you champion the cause of the poor, migrants and the landless, most of whom are Dalits and the traditional constituency of the Congress, so that you do not lose out in populist sweepstakes?
You may promise (and demand) that all types of loans extended to SCs/STs will be waived and all SC/ST families given a compensation package of Rs15,000 per household on the same lines as the loan waiver assistance given to the marginal and small farmers.
You could also promise loans to the landless to buy land and then give them crop loans for cultivation and then, in one sweeping move, waive all loans. Can the UPA beat this?
And since the UPA doesn't seem to be worried about who will pay for its largesse as long as it can hold on to power, maybe you shouldn't either-even if the new promises cost much more.
My acquaintances in the banking industry tell me that after the Budget announcement of waiver of farmers' loans, various sections of rural borrowers are hopeful of receiving similar concessions from the governments in future and are therefore planning to stop making payments.
Some of my friends mockingly asked me if there was any chance of home loans in india also being waived as the interest rates have mounted over the past three years. Even if you promise them waiver of interest payments, it will endear vast sections of the middle class to your party.

Trickle by trickle, banks are unloading their bad home loans to the Asset Reconstruction Company India Ltd (Arcil), the aggregator of distressed industrial assets.

It is not an unnerving torrent yet, but there are signs of more bad mortgages being passed on to clean up books.

So much so, Arcil is expecting to buy as much as Rs 2,500 crore of bad home loans -- or a quarter of its total distressed assets book -- by the end of 2008.

S Khasnobis, managing director and CEO, Arcil, said the company recently bought some more of distressed home loan receivables.

"The total size of our retail home-loan paper would be about Rs 800 crore at present," he said. "This is through Rs 400 crore worth of receivables collected in each of the last two quarters."

He said the composition of bad home loans in the Arcil portfolio will increase, and this business is expected to drive future growth for the company.

In a recent study, rating agency Crisil attributed the rising trend of defaults in home loans to increasing competition in the banking sector to capture market share.

Non-performing home loans in india are currently quite high at around 3.3 per cent, Crisil said.

Khasnobis said defaults on home loans happen last in an economic unwind, after defaults on credit cards and personal loans.

A day after public sector banks led by State Bank of India cut interest rates, Finance Minister P Chidambaram raised hopes of another round of cuts.

The good news is, unlike last month, when bankers waited before acting on Chidambaram's suggestion, they appeared more forthcoming this time around, saying there was scope for fresh cuts.

During a pre-budget meeting with state-run bank chiefs on Tuesday, the Finance Minister flagged housing and consumer goods sectors as part of his overall thrust to ensure adequate credit flow.

The two sectors have been hit due to the credit squeeze enforced by Reserve Bank of India over the last 12 months to ensure that inflation stays within limits.

"Consciously, over a period of a year, there has been a slowing down of credit growth. However, this slowing down of credit has indeed, to some extent, affected flow of credit to the housing sector and consumer durables sector," Chidambaram told reporters after the meeting where he also reviewed the performance of public sector banks during the first three quarters. He said banks have been advised to pay attention to the requirements of credit in these sectors.

Public sector lenders Canara Bank, Corporation Bank and Allahabad Bank have decided to lower interest rates on housing loans, preferring to keep their prime lending rates (PLRs) unchanged. ICICI Bank [Get Quote] Managing Director and Chief Executive Officer K V Kamath has indicated that the country's second largest bank would review interest rates only in 2008-09.

Canara Bank, which had reduced interest rates by 50 basis points on fresh home loans in October 2007, will cut floating interest rates by 25 basis points for new as well as existing borrowers from February 7.

The revised interest rates for housing loans up to Rs 20 lakh are 10-10.5 per cent and 10.25-10.75 per cent for loans above Rs 20 lakh. The bank's PLR stands at 13.25 per cent.

Canara Bank Chairman and Managing Director M B N Rao said, "The interest rates would have definitely softened if this quarter was in the middle of the year. There could be resistance (to lower PLR) because this is year-end and quarter-end."

The bank's net interest margin stands at 2.4 per cent. Mangalore-based Corporation Bank has decided to lower interest rates on personal and home loans by 50 basis points and on loans to small enterprises by 25 basis points from February 15 for existing as well as new borrowers.

Over the last year or so, there have been expectations of a reduction in home loan interest rates. There are various factors that led to these expectations .

The credit policy document and its review statement provides clues on which way the interest rates are likely to move. The increase or decrease in benchmark rates decides the pace and direction of interest rate movements. The decision of the banks to increase, decrease or remain neutral to these interest rate hikes depends on the mandate and direction given by the Reserve Bank of India (RBI).

The RBI has to consider a number of factors. These include the monetary situation of the country, the liquidity position, the needs of various sectors, inflationary pressures, growth needs etc. The central bank has to balance out these requirements from a long-term perspective for the economy.

For quite some time, because of the low inflationary levels, banks were expecting some relief from the RBI. Also, the borrowers have been expecting lower interest rates. The recent two consecutive cuts in interest rates by the US Fed is also a signal of a forthcoming soft interest rate regime. In the past, contrary to the expectations of any relief on the interest rate front, the RBI hiked the statutory deposit - cash reserve ratio (CRR) - by 0.5 percentage point to 7.5 percent .

Home loan consumers in India may get some good news in the months to come with country's biggest private lender ICICI Bank saying it could cut interest rates in the first quarter of next fiscal. Lower rates would not be only for new customers, but existing floating-rate clients also, ICICI Bank's MD and CEO KV Kamath said.

"We expect the rates to drop in Q1. After that we will see if we can write down the rates," he said when asked if ICICI Bank would cut housing loan rates. ICICI is also looking to start risk-based pricing, under which it would start offering lower rates to consumers with better creditworthiness, in about two years, he said.

However, any rate cut for consumers, who have had to reel under a number of interest rate hikes in the current fiscal, would depend on benchmark interest rate trends developing over the coming months.

Government of India (GOI) is actively considering to provide a subsidy of 5% on home loan interest rates to the economically weaker sections of the society in the next year's budget. Being considered by major political outfits as a buildup towards the 2009 elections, this subsidized home loan scheme might go a long way in fulfilling a long cherished dream of the common man - owning a house.

The home loan interest charged by banks and other housing finance institutions (HFCs) will be subsidized and government will bear the costs. This step will put an extra burden on the the exchequer at Rs. 1600 per year. Expressing concerns over the benefits of the real estate boom being limited to the affluent and upper echelons of the society, the urban poverty alleviation minister Kumari Selja said, "The objective of the interest subsidy scheme is to ensure the economically weaker section gets the opportunity to own houses."

Presently the housing sector for the economically weaker section (EWS) of the society is facing a shortfall of 31 million dwelling units and with this scheme GOI is expecting to meet the requirements of more than 50% of this segment in the next five years.

The modalities of this scheme are being worked out and this subsidy scheme is likely to fix a loan ceiling of Rs 80,000 for EWS and Rs 1.50 lakh for the low income group (LIG). People who earn up to Rs. 3,300 per month are classified as EWS whereas those earning between 3,301 and 7,300 are classified as LIG.

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The New Year is likely to bring in some good news for home loan borrowers as most market players are anticipating a slash in the interest rates on home loans. However, auto loan rates may remain intact, they say.

Bankers expect the Reserve Bank of India (RBI) to cut key interest rates during its monetary policy meeting on January 30, as the bank has been successful in fighting inflation and lowering credit growth.

"We expect an interest rate cut by the apex bank by the end of this month as banks are seeing a slackly credit growth. Following this, one can expect some respite in home loan rates as there will be some correction," said Ashvin Parekh, partner and national leader of global financial services at Ernst & Young.

source: Sify

Competition Commission of India (CCI) has raised questions over all public sector banks raising and cutting interest rate at the same time. The simultaneous movement in rates, the competition watchdog suspects could be cartelisation. CCI - which is a toothless body at present with no penal powers and its role confined to advocacy - has written to RBI saying this upsets market dynamics and could be affecting the interests of ordinary consumers.

Banking is the latest sector which has come under CCI's lens with the commission, whose fate was till recently uncertain, having raised similar questions over the shipping and tyre sectors, prompting corporate affairs minister PC Gupta to suggest an enquiry.

Bankers, however, did not take the CCI's letter too seriously, pointing out that almost all interest rate movements were guided by RBI's monteary policy stance and the liquidity conditions prevailing in the market. Private banks, which account for around a quarter of the market, also raise or cut rates accordingly. But CCI has opted to keep them outside the purview of the review for the moment.

CCI's reference comes at a time when banks are already being probed by MRTPC for not offering discounts to existing home loan borrowers, while lowering the rates for new customers.

You may have to live with higher residential prices. After all, in a country where citizens are increasingly flocking to big cities for job opportunities, is there any other way that property prices could go? But then if you are a smart buyer, who is willing to see through the dust, there are opportunities galore to buy that dream house. And yes, that too at an affordable cost.

There is light at the end of the tunnel for home buyers. Old houses in the same locality are available at much cheaper market rates than the newly-constructed ones. So should you toy with the idea of buying an old house? So to get the afforable loans just compare home loan rates.

Raj Kumar of Jones Lang Lasalle Meghraj says: "That depends on one's level of need, one's paying ability and the condition of the house. While a new house is always a better investment, there are certainly occasional good deals available in older units, too. Units in projects by reputed builders often do have sufficient resale value, especially if they are in good locations. If the unit is in a location that meets the buyer's need, all necessary conveniences are available in the vicinity and if it is in good condition, buying it makes sense" .

Bharati Enterprises is in talks with real estate companies for acquiring and leasing land for their proposed retail outlets in North India.

"We are in talks with Unitech, MGF, DLF and Parsvnath, and are looking at buying and leasing land for our retail outlets. The decision to buy or lease land for the outlets will depend on our needs," said Rajan Bharati Mittal, MD, Bharati Enterprises at the sidelines of a Ficci summit on retail here.

Bharati plans to roll out its retail outlets by the first quarter of financial year 2008-09, and is also likely to operationalise its cash-and-carry tie up with global retail giant Wal-Mart by the third quarter of the same fiscal.

source: http://www.business-standard.com/common/storypage_c_online.php?leftnm=11&bKeyFlag=IN&autono=31374

A three-day property and home loan expo, being organised by the Industrial Development Bank of India Limited (IDBI Bank) got under way at Valluvar Kottam here on Friday.

The organiser has brought together more than 40 builders and flat promoters for the event. They would showcase projects worth over Rs.2,000 crore in total. All of IDBI's products, including personal and educational loans, would be available to visitors, senior officials said. The focus would be on home loans, though, and customers with good credit-worthiness would be given concessions such as waiver of processing fee and discount on interest rates, they said.

Another highlight of the fair is the presence of a few stalls offering home needs such as kitchen accessories and interior decoration. Some builders have also offered their services to those looking for building contractors for constructing their own houses.

Forget the metros, it is the smaller cities in India that are really witnessing a housing boom. Sample this: every fourth household in sleepy Gangtok took a housing loan from a scheduled commercial bank in 2005-06, over one-fifth of all homes in Bhubaneshwar did the same that year.

At an average of barely Rs 3.4 lakh per housing loan, the residents of the Sikkimese capital may not be able to match the residents of the metros when it comes to the size of the loan, but in terms of the sheer proportion of families that are borrowing to have a nest they can call their own, small-town India is on the march.

However, in terms of the value of home loans, Mumbai tops the list with a little under Rs 24,000 crore in 2005-06, the latest year for which detailed data is available. Delhi was next with over Rs 16,000 crore, followed by Bangalore with over Rs 14,000 crore, Chennai (a little more than Rs 10,000 crore) and Hyderabad (over Rs 7,000 crore). The metros dominate this list, even without including suburban districts like Thane and Thiruvallur.

The slowdown in home loan growth would continue in 2007-08, with disbursements expected to grow at only 10 per cent, on the back of a subdued 18 per cent growth in 2006-07.

Besides, the present home loan non-performing asset (NPA) figures of banks understate the extent of delinquency in the sector as loans given in the last three years, which form 71 per cent of the total outstanding home loans, are yet to season, according to a Crisil Research report on mortgage finance.

Mortgage finance by banks and housing finance companies grew 35 per cent on a compounded basis during 2000-01 to 2005-06 to Rs 86,500 crore, boosted by low interest rates and a booming economy.

Will DLF orchestrate the burger war in India? US' two leading quick service restaurant (QSR) chains Burger King and Wendy's have held talks with the real estate major for an entry into the Indian market. Before applying for the loan it's necessary to Compare home loan an go for the best option which suits your pocket holes.

Sources say that the ball is now in DLF's court for zeroing in on a partner. The exact partnership model that is being explored is yet not known.

Burger King has been keenly looking at an India entry and had even mandated Kotak Mahindra to scout for a local partner. Internationally, Burger King mostly operates through the franchising model, and almost 90% of its 11,100 restaurants are owned and operated by family-managed businesses.

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The owners of second-largest listed real estate firm, Unitech Ltd, plan to set up a non-banking finance unit to sell home loans in the fast expanding market, the Mint newspaper said on Saturday.

"We are looking at within a year to start the business," the paper quoted Unitech Managing Director Sanjay Chandra as saying.

"We will provide services related to real estate finance, possibly mortgage finance."

The financial services business would be managed by an unlisted group company and the funding would come from the Chandra family's personal wealth, the paper said.

It also said Unitech was in talks with international insurance firms to offer general insurance in India.

The current credit cycle has had a substantial mortgage element from the beginning. The inexorable rise in foreign exchange reserves flooded the economy with liquidity, so companies had no need to borrow. Some of them had so much cash flowing in that they went round the world looking for businesses to buy. For the first time in history, Indian companies began to export capital instead of importing it. Left without their traditional borrowers, banks had to find some use for their overflowing cash. So they cultivated borrowers that they had traditionally treated with disdain - prospective home buyers. And when buyers hesitated, banks went after builders, leaving it to them to lure buyers.

In this way they built up a large portfolio of home loans. The Reserve Bank of India was always chary of mortgages; from last December it began to raise interest rates. But that did nothing to dampen either the banks' enthusiasm or the builders' energy. When real estate prices were doubling every year, a rise of a few per cent in interest rates could hardly discourage anyone from investing. But the new financial year changed the mood. The stock of creditworthy borrowers began to run out. First, sales of two-wheelers began to fall; sales of cars soon followed. The banks' perception of risk increased; they began to raise rates. By July, growth of new house loans was also slowing down.

India has an increasingly strident anti-organized retail movement. One of its demands is that the licences for cash and carry wholesale companies, such as yours, should be cancelled. How do you respond to this?
I want to explain that we are a wholesale chain and sell only to registered customers. We are helping support mom-and-pop shops here. We give them products that help to run their businesses and compete with big retailers. We have customer consultants who help them build an assortment, and will bring one of our international programmes, where we create localized marketing campaigns for neighbourhood stores, to India next year.
From your experience in international markets, what is the impact of organized retail on neighbourhood stores? How can small stores respond to such a threat?
Yes, the coming of organized retail does lead to more competition and pressure for small shops. But, we believe individual shop owners can survive because they know their customers well. They can build their assortment, fine-tune it according to the needs of customers, and provide more personalized service.
We have seen in Russia, central Europe and Turkey that the coming of organized retail led to initial surprise. But after that, small retailers can grow again. We saw the number of small retailers also increased.

There was euphoria and expectation. Everyone hoped that the rates would come crashing down. Very much like how the rates peaked steadily with every Reserve Bank of India (RBI) move, the anticipation of a fall was huge. New borrowers were offered lower rates compared to existing borrowers. And Devansh was certainly unhappy and upset.

Three years ago, he procured a home loan of Rs 20 lakhs. The tenure of the home loan was 10 years. The rate of interest was a humble eight percent. His monthly EMI outflow was a reasonable Rs 24,000. Today, the interest rate stands at a whopping 13 percent. This translates to a monthly outflow of Rs 30,000. Devansh contacted his bank to find out if any rate cut was being planned for existing borrowers and their answer was ambiguous.

The burden of unanticipated increase in monthly EMIs caught Devansh off guard. He had planned his monthly expenses and other financial commitments. Now, it had all gone for a toss. He had to rework on his finances, take stock of his assets and explore any changes to the structure of his home loan. The two most obvious options before Devansh are pay higher EMI or increase the tenure of the loan.

The practices by banks for increasing housing loan interest rates for existing borrowers could be in for a complete overhaul, with the RBI Governor, Y V Reddy, taking exception to such methods.

Reddy yesterday took exception to the arbitrary increase in interest rates on fixed rate home loans without any linkage to any benchmark, banking sources said.

While addressing a meeting of bankers yesterday, the RBI governor said that "There have been too many (interest rate) increases and banks have taken coercive steps for recovery. As banks, we should not bring in such unsocial elements. Banks should be transparent. Banks should not keep on revising interest rates". This was revealed by the chairman of a leading public sector bank.

With longer life spans and nuclearisation of families, has come the need for greater financial planning among the elderly. While it goes without saying that early retirement planning is best, what about those older people who, due to unfavourable circumstances, have not been able to build an adequate kitty to live off?

The Reserve Bank of India, along with the National Housing Board, permitted reverse mortgages to serve the needs of the elderly who have a house to live in, but not enough financial resources to meet their expenses. Subsequently, some banks have started offering reverse mortgages in India.

-> A reverse mortgage, is, as the name suggests, a "mortgage loan in reverse", with the bank making a payment as per a predetermined schedule to a home owning senior citizen.

-> Those above the age of 62 are eligible for a reverse mortgage. When the main borrower and his/her spouse are alive, generally, both become co-borrowers.

-> The couple must be residing in the home against which they are taking a reverse mortgage. In addition, the house must be unencumbered, and worthy of being mortgaged. Payment of taxes, insurance premium etc. are the home owners' responsibility.

'Find and fund your house' is the motto of State Bank of Mysore's Home Loan Utsav that opened here on Monday. A 50 per cent concession in processing fee is offered. Some 10 builders are showcasing their housing projects at the venue. If a visitor decides to choose one and seeks a housing loan for it, the bank would provide its home loan that takes care of furnishing, and registration costs, in addition to the cost of the house.

The home loan can also be insured under 'SBI Life' for a one-time premium that is part of the home loan.

Loans are available with a floating rate of 11 per cent interest. Actor Kumari Sachu inaugurated the utsav .

With a majority of the nationalised and private sector banks going in for cuts in their lending rate on home loans and others loans, that too before the RBI's mid-term review of monetary policy this month-end, it is expected that the urban co-operative banks in the state might follow suite.

With the recent rate cuts on home lending rates and vehicle loans by banks like ICICI Bank, IDBI, State Bank of India (SBI) and Bank of Baroda (BOB), the urban co-operative banks are feeling the heat of competition from private and nationalised banks.

Jyotindra Mehta, managing director of Rajkot Nagarik Shahakari Bank Ltd (RNSBL) told Business Standard, the reduction in the lending rates by the nationalised and private sector banks will certainly have impact on the co-operative bank's business on home loans and vehicle loan.

Country's largest public sector lender State Bank of India (SBI) has launched two new schemes - Reverse Mortgage Loan and SBI Home Cash - for people in Gujarat.

The Reverse Mortgage Loan has been specially designed for senior citizens, SBI Chief General Manager and Gujarat Circle Head H C Patnaik told reporters here last night.

Under the scheme, as senior citizens have inadequate income to support themselves, bank makes payment to the borrower against mortgage of his property, either by way of periodic installments or lump sum payment.

Feeling the heat of competition, Bank of Baroda (BOB) has cut the interest rates on new home loans for the second time in just 45 days. It has slashed the floating rates by upto 75 basis points to 10-10.5 per cent.

The public sector bank has also reduced the number of repayment slabs for floating loans from five to three.

"We have reduced home loan rates again in response to the decisions by competing banks to cut rates", V Santhanaraman, Executive Director, Bank of Baroda said. The new rates are effective from October 15, 2007. The bank had reduced the rates by 25 basis points in September.

BOB's floating rate loans upto Rs 20 lakh would attract interest rates between 10 per cent and 10.50 per cent, for a period ranging from 5 to 25 years. Under the new three-slab structure, loans with repayment periods upto five years would attract 10 per cent rate of interest.

This festive season your dream home may just be within your reach. The slowdown in retail asset growth and competitive pressure have forced banks to reduce rates on retail loans.

After HDFC reducing floating home loan rates by 50 basis point, it is now the turn of Axis Bank, which has reduced its floating home loan rates by 50 basis points to 10.50 per cent for existing and new customers.

Kotak Mahindra Bank has also reduced its floating home loan rates by 50 basis points. ICICI Bank, the largest private sector bank in the country, last week cut its retail loan rates, except for home loans, by 50 basis points.

However, it is important to note that the reduction in rate is on floating rate loans, which can be increased at the discretion of the bank depending on the market situation.

Private sector lender Axis Bank has reduced floating interest rates of home loans by 0.50 per cent for existing and future customers, a senior bank official said today.

The industry practice was to acquire fresh customers by offering a lower rate on floating loans "but we want to maintain a parity between both our existing and future customers," Axis Bank's Assistant Vice-President Imtiaz Ahmed told PTI here.

The rate has been brought down from 11 per cent to 10.5 per cent for both categories, he said, adding that the revised rate comes into effect from October 1.

The bank (formerly UTI Bank) has, however, not effected a change in its fixed home loans rate, which remains at 13 per cent.

GE Money and Wizard are set to invest $200 million in the Indian market and thus transform the home loan industry in the country. With an aggressive interest rate of 9.99% to consumers and a successful business model that ensures superior customer service, the joint-venture is planning to wake-up home loan buyers in the country.

GE Money, the consumer financial services arm of the conglomerate General Electric Co.and Wizard, an international mortgage major have established a joint-venture, Wizard Home Loans plans to set up 250 branches in the country by 2011. The JV is set to bring about a revolution in the sector by introducing an innovative strategy based on a wealth-sharing model, pioneering owner-operator branches, competitive pricing policy and customer-focused transparent mortgage solutions.

This festival season could make Prospective home loan borrowers smile a bit. Housing finance Institutions are now out to surprise by their lowered lending rates.

Housing Development Finance Corporation (HDFC) has lowered its floating interest rates on new home loans by 0.75 percentage points to 10.50% for a limited period. State Bank of India (SBI), too, announced similar concessions for fresh home loan borrowers in Kolkata. SBI is offering the scheme only at its home mela held in Kolkata.

The country's largest bank is offering 10.50% interest for loans above Rs 5 lakh in case of approved housing projects. In all other cases, the bank will charge 10.75% from borrowers in Kolkata. These rates are available for loans beyond a five-year term.

Union Bank of India has cut interest rates on home loans by 25-50 basis points, depending on the size of the loan. The reduced rates are applicable to new home loans.

For loans less than Rs 20 lakh, the floating rate has been revised by 25 basis points to 10.75 per cent (11 per cent) for a tenor of 5 years, 11.25 per cent (11.5) for 5-10 years and 11.50 per cent (11.75) for 10-20 years. The fixed rate remains unchanged at 10.75 per cent.

In the case of loans above Rs 20 lakh, the discount in interest rates would depend on the margin of loan taken. For instance, if the customer takes a loan for over 75 per cent of the value of the house, the discount in interest rate would be 25 basis points.

Frauds in the financial services industry are on the rise and the situation is even more alarming in case of the housing loans.

The frauds in the sector have increased tremendously, of late, leading to a rise in non-performing home-loan assets for banks.

Combating frauds has become a high priority because mortgage lending and the housing market have a significant effect on the national as well as global economy.

In the US, the FBI recently issued a warning that mortgage fraud had reached epidemic proportions, while a recent press report in the UK said lenders there are set to lose millions of pounds on fraudulent mortgages.

If skytouching interest rates have grounded your dreams of owning a home, take heart. You now have the option to borrow at just 9.99% rate of interest.

Consumer finance services provider GE Money and international mortgage player Wizard on Thursday announced a joint venture - Wizard Home Loans - that promises to offer loans at a floating interest rate of 9.99%. The company will invest $200 million in equity by 2011 and set up over 250 branches across the country by then.

"GE has 75% stake in the JV and will accordingly invest in the venture," Wizard India CEO Egisto Franceschi said on Thursday. The remaining 25% will be held by the founders of Wizard Home Loans. As much as $1 million has already been infused. By the close of this fiscal year, over $10 million would be invested, he added.

India's largest real estate developer by market value, DLF Ltd said the high interest rate on home loans has slowed down the demand for homes and properties.
"I want the interest rates to be reduced," Kushal Pal Singh, chairman, DLF Ltd said. "The moment interest rates drop, people will come forward to buy houses."
DLF Ltd chairman Kushal Pal Singh
DLF Ltd chairman Kushal Pal Singh
The Reserve Bank of India has increased the interest rates on home loans by almost 400 basis points since January 2006 to cool the property market. Home loan rates have moved up from 7.50% to 11.50% in the last two years.
"Due to the increase in the mortgage rates, the market has got subdued at this moment temporarily," Singh said, adding, "there is a slowdown on the mortgage side of the market."
Singh, who made his name and money building up Delhi's southern suburb, Gurgaon, is among those who have benefited from the three-year boom in real estate in India. Lower lending rates three years ago, coupled with tax breaks for house ownership and rising salaries, helped boost real estate prices three times in this period. Singh started developing Gurgaon in the late 1980s when land values were still at throwaway rates. Now high-end flats in Gurgaon can sell for as much as Rs3 crore a unit.

GDP ratio for Home Loan in India continues to be a dismal 5 per cent as against 50 per cent in US and UK Despite a boom in the real estate.

These observations were made by the Associated Chambers of Commerce and Industry of India (Assocham), which also pointed out that since buying a home requires huge investment, higher home loan GDP ratio is necessary as 90 per cent of borrowers are the first time borrowers.

"At present, India has a housing shortage of about 19.4 million units of which 6.7 million is estimated for urban sector and 12.7 million units in rural. However, the demand is set to shoot up to 45 million units for both rural and urban areas by 2012," said Assocham president Venugopal N Dhoot.

Mivtach Real Estate, a subsidiary of investment company Mivtach Shamir, has purchased along with partners 1,100 dunams (about 275 acres) in the Indian city of Chennai, where it plans to build assets spreading over 2.25 million square meters (24.2 million square feet), including offices, hotels and commercial centers.

Chennai is India's fourth-largest city. Mivtch Shamir's investment is expected to amount to $13 million (out of a total of $30 million), and in exchange it will own 32% of the Indian project company.

This is not Mivtach Shamir's first investment in India. Two months ago the company announced that it would invest $15 million in the Tower Vision company, which builds and operates cellular antennas in India.

Mivtach Shamir also announced that it would invest up to $25 million in the INMB company, which plans and builds hotels in the business sector across India.

As much of the mortgage world reels, Greg Sullins is hiring, pioneering new systems and drumming up clients for a startup loan-processing company based in Charlotte.

It helps that his business is part of technology giant IBM Corp. His goal is to bring a normally paper-intensive business into the digital age, improving efficiency and cutting costs for prospective customers.

"The opportunity lights are all on," Sullins said. "Clearly, our phones are ringing right now with lenders who have a lot of pain points."

IBM Lender Business Process Services Inc. got its start late last year and went public with its plans this spring. About half of the unit's 150 employees are in Charlotte, and Sullins expects that number to double in the next six months or so.

Housed in IBM's University area complex, the business won't make loans itself, but wants to provide systems that help lenders do everything from input a borrower's application to close a loan. By going more electronic, the idea is to speed up the process and make it easier to provide status reports to loan officers and consumers along the way.

IBM, based in Armonk, N.Y., hasn't announced any clients yet but plans to be processing applications by early next year. The unit so far has obtained licenses to operate in 41 states and Washington, D.C., and plans to eventually enter more states. It also has received permission to handle Federal Housing Administration loans.

The business is coming to life during one of the mortgage industry's biggest downturns. The crisis began with defaults among subprime borrowers with spotty credit and spread to more mainstream lenders who suddenly found it difficult to get financing to make loans.

Yatra Capital Ltd is planning to invest over 1 bln usd in real estate in India over the next year, The Hindustan Times reported, citing Yatra's investment managers Saffron Asset Advisors.

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State Bank of India (SBI) is reportedly considering options to boostdemand for retail loans, by reviewing lending rates in October 2007, when the festival season begins, says media reports quoting bank sources.

SBI and other banks are likely to opt for a rate hike if credit does not pick up by the end of August 2007.

The banks' prime lending rates (PLRs) increased by 250-300 basis points during 2006-2007. The PLRs of most major banks have increased to 12.75-15.75 per cent at present from 10.25-12.75 per cent in 2006.

Bank of Baroda (BoB) has reduced its home loan rates for new loan seekers/borrowers by 50 basis points. For floating rate loans below Rs 20 lakh, the new home loan rates are in the range of 10 per cent to 11 per cent and for loans above Rs 20 lakh, the new rates are in the range of 10.25 per cent to 11.5 per cent. For fixed rate loan below Rs 20 lakh, the new rates will be in the range of 11.25 per cent to 12.5 per cent and for loans above Rs 20 lakh, the rates will be in the range of 11.5 per cent to 12.75 per cent, said a bank press release.

The cut in interest rates has been done with a hope to generate demand among the housing finance consumers. BoB saw a slump in demand for especially for retail loans, for the first five months of 2007-08.

BoB officials are concerned about the high costs of deposits which offer high interest rates, though there has been a negligible loan growth in the first five months of 2007-08.A There has been a slow down in loan off-take after a series of rate hikes in 2006-07

HDFC announced the closure of its first sponsored 'HDFC International Real Estate Fund' (HIREF) at $800 million on August 30. This will be invested in FDI-compliant Indian realty projects.

HIREF makes HDFC the largest player in the real estate private equity space in India. One of the largest international real estate pools, the nine-year close-ended fund, that was open only to foreign investors had been privately placed and subscribed by 28 investors.

The fund will have a conservative approach and will invest in residential, commercial, hospitality, education, healthcare and developers' entity level.

The fund's strategy is to invest in these companies and manage its funds in a manner that enables realty developers to harness growing Indian economy and develop profitable ventures.

Following the real estate majors like Emaar and Nakheel, Dubai-based infrastructure giant SS Lootah group is set to enter the Indian real-estate market.

The group which may set up its office in Delhi is reportedly in discussion with Hyderabad-based IVRCL to invest in a construction project.

Real estate developer, Vipul Ltd, the eighth largest real estate company in India, plans to expand into Tier-II markets.

Media reports that the company is expanding into cities like Nagpur, Bhubaneswar, Chandigarh, Ludhiana, Mohali and Dharuhera (in Haryana). The company also has residential and commercial projects only in Gurgaon, Delhi.

The company is also exploring buying out projects of smaller developers who may have projects in good locations.

Vipul is also involved in the development of the proposed Nano city project, which will also house a information-technology park in Haryana. Nano city project is a Rs 5,000 crore city, a joint venture between the Haryana State Industrial and Infrastructure Development Corp. and Nano Works Developers Pvt. Ltd.

Shobha Developers Ltd has entered into a memorandum of understanding (MoU) with the Kerala government to set up a Rs 5, 000 crore hi-tech city here. Mint reports that the project will create 75,000 direct jobs and provide 600 apartments for free to the poor.

This 400 acres city, dubbed Shobha Hi-tech City is set to provide utilities such as electricity, gas, water, sewage and communications.

The project will create an integrated city with a focus on research and development, knowledge dissemination, information technology and pure and applied sciences, the builder said.

It will have a 7 million sq. ft knowledge park, retail shopping malls and avenues, hotels, resorts, residential complexes and a marina.

Real estate developer, Parsvnath Developers Ltd plans to enter the international real estate market by forming offshore development companies in various countries like Sri Lanka, Mauritius, Singapore and the UK and in West Asia to kick off projects overseas, even as the real estate market in India starts to slow.

Mint reports that Parsvnath Developers Ltd will be ready to make the move by September 2007. Currently, Parsvnath is present in 48 cities in India and plan foray into the offshore markets either on its own or through joint ventures with local developers or the government.

Parsvnath has already entered a joint venture with the Oman-based, Al-Hassan Group of Industries and is looking at developing stand-alone housing projects, retail projects and integrated townships in the offshore markets.

It is also looking at bidding for airport modernization and management projects and is in talks with leading global airport operators to jointly bid for projects.

The Bombay Stock Exchange Sensitive Index or Sensex as it is more popularly known fell by 643 pointson Thursday, August 16. Various stock market experts have blamed the subprime crisis in the United States. So what is this subprime crisis? And why is it having such a decisive impact on the Indian stock market? To know more read on.

Essentially it all starts with an American wanting a home loan. But there is a slight problem. He doesn't have a great credit rating. So a bank will not give him a home loan. Enter a second American who has a good credit rating and is willing to take on some amount of risk. Given his good credit rating the bank is willing to give him a loan. The bank gives the second American a loan at a certain rate of interest.

The second American divides this loan, into a lot of small tranches and gives it out as home loans to lots of other Americans like the first American, who do not have a great credit rating and to whom the bank will not give a home loan.

Many home loan borrowers have experienced the pain of rising interest rates in the recent past. Monetary tightening by Reserve Bank of India [Get Quote] left many families see their EMI burden rise by as much as 25 per cent.

Where are interest rates expected to go from here? What should the new home buyers do? What should the existing home buyers be aware of?

We answer some of these questions in this article.

The interest rate hike by RBI was part of a conscious strategy to rein in inflation and curb credit growth in Indian economy.

With wholesale price inflation well below 5 per cent now, experts are of the opinion that RBI might be done with the rate hikes for now. The recent decision of RBI to increase Cash Reserve Ratio instead of increasing the benchmark interest rate was an indicator of this trend.

There are of course some voices amongst the experts that RBI might still take a view that inflation numbers are still on the higher side. That said there seems to a consensus that in all likelihood, the interest rate hike in near future, if any, will be one-off.

In short, the interest rates are either already at their peak or nearing it.

What it means for the new set of home buyers is that they should only opt for floating rate loans.

A study by realty consultants, Knight Frank on 'Emerging Centres' revealed that the realty is on an upswing in smaller cities like Pune due to factors like consistent and sustaining GDP growth, the expanding service sector, rising purchasing power and changing government policies.

The reports also said that retailing and entertainment avenues have led to demand for quality residential space.

Today the scenario of Loan market is changing rapidly. More and more people are applying for loans whether for buying car, home, personal etc. There has been malpractice in the home loan market to a large extent; the customer never gets the fair deal the major portion of the profit goes to direct selling agent (DSA).

Now the home loan market will see a major change as the National Housing Bank (NHB), the apex body for promoting and regulating specialized housing finance companies (HFC), is stressing on engaging certified mortgage counselors to ensure customers get fair advice before finalizing home loan deals. The practice of using ordinary direct selling agents (DSAs) by home loan financiers will soon be history.

The benchmark of home loans is not an independent gauge. It's neither the Reserve Bank of India (RBI) nor the National Housing Bank (NHB), which set the benchmark for prime lending rate for home loans. It's the banks which compute their internal prime lending rates. For example, HFCs benchmark the home loan rate on retail prime lending rate (RPLR), while ICICI Bank uses floating reference rate as the base and the State Bank of India (SBI) uses State Bank Advance Rate (SBAR).

Let us see what is the benchmark interest rate for the home loan . A benchmark rate is used as the base to which the banks/HFCs (housing finance companies) link the effective rate of interest. The effective floating loan rate is usually 2-3% higher/lower than this rate. This benchmark is not the actual cost of funds for the bank, but an internal measure related to the cost of funds. The difference between the cost of funds and your home loan rate is the bank's 'spread'.

Home loans are unlikely to turn expensive despite the increase in cash reserve ratio (CRR), which will make money scarce for banks. The Reserve Bank of India (RBI) has raised CRR by 50 basis points to 7%, but a large section of bankers told ET that they do not expect lending rates, including home loan rates, to go up.

At the same time, bankers are unlikely to lower the home loans rates. This comes as a bad news for a large number of borrowers who had expected interest rates to come down post-credit policy. Earlier, Deepak Parekh, chairman of HDFC, the largest home loan provider, had said HDFC would consider a lower lending rate if RBI does not hike CRR.

While the home loan sector continues to rack up healthy rates of growth, consumers of floating rate loans continue to get the short shrift.

Though interest rates continue to fall, earlier customers are not getting the benefits from the lending banks and home finance companies. And this after borrowing at floating rates - in other words, taking the risk of an upward change in the rates.

Floating rates are pegged against a benchmark - like the prime lending rate (PLR), medium-term lending rate (MTLR), retail-term lending rates (RTLR), and so on. Banks and HFCs fix the home loan rate by subtracting from this benchmark a certain spread for its retail customers.

If you have a housing loan with a floating interest rate, you can breathe easy, as rates are likely to remain steady in the near future.

However, prospective loan seekers don't have much to cheer about, because interest rates are unlikely to fall anytime soon.

RBI decision to keep key policy rates unchanged in the first quarterly review of its annual policy statement is likely to keep interest rates steady in the near term.

High liquidity and inflation remaining below 5 per cent for six weeks in a row have raised banks' hopes for a cut in home loan rates after the credit policy review on July 31. But it is unlikely to be broad-based cut with public sector banks preferring to remain away from slashing rates. Private banks, which effected severe hikes over the last few months, however, may slash them.

The Reserve Bank of India (RBI), however, is not likely to signal reversal of upward trend in interest rates in the upcoming credit policy review on July 31, according to experts. The reversal in benchmark interest rates like reverse repo rate and repo rate could be seen only by the year-end, they say.

The prices of apartments are stabilising following a fall in demand, said representatives of the State Bank of India (SBI) at the inauguration of a three-day property fair at MRC Centre, R.A. Puram, on Saturday.

The home loan mela features 30 builders offering information on their various projects, besides special offers from the SBI. It concludes on Sunday.

Of the projects featured, prices of flats range from Rs. 35 lakh to Rs. 1.5 crore. For a ground (about 2,400 sq ft) , prices start at Rs. 35 lakh. Ram Krishna Garg, general manager, Local Head Office, SBI, said that on the first day nearly 400 loans worth Rs. 86 crore had been sanctioned in principle.

Housing loan customers may have to repay part of their borrowings or suffer very high EMIs, as there is a scurry among banks to avoid bad debts following successive interest rate hikes in the last six months.

Private sector lenders like ICICI Bank [Get Quote] and HDFC [Get Quote], who were very aggressive in the home loan market in the low interest rate regime two years ago, are banking on tools such as part repayment of loan or increased EMIs so that borrowers meet their liabilities before they retire, an analyst said.

Are you are good bargainer? If yes then you can now do bargaining on home loan. It will all depend on your art of negotiation. Home loans are available for bargain - unofficially though. Banks and housing finance companies (HFCs) are willing to bend and lower rates if you are ready for negotiation.

According to HDFC's "Monsoon Hungama" new customers get a 0.25% discount on home loans. Old customers, however, do not benefit from this. They continue to pay 11.25% pa on floating home loans even as new customers got a tad better deal at 11%.

Mangalore-based Corporation Bank, decided to reduce interest on fresh floating rate home loans by 25 basis points on the back of easy liquidity and stagnant home loan portfolio.

The 100-150 basis points increase in the bank's home loan rates for varying tenures over the last one year had stunted the growth of its portfolio in the first quarter of the current fiscal. The bank's home loan portfolio stood at Rs 3,510 crore at the end of June 2007. The bank added only Rs 19 crore to the portfolio in the first quarter of FY08.

Are you are good bargainer? If yes then you can now do bargaining on home loan. It will all depend on your art of negotiation. Home loans are available for bargain - unofficially though. Banks and housing finance companies (HFCs) are willing to bend and lower rates if you are ready for negotiation.

According to HDFC's "Monsoon Hungama" new customers get a 0.25% discount on home loans. Old customers, however, do not benefit from this. They continue to pay 11.25% pa on floating home loans even as new customers got a tad better deal at 11%.

* Desired/promised Home loan amount not available. - no real solution except that you can try to get a written (or even email) acknowledgement from the lender or his representative that the processing fee will be refunded if the loan amount is not as per application.
* Promised interest rate not available. - Ditto -
* Non-refund of processing fee in the event of non-sanction or non-use of the sanction - Ditto
* Loan amount getting restricted post sanction due to lower valuation of the property by the bank. - Try and get the bank to value the property even before getting the sanction even if it means paying a small valuation fee. This is especially important for old resale properties
* Non availability of chain of title documents and/or NOCs in the format desired by the bank or problems with any other legal/title document. - Give copies of all property papers alongwith the application form so that any problems can be high lighted quickly. Obtain copies/formats of the NOC issued by the society/other authority in earlier cases and ensure that the particular format is acceptable to the bank. The society/other authority is unlikely to change its format for your lender.

Real estate agents across the country have formed a national association for first time called National Association of Realtors India (NARI), aiming to self regulate their profession.For further information check out Home loan india.

State Bank of India (SBI) is expecting a small rise in defaults in home loans due to increase in equated monthly instalments (EMIs), O P Bhatt, chairman, SBI, said on June 28, 2007. The bank is planning to increase the EMI amount of existing home loans under floating rate interest rate. Till now the bank had been increasing the tenure to adjust for the higher outgo due to interest rate hike.

Speaking to newspersons, Mr Bhatt said that the bank has already seen a slowdown in home loans due to high interest rates. In the last one year, interest rates have gone up by almost two percentage points.for further information check out Home loan india.

GIC Housing Finance Ltd (GICHF) is set to participate in Rajiv Swagruha Scheme, the mass housing project in Andhra Pradesh, with over Rs 100 crore exposures. The scheme, introduced by the State government to provide the low cost housing to the poor and low income group, is being implemented with the help of various financial institutions and housing companies.

GIC housing has kept aside Rs 100 crore for the project, Rajib De, vice president of GIC housing finance was reported in the media. The fund will be utilised either as loans to the identified beneficiaries of the project or through the government. The company is currently in discussion with Andhra Pradesh Housing Board (APHB), which is anchoring the project.for more enquaries just check out Home loan india.

The government is planning to bring in a new law that restricts the maximum amount that a real estate developer or financier can charge a home buyer as penalty in case of delay in payment. The proposal is to limit the penalty to 1% of the default amount. This clause will be incorporated in the proposed Real Estate Management & Regulation Bill.

According to reports, developers used to charge 8 to12% as penalty on delayed payments. This is especially valid for under-construction projects, where the home buyers pay back is linked to completion of the project in stages.for further information check out Home loan india.

Banks feel interest rates will stay at the current elevated levels for some more time. State Bank of India (SBI) has extended its 9.5 per cent special deposit scheme by another months and Bank of India (BOI) has raised its deposit rates by 75 basis points.
The decisions of the two banks are in the backdrop of an expected increase in demand for the credit in the second quarter. The increase in demand for credit over the next few months is likely to see banks rushing to raise resources, which in turn will exert pressure on interest rates.for further clarifications check out HOME LOAN INDIA.

Oakwood Asia pacific, the world's largest provider of serviced apartment, has launched its first Indian property in Pune. It has also signed up with local partners to develop seven additional properties in the country over the next 18 to 24 months.

Oakwood will join a list of global firms, including Marriott International Inc., Starwood Hotels and Resorts Worldwide Inc., and Ascott Group that are tying up with Indian real estate developers to tap the increasing need for long stay apartments across various Indian cities like Bangalore, Mumbai, Hyderabad and Pune.for further enqueries check out HOME LOAN INDIA.

Unitech Ltd is expecting revenues of Rs 15,000 crore from the new luxury housing project it is planning in Noida near New Delhi.

Unitech has acquired the land for the project at Rs 1,582 crore in May last year. The total cost of the project in Noida will be Rs 6,000 crore for which company is planning to borrow Rs 2500-3000 crore from local lenders. After this borrowing, the cost of debt for the Unitech will increase 300 basis points as government has restriction on overseas borrowing by real estate companies.for further information check out HOME LOAN INDIA.

Real estate developers, retailers and multiplex owners among others have moved the Bombay High Court challenging the levy of service tax on rental income from commercial properties.

Among the many developers and corporates demanding relief on this front include real estate developers like DLF universal and retailers like Pantaloon, Trent Ltd, Aditya Birla Retail Ltd, Archies and corporates like CISCO Systems India, Citi bank NA, IBM India, reliance Petro marketing, Reliance Webstore, McDonald, Adlabs Films and Bijli Group.for further clarification check out HOME LOAN INDIA.

Finance Minister P. Chidambaram on July 10has launched India's first the official housing price index, called NHB Residex. The index, developed by National Housing Bank (NHB), has . The index has been introduced as a pilot in five cities --Mumbai, Bhopal, Delhi, Kolkata and Bangalore. The index will cover different localities in each of the cities for five years. NHB is the regulator and apex bank for housing finance.

Interest rates in economy including home loans have peaked and it is unlikely they would go up further, said Deepak Parekh, HDFC chairman, according to a Times of India report on July 10.

"I think interest rates have already peaked. I don't see RBI hiking rates in the upcoming credit policy nor do I see interest rates coming down in near future, Parekh added.

The National Real Estate Development Council, a realty trade group, has proposed the formation of a self regulatory body for real estate industry to liaison with the government.

The proposed body could operate in four levels-centre, state, district and town levels and will have representation from stake holders such as the ministries of urban development, as well as real estate developers and others managing bodies such as the Delhi Development Authority.

Shobha Developers Ltd, the Bangalore based real estate developer, is planning to bid for the slum redevelopment projects in Mumbai. Shobha is will tie up with local partners to bid for projects under the Slum Rehabilitation Authority (SRA) scheme. Partnership with an existing developer is necessary to bid for projects under SRA scheme. As per the Slum Rehabilitation Authority (SRA) scheme a developer must have successfully completed housing township development project covering at least 4, 00,000 Sq m and with a minimum built up area of 70 lakh sq ft.

"Indian lenders may face marginally more bad mortgages because of higher interest rates," said Deepak Parekh, chairman, HDFC, Indian leading home finance company, on July 12, 2007, according to a wire agency report carried in today's newspapers.

Banks have raised interest rates 3 times since the beginning of the year.

HDFC will wait until 31 July for the Central Bank to announce its quarterly assessment of the economy before deciding on its lending and deposit rates, Parekh added.

Property buyers beware someone is watching you. Look who - the income tax department. Now when you buy property you must be able to prove that you can afford what you buy. Whether you have taken home loan, to buy property or have arranged the money from somewhere else I -T department will keep check on your finances.

The Income Tax department is planning to scrutinize the tax returns of people who have purchased property worth more than five times their annual income. This means that if you have purchased property worth Rs 1 crore, then your annual income should be at least Rs 20 lakh.