Wealth Maximum

Ashish Wagh, a senior executive with a foreign investment bank, recently approached his mortgage lender for a lifeline after his company started cutting jobs and trimming salaries.

Wagh had taken an Rs80 lakh home loan earlier this year to buy an apartment in Bandra, a Mumbai suburb, repayable over 20 years at an annual floating interest rate of 11.75%.

Wagh is now considering selling his ancestral property in Pune so that he can immediately repay nearly half the loan amount and avail a two-year moratorium—a legal authorization to delay payments.

He declined to name the mortgage firm because he said that could hurt his negotiations with it.

As interest rates surged earlier this year and companies started laying off staff and tightening employee costs, recovery teams of banks and housing finance firms have, in the past few months, been busy offering at least half a dozen easy repayment solutions to a growing number of borrowers who have been hurt by the slowdown.

Lenders are open to offering easier terms to existing borrowers because they want to prevent an increase in the proportion of non-performing assets (NPAs) on their books and the worth of their collateral—the houses—has declined sharply this year with falling real estate prices.

Banks have extended home loans worth about Rs2.69 trillion as on 29 August, but growth in home loans between 1 September 2007 and 31 August slowed to 13.9% at Rs32,792 crore, from 17% in the previous year, according to the Reserve Bank of India.

Interest rates on home loans have increased from 7.50% in 2003 to 11.75% in August, putting pressure on borrowers who had taken loans at floating interest rates.

For instance, if a person had taken a Rs20 lakh home loan repayable over 20 years, his monthly repayment would have increased from Rs16,418 in November 2004, when the interest rate was 7.75%, to Rs21,674 now.

Housing Development Finance Corp. Ltd, or HDFC, the oldest mortgage lender in the country, is offering its existing borrowers the more common options of stretching the term of the loan without raising the interest rate, or increasing the equated monthly instalments after closing other debts such as personal or auto loans.

“In case a customer is servicing multiple loans such as a housing loan, vehicle loan, personal loan, and has to make the choice to repay, it is advisable that the customer evaluates the loans and decide to repay the loan based on its cost and impact on cash flows,’’ said HDFC’s joint managing director Renu Sud Karnad.

For additional collateral, some lenders are willing to allow borrowers to “balloon” the loan to the end of the tenure or make a large payment towards the end.

Borrowers can also choose to make large payments, or so-called bullet payments, every year so that the term of the loan is trimmed.

Depending on an individual’s future cash flow, Axis Bank Ltd is even allowing borrowers to pledge savings instruments in return for easier repayment terms.

“Depending on the customer’s need we take a three-pronged approach, which includes increasing the tenure of the home loan, keeping the interest rate constant for a limited time frame, and balloning up the loan towards the end of the tenure,” said a senior official at ICICI Bank Ltd, India’s second-largest lender.

“(But) we do not encourage customers to opt for the option of deferring the payment towards the end of the tenure of the loan as it increases the debt burden on the customer. The chances of default also increases,” he added, asking not to be identified because he isn’t the bank’s official spokesman.

Another reason for borrowers seeking a restructuring of their home loans is delays by builders for various reasons.

“Some builders are finding it difficult to complete the housing project on time (and are) hence delaying the possession of the flat. In such cases, banks have seen many customers come to them and ask for a reschedulement of the loan,” said a senior official with Axis Bank.

“All the major real estate developers are seeing a time overflow, hence this is a very common request we are getting from customers,” added this official who wished not to be identified.

Terms on offer

Options to ease home loan repayments:

* Increase tenure of the loan

* Increase monthly payments after closing other loans

* Make lumpsum payments

* Keep interest rate constant for limited period

* Balloon up and pay towards the end of the loan tenure

* Pledge future cash flows to the bank

Useful Links

Apply for a Personal Loan
Apply for a Home Loan
Apply for a Loan Against Property

The government is considering a proposal to make home loans cheaper for consumers through interest subsidy, aiming to stimulate demand in the realty sector which has a spin-off effect on many industries like cement and steel, said a senior government official, who declined to be named.

The proposal will also include providing loans at below market rates to real estate developers. But the loan disbursed under this will come with a number of conditions like an upper ceiling on selling price of flats and individual homes.

The threshold limit for loans is likely to be around Rs 10 lakh, as it was estimated that nearly 75 per cent of the housing loans were below Rs 7.5 lakh. Only developers who have land in their possession or already in the middle of a housing project would be eligible for the government subsidy. Individual planning to construct homes on their own would also be eligible, said an official.

The panel of secretaries headed by Finance Secretary Arun Ramanathan has advised the urban development ministry to prepare a note in this regard and present it to the apex committee headed by Prime Minister Manmohan Singh.

The final decision on the proposal will be taken by the apex committee.

“Discussions were held on this proposal which includes making available loans at around 8 per cent interest rate, which could remain fixed for a period of around five years. The government will pay for the balance interest amount,” said a senior government official.

Interest rate charged by commercial banks in India has risen sharply in the last one year, with prime lending rate of certain banks increasing above 14 per cent as against around 9 per cent a year ago. This has dissuaded many home buyers to postpone their home purchases and also increased loan repayment amount.

To avoid a repeat of sub-prime like crisis in India, credit worthiness of borrowers would be scrutinised as in normal loans.

This measure is being mooted to ensure that the demand in the economy does not slow down. “If the housing sector does not kick off in the next two to three months, it could have a domino effect. Currently, most housing projects are stuck because of the liquidity crunch. A boost to this sector will mean additional demand for cement, steel and other material, which is likely to stimulate the economy. Moreover, it would also ensure that jobs in the sector are not lost,” the source added.

According to analysts, nearly 80 per cent of the total real estate demand originates from the housing sector. By 2010, nearly 530.5 million square feet of residential space will be developed in the premium category alone in seven major cities, which translates to the supply of 200,000 units per year in the middle income group (MIG) and high income group (HIG) segments.

Indicus Analytics estimates that between 2008 and 2015, 17 million additional dwelling units will be needed.

Source: http://www.business-standard.com

Useful Links

Apply for a Personal Loan
Apply for a Home Loan
Apply for a Loan Against Property

Finance minister P. Chidambaram had asked the real estate developers to cut down the prices of apartments and houses but property developer DLF refused to scale down its prices.

The finance ministry had asked for such a move because of the falling demand but the Chairman of DLF, KP Singh said that since the economy was seeing a slowdown the prices have already been cut in the past one year and now the government should play its role.”The government has to ensure through regulatory mode and policy to facilitate larger supply of housing in the market, then the prices will come down,” he added.

Following a slump in demand the company has deferred some projects and laid off some employees rather than lowering the prices to raise its revenues. “In hotels, residential and commercial everywhere, the projects deferred because of lower demand and liquidity crisis,” Singh said. Read More

Important Links

Apply for a home loan | Apply for a Personal Loan | Apply for a Loan Against Property

If your aspire to purchase a house and are depending upon a bank or housing finance company to fund your needs then interest rate charged by the lender is what that may be boggling your mind. As a matter of fact we keep on comparing rates that are offered by different lenders in the market and select on most appropriate one. However there are times when the two lenders charge exactly same rate of interest. How does one decide? There are many other factors that you would have to consider before plunging in the act of financing home mortgage.

In spite of two lending institutions offering us a loan at an identical rate of interest, there are chances that cost of our loan may greatly differ between both these lenders depending on the methods of interest rate calculation adopted by these lenders. Also if one lender is offering an interest rate lower than the other, it need not necessarily mean that the lower interest rate loan is a cheaper option. The method of calculating interest plays a vital role in justifying the loss that can be incurred by the borrower. Read More

Important Links

Apply for a home loan | Apply for a Personal Loan | Apply for a Loan Against Property

Investment strategies in the real estate sector are becoming popular in the recent times. However these deals require hard work as there are lots of hassles that are involved while dealing with the real estate agents, lawyers and potential buyers. Above there is a need for huge amount of funds before finalizing on a real estate deal. Thus it is always better to a have good market survey prior to your property purchase.

Going on the fund side, there are many banks and housing finance companies that offer home loans which are easily availed. But to do a bit of market research is beneficial as it will keep you well informed about the changes that will you help in getting flexible loan terms and low interest rates. A good online research on home loan comparison would prove useful on deciding the best lender for you. Read More

Important Links

Apply for a home loan | Apply for a Personal Loan | Apply for a Loan Against Property

Personal loan interest rates are not what they look. The question to be asked is what period is the lender charging the interest for. Question whether the interest is being charged is 2% monthly, 2% half yearly or 2% yearly. An interest of 2%, which compounds monthly, works out to a yearly rate of almost 27%.

The most important question to ask is how is the interest is being calculated. Take the case of a bank offering a personal loan of Rs 50,000 at an interest of 12% p.a. to be repaid over a period of 36 months. The EMI to repay the loan works out to Rs 1,890 p.m. The question is how a bank can offer a loan at an interest rate of 12% per year, when the interest rate of home loans is similar. The bank’s logic is — an EMI of Rs 1,890 p.m. means that for 3 years you will pay the bank Rs 68,040 (Rs 1,890 x 36). Read More from DNA

Personal loans can be referred to as all-purpose loans as they are meant to meet all the personal needs of the borrowers. Whatever be the cause, for instance, planning a trip to a foreign country, renovating your house or celebrating your marriage anniversary, these loans can ‘rescue’ you quite comfortably.

Personal requirements now no longer means a home, clothes and food. In this age of diverse needs, many other things fill the criteria of personal needs. Not to forget, fulfillment of all these things require money. In other words, money plays the role of a driving force and decides the position or status of a person. Some people stay content with their limited budget while others need more. However, at times our limited budget proves to be the barrier of our dreams and expectations. In such a case, is it better to listen to your heart or just move with the wave. Read More

Because SBI has moved up in global ranking!

Even as the world financial markets have seen either the total disappearance or the loss of positions of top banks and financial institutions due to ongoing subprime crisis, it is now time for the Indian state owned banks and financial institutions to scale heights in global markets. State Bank of India, the country’s largest bank and GIC Re, the sole official reinsurer, have improved their global rankings.

SBI with over Rs 7 lakh crore assets has improved its ranking from 70th to 57th position, according to the latest annual top 1,000 bank list prepared by the UK based leading banking publication The Banker.

Also in the latest list of top 40 global reinsurers prepared by the prominent rating agency, Standard & Poor’s, GIC Re with assets over Rs 36,000 crore, has moved up from 22nd to 16th position. The global list is prepared on the basis of global premium earned by the reinsurers. Read Full Report

Wall Street’s meltdown has forced home lenders to tighten their belts with potential buyers. Just how tough is it to get approved for a mortgage? Lenders aren’t handing them out to just anyone, but if you have good credit and can prove a stable income, you should get that mortgage.

Looking for a piece of real estate can be scary during an economic crisis.

“I’d rather know for sure before I make a commitment, especially now that you see everybody else that have all these problems and there like stuck with a home,” said Rosalia D’Amato, a renter from Bandon.

D’Amato learned without stability- your chances of getting a loan are slim to none.

“It’s like putting a house on a sink hole, or something. There’s no real foundation,” said D’Amato.

But lenders are still finding people who qualify for a home mortgage. If you’re looking for a loan, you need to ask yourself a few questions. Read Full Report

Any one who doubts the housing bubble inflated from the ground up, who thinks all the attendant greed and deception resided on Wall Street rather than Main Street, hasn’t been listening to my brother-in-law the appraiser. Long before Washington Mutual and Wachovia and Lehman Brothers bit the dust, he complained, the whole system was corrupt. This was how he explained it:

A bank loan officer is paid on commission. No loan, no commission. So when somebody comes in to finance a house purchase, he wants to make the loan. But first he needs an appraisal. If the appraiser says the house isn’t worth what the buyer wants to pay, he can’t make that loan. Read Full Article