Demonetisation: Actual home buyers benefit; developers roll out attractive rates and payment plans

The real estate sector, known as a safe haven for parking black money, was hit hard by demonetisation. The sector which was already going through as tough phase saw sales go down by 32 per cent during the October-December 2016 quarter compared to previous quarter as per Anarock Property Consultants. Apart from this there was a drop of around 60 per cent in new launch supply in the quarter.

Demonetisation along with other reforms-- Real Estate Regulatory Act(RERA) and Goods and Services Tax (GST)-- disrupted the real estate market at least in the short-term.

However, these reforms have turned out to be a blessing in disguise for the actual home buyers as the prices have remained almost stagnant or dipped a bit across major cities. "While a few cities such as MMR, NCR and Chennai have witnessed minor corrections in price, other cities - namely Bangalore, Pune, Hyderabad and Kolkata - have shown a small upward movement," says Anuj Puri, Chairman, Anarock Property Consultants. Now the developers are more focused towards clearing their existing inventory rather than launching new projects. This is ensuring that the home buyers who were waiting for the possession of their house are actually getting it and more ready-to-move-in projects will be available in the market. "The subdued demand and huge unsold inventory have led developers to maintain competitive prices to offload their existing inventory faster and complete their ongoing projects sooner," he added.

"Owing to the ongoing transformation, developers have also been offering attractive rates and payment plans to draw potential buyers. It is a great opportunity to book homes and cash in on the deals offered by developers," says Surendra Hiranandani, CMD, House of Hiranandani. Apart from this, the influx of liquidity with the banks due to demonetisation has also led to a drop in interest rates which has brought down home loans interest rates at almost a decade low. Now majority of the banks are offering home loan in the range of 8.35 to 8.5 per cent. Lower interest rates means lower EMI and thus increases the budget of the home buyers.

Also, the cash component or black money component has gone down after demonetisation claims experts which will be a big positive for actual home buyers as this will curtail the prices from going unreasonably high as we had seen during the previous boom.

"The funneling of unaccounted monies into the real estate sector has become virtually impossible because of the demonetisation move, which means that future growth in the sector will be based on much sounder and more sustainable fundamentals than ever before," says Anuj Puri, Chairman, Anarock Property Consultants. Also, the reduction of cash component will help homebuyers buy their dream house which was earlier difficult -- they couldn't buy due to the cash component despite the fact that they were capable of getting home loan and paying EMIs.

"In fact all property purchases today already take place on the basis of transparent cheque payments and legal online payment gateways in the post-RERA era. Real estate transactions happening on the basis of cash, or with any significant cash component, are inevitably going to be questioned by the authorities. Nobody wants their property investment to fall under scrutiny for untoward practices,"added Puri.

"Demonetisation needs to be seen in the context of a wider program of reforms in India which are significant in terms of the nation's economy, society and real estate sector. While it did result in some short-term pain for the sector there has been no long term negative impact. Demonetisation, coupled with the implementation of the Real Estate Regulator Act and GST reforms has boosted the confidence of investor and added much needed liquidity in the market," said Anshuman Magazine, Chairman, India & South East Asia CBRE.

SBI holds home loan customer meeting

State Bank of India held a home loan customer connect meeting here on Friday to reiterate that the bank was always at their service.

SBI assistant general managers Haritha Purnima (region-I) and Sekhar Rao (home loan sales team) attended.

Retail assets central processing centre (RACPC)-1 AGM Ch. Narayana Rao in the inaugural address thanked the customers for patronising the bank for a long time and emphasised that for fast and quick sanction of home loans, they were working till late hours.

Ms. Purnima clarified the doubts raised by customers. She explained about the home top-up loan and informed about the discounts offered by the bank in documentation and processing charges during the festival season.

Mr. Sekhar said they had formed exclusive sales team consisting of experienced staff for taking the bank products to the doorsteps of customers.

The customers, who attended the meeting, shared their experiences with the bank and made certain suggestions on how to improve their service.

Among others, chief manager (maintenance) K.N.V. Surendra, CM (sanctions) Basheera Begum and other managers Nageswara Rao, Ramana Rao, Sai Prasad and Swati were present.

Taraqi Ki EMI watch & share

Govt plans higher interest subsidy for economically weaker section in Home Loans

In a move to ensure every household has a roof over their heads by 2022, the housing ministry is likely to increase interest subsidy for flats under economically weaker section (EWS) and low income group (LIG).

Sources said that the proposal has been formulated based on the recommendation of an informal group of ministers, which looked into the 'Housing for All' scheme. The fresh proposal would be placed before the Cabinet for its approval.

TOI has learnt that one of the ministers in the group has even suggested that there should be 0% interest for people falling under the category of economically weaker section. He has also suggested that the cost of such flats should not be more than Rs 5 lakh in any urban area so that people across all sections can own a house.

One of the major components of the ambitious Housing for All scheme is to construct at least two crore affordable housing in urban areas. The cost of such flats is estimated to be around Rs 6.5 and Rs 7.5 lakh. There are also provisions including interest subvention scheme in the housing sector that will meet part of the buyers' home loan burden.

Providing two crore affordable housing is likely to involve investment of about Rs 13 lakh crore in the next seven years.

Sources said that Cabinet clearance of the urban component of Housing for All is crucial. "We cannot start work until the proposal is approved by the Cabinet. We are losing crucial time since we have to meet the target by 2022," said a source.

Source: http://timesofindia.indiatimes.com

India recovers from car sales slowdown in next year

As per the recent study conducted by the research firm Deloitte, the slowing down car sales in the Indian market will bounce back again in year 2012, as the car loan interest rates and inflations in the country are expected to decrease in the next year.
In its report – Driving through BRIC markets, Lessons for the Indian market – Deloitte said that a number of poor microeconomic factors have affected the growth of the passenger vehicle segment in recent months including the likes of skyrocketing fuel prices, high auto loan interest rates and restrained growth of real disposable income.
Since the deregulation in year 2010, there has been a jump of 34 percent in the fuel prices in the Indian market. On the other hand, the interest rates on new car loan have surged to 13 -14 percent.
As per a report given by Mr. Kumar Kandaswami, "The current slowdown is not here to stay as the fundamentals of car sales growth namely urbanization and car density are still very attractive."
The report further elaborates, "Car sales have declined, and registering de-growth since July 2011, compared with the previous year and is not expected to recover unless the macroeconomic factors become attractive. In FY 2011-12, car sales are expected to grow by a meager 2-3 per cent against 30 per cent in 2010."

PSU Banks approve credit proposals up to 400 crore

The government has quadrupled the limits on loans that a bank's internal committee can approve, a move that could quicken credit clearance at 26 state-run banks, including the Bank of Baroda and PNB.
The government has directed banks to set up a credit approval committee - comprising chairman, executive directors and three chief general managers who handle credit, finance and risk management functions. This group can approve credit proposals up to 400 crore. Currently, any loan above 100 crore has to be vetted by the management committee of the board, which met once a month, or 20 days.
"The new initiative will help in facilitating credit disbursement at a much faster pace," said KR Kamath, CMD of PNB. "This would take care of a substantial part of the lending business."
The chairman, through a credit approval committee, can now lend up to 400 crore to an individual borrower. Under the old regime, a management committee of the board, which included a RBI nominee and two independent directors appointed by rotation, the bank's chairman and managing director and executive directors, took these decisions.
This limit is applicable on Category 'A' banks with a business of 3 lakh crore, while smaller public sector banks can use the same structure to approve loans up to 250 crore. If a loan under consideration is higher than these limits, it would be taken to the management board.
"The government decision would enable the management to take operational decision and the board could focus on policy matters," said S Ravi, shareholder director at Union Bank.
Over the past few years, the project size has increased many folds and the restriction of 100 crore was seriously affecting the lending business, said one of the person quoted above. "At least 60-70% of the loan size is above 100 crore, which used to be referred to MCB. Now less than 10% cases would be referred to MCB," he added.
"Though a credit approval committee has replaced the board's management committee, the two are significantly different. The MCB has outside members such as RBI nominee and independent directors; the new committee comprises two EDs and chief general managers, who report to the CMD," said another retired chief of a nationalised bank.
SBI, the biggest, already follows such a practice where loans of up to 500 crore are approved by such a committee and loans bigger than this are referred to the board's committee.

Demand of Car loan Increased in Nov 2011

The unyielding attack on interest rates in a bid to rein in runaway prices is elastic results: the demand for vehicle loans has come down. The growth rate of Car loan volumes have almost halved so far in 2011-12 compared to the same period last fiscal,RBI.
While vehicle loans disbursed by banks in April to October 2010 rose by 13%, in the current year the pace has come down to just 7% this fiscal year. Interestingly, apart from the plunging auto sales, another factor for this decline is a rise in cash-down purchases.
Among car and utility vehicle buyers, customers opting for vehicle finance went down from 80-84% to 70-74%, according to Pawan Goenka, president, Mahindra & Mahindra.
“Another trend is people increasing their down payment. The LTV (loan-to-value) ratio came down from 85% to 75%, in some cases 50:50,” he said. The increased cost of finance added up to the overall cost of vehicles, prompting many aspiring car buyers to postpone their purchases.
“There is a decline in demand for vehicles and it impacted car loan as well. Hike in interest rate also is a crucial factor,” said Jairam Sridharan, senior vice president and head of consumer lending, Axis Bank. Auto loans account for 13% of Axis Bank’s retail lending.
RBI has hiked the repo rate 13 times by a cumulative 3.5 percentage points since March.
Maruti still lags, but auto sales rise 7% in November
After four months of decline, domestic car sales in India grew by 7% in November despite market leader Maruti, which controls almost half of the industry volumes, posting a near-20% decline in sales during the month.
Second-placed Hyundai Motor, homegrown Tata Motors, Toyota, General Motors, Ford and Volkswagen all grew handsomely during the month, but industry body Society of Indian Automobile Manufacturers (SIAM) warned that December could see sales drop again and a full revival will only happen in 2012.
“Sales would fall again in December though it would not be as drastic as in the last four months,” said Sugato Sen, director, SIAM. “Sales growth would only happen from January onwards but even then it would not be enough to reach our target of 2-4% for the entire fiscal.”
So far this year, car sales have declined by 3.5% as a mix of high interest rates, fuel prices and runaway inflation have dampened consumer sentiment.
There is however, no hint of a slowdown in two-wheeler sales in the country, which grew by over 25% during the month. The segment that accounts for a lion's share of overall industry volumes, ensured that total automobile sales in the country grew by 22% during the month at 1,489,714 units.