HOME buyers have their plate full, at least in terms of financing options. A recent addition to the offer list is Canara Bank’s new home loan scheme. Let us take a look at some of the public sector bank schemes to check which of these involve the minimum outflow. After the stimulus package’s blanket offer (five-year fixed 9.25% interest rate for loans up to Rs 20 lakh taken till 30 June 2009), there are other equally luring offers. Be it the largest public sector bank SBI, or the likes of LIC Housing Finance, Bank of Baroda or Union Bank, every bank is vying for the same customer. However, there is a word of caution; one must keep the borrowing component low to avoid high leverage.

CANARA BANK’S NEW HOME LOAN

This scheme is applicable for home loans up to Rs 30 lakh. The interest rate will be 8.25% in the first year and 9.25% for the next four years. Thereafter, the benchmark prime lending rate (BPLR) will be applicable, less 2.5%, subject to a minimum of 10%.

For loans above Rs 30 lakh and up to Rs 1 crore, the rate of interest will be 9% for the first year, 9.75% for the next four years and BPLR less 2% subject to a minimum of 10.50%. These rates are only available for the new borrowers and up to December 31, 2009. The maximum loan tenure that can be allowed under this scheme is 25 years. The loan to value ratio would be 80%.

SBI had earlier unveiled its Happy Home offer. This scheme specified an interest rate of 8% for the first year, a discount of almost 200-250 basis points to the prevailing market rate. However, after the first year, it would be markedto-market.

OUTFLOW

The EMI for Rs 30 lakh loan would be Rs 29,104 in the first year, at an interest rate of 8.25%. For the next four years, the EMI would be Rs 30,783, calculated at 9.25%, resulting in increased outflow of Rs 1,679. But assuming that the minimum rate applicable after the fifth year would be 10% as per rules, the EMI payable would be Rs 31,774. This would be a marginal increase of 3.2%, which would not be heavy on the pocket.

A borrower would be protected against the rising interest rate regime, at least for the first five years. However, on the flip side, one would end up paying a higher EMI amount in case the interest rates decline during the first five years.

THE BEST OPTION

A cursory glance at the scheduled interest rates gives the impression that this is the cheapest home loan scheme, but it is not the case. A comparative analysis shows that the interest outgo of other public sector bank schemes is higher than LIC Housing or Bank of Baroda. However, the interest outflow is lesser compared to SBI’s offer. Nonetheless, each bank has its own payment schedule (whether the repayment will first be towards interest or principal). A customer must, therefore, undertake thorough analysis on his own before opting for a scheme. Happy home buying.

A gift is a common mode of transfer of property. It is the transfer of certain existing moveable or immoveable property by one person to another. The transfer should be made voluntarily and without consideration. The person transferring the property is called the donor. The person to whom the property is transferred is referred to as the donee. The donee must accept the property during the lifetime of the donor and while he is still capable of giving. In case the donee dies before acceptance, the gift is void. The gift can be effected through a gift deed.
Here are some points that need to be considered while drafting a gift deed:

To make a valid gift of property

The donor is the person who gives. Any person who is competent to contract can make a gift of his property. A minor, being incompetent to contract is incompetent to transfer. A gift by a minor is void.

However, a minor can accept gifts. A natural guardian can accept a gift on behalf of a minor with the condition that the person nominated in the gift deed will act as a manager of the gifted property. Such acceptance would amount to recognition by the natural guardian of the nominated person as the manager or the agent of the minor for the purpose of the property.

For a valid acceptance

The donee is the person who accepts the gift. A minor may be a donee. But if the gift is onerous, the obligation cannot be enforced against him while he is a minor. But when he attains adulthood he must either accept the burden or return the gift. A gift may be accepted by or on behalf of a donee.

A donee may also be a person who is unable to express acceptance. A gift can be made to a child and could be accepted on the child's behalf. The donee must be an ascertainable person.

Process of gifting

A gift involves the process of giving and taking which are two simultaneous and reciprocal acts. There must be acceptance of a gift as well. There is no particular mode of acceptance. It may be express or implied. Further, the property must be accepted by the donee during the lifetime of the donor. The fact of acceptance can be established by different circumstances such as donee taking the property or being in possession of the deed of gift. If a document of gift, after its execution or registration in favour of a donee is handed over to him by the donor, it amounts to a valid acceptance of the gift.

Competence to contract is an important qualification required for making a gift. A gift to be valid must be made by a person with his free consent and not under compulsion. However, a mere weakness of the intellect would not be sufficient to invalidate the gift.

The gift must be a certain existing movable or immovable property. It may be land, goods, or actionable claims, and must be transferable. There cannot be any gift of future property. A gift must be of tangible property. Only an existing and tangible property is capable of being gifted.

Absence of consideration must

A gift is a transfer without any element of consideration. Complete absence of monetary consideration is an important prerequisite. Where there is any equivalent of benefit measured in terms of money in respect of a gift, the transaction ceases to be a gift.

The transfer of property must be voluntary and made gratuitously. It must satisfactorily appear that the donor knew what he was doing and understood the contents of the instrument and its effect, and also that undue influence or pressure was not exercised upon clear intention to make a gift.

Acceptance

Even when a gift is made by a registered instrument, it has to be accepted by or on behalf of the donee to make it complete, failing which the gift will be void. The law requires acceptance of the gift after its execution, though the deed may not be registered. The acceptance may be signified by an overt act such as the actual taking of possession of the property, or such acts by the donee as would in law amount to taking possession of the property where the property is not capable of physical possession. Delivery of possession is an essential condition for the validity of the gift.

However, it is not necessary that in every case there should be a physical delivery of possession. Possession may be either actual or constructive. The donor should divest himself completely of all ownership and dominion over the gift.

Registration

A gift of immovable property can be made only by a registered instrument. A gift of immovable property, which is not registered, is bad in law and cannot pass any title to the donee. Documents should be stamped with appropriate non-judicial stamp, registered as required under the India Registration Act and attested by two witnesses. A mere delivery of possession without a written instrument cannot confer any title. A deed cannot be dispensed with even for a property of small value.

The current market conditions are good for those looking at investing in a residential property. Many good deals are available in the market. Many new housing projects are being launched by developers with attractive and affordable prices. Also, the housing loan interest rates are low. Attractive property rates together with low interest rates on housing loans and tax benefits make property investment a good value proposition for property buyers.
A home loan attracts a significant amount of saving from income tax. Home loan borrowers can claim a deduction of up to Rs 1.5 lakhs from their taxable income against the interest paid on a housing loan. The repayment of the principal amount of a home loan is eligible for an income tax rebate up to Rs 1 lakh under Section 80C. Therefore, a home loan brings a significant tax incentive for the borrowers, especially for those in the high taxable bracket.

Claiming IT rebate

According to the Income Tax Act, only those who have taken a housing loan from a recognised financial institution and solely or co-own the property can claim rebates from IT.

Tax deductions can be claimed upto a maximum of Rs 1.5 lakhs under Section 24 for the interest payments on housing loans. The interest on home loans taken for repairs, extension or reconstruction of an existing property also qualifies for the deduction of Rs 1.5 lakhs. One can also claim rebate under Section 80C for the principal amount payments made against a housing loan. It should be noted that the upper limit of Section 80C is Rs 1 lakh and it includes all tax saving instruments, for example, provident fund, life insurance policies, tax saving bonds etc.

Income tax and HRA

Many people have this question - is it possible to claim HRA benefits as well as home loan rebate/deductions under the income tax. The answer to this question depends on the situation and should be decided on a case to case basis with your employer or income tax advisor.

These are some typical situations:

Living in own house

If you are living in the house which you have bought with a loan, you will be eligible for tax rebate under Section 24 and Section 80C only. You will not be eligible for any tax rebate under the HRA clause.

Own home under construction

If you have taken a loan to buy a home but the home is under construction and hence you are forced to live in a rented place, you cannot claim income tax benefits on the housing loan. You can claim only HRA benefits till the date you get possession of your house. After that date you can claim the housing loan benefits and HRA benefits will stop. However, you can adjust the interest paid during construction period in subsequent years subject to your total limit of Rs 1.5 lakhs under Section 24.

Feasibility to occupy own house

Suppose your own home is in a different city than your work location or the home is in the same city but at a considerable distance from your workplace, you can claim the benefits of income tax rebate and HRA simultaneously.

Own house let-out

If you rent out your own house and live in a different rented place, you can claim the benefits of income tax rebate as well as HRA. However, the rent you receive would be added to your taxable income. Also, in case of rented property you can claim a flat deduction on account of repairs and maintenance at 30 percent of rent received minus property tax. The upper limit of Rs 1.5 lakhs on interest deduction is not applicable in this case.

While the possibility of doing up an apartment for just five lakh rupees seems far-fetched, it is no longer impossible. It only boils down to basic rules of planning and employing the services of a prudent interior designer. And now, more people in the city are giving their homes a makeover on a realistic budget.
He offers some tips on furbishing your home for Rs 5 lakh.

• Flooring

Ceramic tiles are cheaper compared to their vitrified counterparts. But, vitrified flooring is the flavour of the season. Vitrified flooring for a 1,000 sqft apartment can be done for Rs 1.5 lakh including labour charges. It works out cheaper to give out the tilelaying work on contract.

• Cabinets and wardrobes

While most prefer buying readymade cabinets and wardrobes, there are those who opt for carpentered woodwork. A modular kitchen and wardrobes can be made for as less as Rs 1.7 lakh. The materials used in this kind of woodwork are waterproof ply and particleboard. While the base cabinets in the kitchen will be made of waterproof ply, the top cabinets and wardrobes will use particleboard. The cost includes all basic hardware, stainless steel fittings and steel baskets for storage inside the cabinets.

• Painting

Distemper is hardly a preferred product today and most people prefer emulsion. The cost of painting for the entire house using a good brand of emulsion paint will be approximately Rs 50,000. However, a mix of enamel and emulsion for the interiors only could come up to around Rs 23,000.

• Lighting

Standard fittings like lights and fans in all the rooms could amount to an estimated Rs 20,000 while extra electrical wiring could be pegged at an additional Rs 20,000.

The urban wing of the Forest Department has come out with an urban lake protection and management plan. The action plan covers 57 lakes presently and has been drawn up for the years 2008-11.
It includes:

• Documentation of status of lakes Boundary demarcation - this will include conducting a survey of the lakes, fixing of name boards, and fencing.
• Encroachment identification and eviction Protection by having watch and
• ward Diversion of sewage and cleaning
• Integrated development

A resurvey of lakes needs to be done since many are not traceable, and permanent boundary stones or cairns need to be fixed. The Lake Development Authority (LDA) will be requested to take up the survey for the year 2008-09. The amount required is Rs 17 lakhs. This will also include fixing of permanent name boards engraved in stone or cement blocks on all sides facing habitation. This is to enable identification of the lake and the agency to fix responsibility for maintenance.

Fencing around the lake can be temporary (with barbed wire) or permanent (chain link mesh). B Jayaram, Assistant Conservator of Forests (Bangalore South), Forest Department, says, "Temporary fencing is done wherever the area is under litigation or has been encroached. Once it is free of encroachment, we will permanently fence the area." The cost of one kilometre of permanent fencing comes to Rs 27 lakhs and barbed wire comes to Rs 3 lakhs. This year, fencing will be provided for three lakes. It has been proposed to fence 23 lakes in the year 2009-10 and 26 lakes in 2010-11.

Planting will be taken up in the foreshore area after demarcation and fencing is done. Dried tanks will be converted into tree parks. It has been proposed to take up foreshore planting over 300 hectares this year, 200 hectares in 2009-10, and 100 hectares in 2010-11. The cost of foreshore planting over one hectare comes to Rs 60,000.


To save tanks from land grabbing and dumping of waste, there is a need for a 24-hour watch-and-ward. "There is one muster-roll employee who is responsible for 5-7 lakes. This makes it difficult for him to take action or report on time. So, we have proposed to erect watchmen sheds in the remaining 47 tanks", Jayaram adds. It has been proposed to have three watchmen for a tank area less than 20 hectares and six watchmen where the area is more than 20 hectares.

In some tanks, the sewage is being let in is causing pollution. This needs to be diverted, treated and let into the tank. The Bangalore Water Supply and Sewerage Board (BWSSB) has been mandated to execute sewage diversion and establish a sewage treatment plant (STP), wherever required.

The tank will be cleaned of garbage, light de-weeding and minimum desilting done without affecting the lake's biotic life. For initial cleaning, the cost comes to around Rs 1,000 per hectare and subsequent annual maintenance is 30 percent of the initial cleaning cost.

Integrated development of the lake includes removal of silt, improvement of waterholding capacity, strengthening the bund, removing encroachments, providing fencing, creating a jogging path all around the lake, recreation facilities like a small garden, planting in the foreshore area, creating islands for birds to breed, providing boating facility if possible

Out of the 57 tanks that the Forest Department plans to retain, eight tanks have already been developed with four having permanent fencing.

Tanks developed by Forest Department:

• Uramudinakere tank
• Hennur tank
• Iblur tank
• Kurubarahalli tank
• Madivala tank
• Narasipura tank
• Tindlu tank
• Janardhanakere tank

In another 15 days, Madivala tank will be free of weeds with some portion retained for the birds. Boating facility will also be open.

Proposal to return lakes

The urban wing of the Forest Department has come out with a proposal to retain 57 lakes of the 114 lakes allotted to them. They are planning to return the remaining lakes to the other government agencies for development. Jayaram says, "We have already sent the draft proposal to the Principal Chief Conservator of Forests. Once it is sent to the Government for approval, a decision will be taken as to whether they will be allocated to other agencies or will stay with us."

Out of the 114 lakes, 90 lakes are wholly under the Forest Department. The remaining 24 lakes are being developed with other agencies like the Bangalore Development Authority (BDA), Bruhat Bangalore Mahanagara Palike (BBMP), Karnataka State Tourism Development Corporation (KSTDC), and the Tourism Department. "Some lakes which are with the department are now being developed by the other agencies. For instance, Sankey Tank, Kempambudhi Tank, and Yediyur Tank are being developed by the BBMP. Others like Geddalahalli Tank near Sanjaynagar have become BDA layouts. Since it is not feasible for us to maintain these lakes, the Forest Department has made a proposal to retain only 57 lakes under it", Jayaram explains.

Investing in a house is the best way to save tax. Tax experts say buying a second house as an investment will save even more tax for you than the first house you bought for your own use. When you buy a house for your personal use, you can avail a deduction from your taxable income against the interest payments of up to Rs 1.5 lakhs only on the loan taken to buy the house. Besides this, you can also avail the benefit of deduction against the repayment of principal amount under Section 80C. However, under Section 80C, you can avail a deduction up to Rs 1 lakh, but this is inclusive of all investments like your contribution to EPF, PPF, tax savings mutual funds and school fees of your children, among other things.

Therefore, normally, if your taxable income is more than Rs 5 lakhs, most of the limit provided under Section 80C is exhausted because of the compulsory savings schemes. Still, if you take repayment up to Rs 20,000 against the principal under Section 80C, your net tax savings every year will be Rs 52,350.

This is mainly because the benefit against interest payment is capped at Rs 1.5 lakhs even if you have taken a loan of Rs 50 lakhs to buy a house at eight percent, and your interest outgo in the first year will be Rs 3,96,181. The monthly installment on the Rs 50 lakhs loan at eight percent for 20 years will be Rs 41,822. This works out to an annual payment of Rs 5,01,864. Out of this, Rs 3,96,181 will go against the interest payment in the first year and the rest Rs 1,05,683 will go against the principal repayment.

Despite, the interest payment of Rs 3,96,181 you will get a deduction benefit of Rs 1.5 lakhs only. So, the tax benefit under this will be Rs 46,350 - including the education cess - at the rate of 30.9 percent. Besides this, though you have repaid Rs 1,05,683 from the principal, you will get a deduction of Rs 20,000 as most of the quota of Rs 1,00,000 is used up by the investments in other instruments. So, the tax benefit against the principal repayment will be Rs 6,180, making your total benefit Rs 52,350.

But, if you have invested the same amount to buy a house as an investment instrument, you can take the benefit against the interest payment for the entire amount. In this case, the benefit against the interest payment is not capped. But, there is a catch. The rental income of the house will be included in your income.

But, in India, annual rental income, most of the time, is in the range of 2-3 percent of the capital value. Even today, an apartment of Rs 50 lakhs is easily available on rent for Rs 10,000 a month. At the same time, the repayment of principal amount will not be allowed for deduction from your taxable income under Section 80C. But still, as the interest payment on the loan is huge, the rental income does not offset a substantial benefit.

Take for example a loan of Rs 50 lakhs. In this case, the interest payment in the first year is Rs 3,96,181 and the rental income is Rs 1,20,000. But, only 70 percent of the rental income gets added to your income. You get a rebate of 30 percent on rental income against the maintenance of the house. So, in the first year, only Rs 84,000 will be included in your income as the house income. Now, as you spend Rs 3,96,181 as interest payment and Rs 84,000 you earned as house income, you will get a net deduction of Rs 3,12,181 because of your investment in the house. At the rate of 30.09 percent, you will save a tax of Rs 96,464.

Similarly, in the second year, the interest element in your EMI will come down to Rs 3,87,409 while your tax benefit will be Rs 92,456. In the calculation for the second year, the rental income was taken at Rs 10,500 - five percent more than that in the first year. Similarly, for the third, fourth and fifth year, as shown in the chart, the tax benefit remains substantially more than when the property is bought for personal use.

Because of the tax benefit, the effective interest rate on your loan will work out to be six percent, instead of eight percent - the rate at which you have contracted the loan. This benefit will become even bigger, if you are buying a house of larger amount. While the loan amount becomes bigger, the interest amount will become larger. In the case of buying the house as an investment, you can avail the benefit of deduction against the interest payment. But, in the case of personal use, it is capped at Rs 1,50,000.

However, the rental income may pose a problem in the 10th year onwards. Around the 10th year, the tax benefit in case of buying as an investment will be lower than in case of buying for personal use. But, at the same time, after 10 years, the value of money will go down substantially and so the payment of a higher tax will not hurt you as much as it does today.

A few important aspects you need to go into.

• Scheme of loan

Whether the loan is a fixed or floating rate one. As is common knowledge, in case of floating rate loans, the interest rate will move up or down with each revision in the benchmark rate of the bank. In case of a fixed rate loan, the interest rate may remain fixed for either a given period of time or entire tenure of the loan.

• Rate benchmark

In case it's a floating rate loan, what the rate is benchmarked against is important. Usually, floating rates are determined with reference to the prime lending rate (PLR), fixed at the time of taking the loan plus a mark-up. If your home loan is at a spread of one percent to the PLR, which is say 10 percent, you will pay an interest rate of 11 percent per annum.

How often the bank changes the benchmark rate should be checked. Banks periodically revise the PLR to which the home loan interest rate is pegged.

If one has opted for a fixed rate loan, it is to be checked whether the interest is fixed for a part of the tenure or the entire tenure. Do check the reset clauses. The bank normally reserves the right to revise the interest rates upwards or downwards, once in three or five years, even on a fixed rate loan.

• Charges

Also check whether the loan can be prepaid, and if so, what the charges are. It may be a fixed fee, a percentage of the loan outstanding, or a percentage of the loan amount. Further, there may be a restriction on the number of prepayments you can make during the tenure of the loan.

Check what the other charges you will be required to pay to get the home loan are. There could be a fee for processing, services, and administration.

Some tips to design your dream home within a budget
Low cost décor can be easily camouflaged simply by using bright colours for the soft furnishings complemented by greenery. Bright colours essentially give a warm ambience. A low cost diwan with bright cushions can lend a classy look to decor.

To liven up a dark room, the use of warm coloured paints can be of great help. If the room is so sunny that it gets hot, cooler paint colors such as green or blue will do the trick. The paint should always coordinate with the fixed interiors such as the furniture and curtains.

For a narrow space, mirrors create the illusion of spaciousness. White or lighter coloured paint will make a space appear less cramped: you must make sure all of the other furnishings colours coordinate with the paint you choose to create this effect.

If you have a penchant for plants, go green. The creative use of plants will liven up any space. Just make sure they're well-maintained. Use inexpensive but attractive plant holders. If you have a terracotta container, decorate it with mirrors and paint the borders to add a touch of artistry.

Displaying the things that the family collects such as curios, scented candles, and miniature cars can add to the decor.

Reinvent

Pull out an old antique item, spray paint with bronze or gold and turn it into instant home decor treasures. Recycle old newspaper, scratch paper, etc. to make them into papier-mache and use them as photo frames or vases. If you find a piece of furniture or any item from bargain stores or garage sales, sometimes it needs just a bit of retouching, reupholstering or just a strategic spot to place it to make it add ambience to a room.

Pick a theme, get rid of clutter and make your living space inviting and alluring.

Smart decorating ideas

It's easy and economical to decorate your home. You need to keep your eyes open for good bargains when you come by them, and need to have a keen sense of decor. Start picking out the right furnishings first. You need to opt for furniture like a dewan, which can also double up as a storage cabinet, with draws in its belly. The same can be the design for your beds too. The rule of thumb is, it should fit and be easy to move around the house. Rearranging the furniture can be the cheapest way to decorate your home. Instead of buying a sofa, consider buying two loveseats especially if space is limited. There is plenty of material available for a low-end contemporary decor. Rubber wood furniture costs half or even less of the cost of solid teak wood, depending on the design.

In terms of style, rubber wood can feature some stunning designs and unique creations. However, mixing a bit of cane with upholstered seating can give an exotic look to the living area. Use modular options for side tables and display cabinets. These are not only less expensive but easy to assemble.

Low cost decor can be easily camouflaged simply by using bright colours for the soft furnishings complemented by greenery. Bright colours essentially give a warm ambience.

As with great works of art, having a focal point is essential to good design. All compositions need a center of interest for the composition to make visual sense. Creating a focal point is probably the most important design step you can take. It will help give your rooms meaning, order and a feeling of balance.

Common ones include fireplaces, bookshelves, built-in cabinetry and picture windows-especially if they showcase a gorgeous view. These features draw the eye to them, giving a feeling of structure and balance to a room.

Choose organic cotton fabrics or even jute for your furnishings. Kuli print organic cotton duvet covers, made of top quality Peruvian organic cotton and printed using ancient wooden block patterns offer an extremely stylish option to organic bedding to offer organic elegance in the bedroom.

Create, recreate and refresh your interiors to get a haute look.

Equated monthly installment (EMI) is an unequal combination of principal and interest due to the lender every month. During the initial years of loan repayment, a bulk of EMI goes towards interest repayments. Towards the end of the repayment tenure, it is more of the principal that is being repaid, and not interest amount.

How amount of EMI is determined

There are three parameters that directly impact your EMI outflow. The total loan amount, tenure of loan and rate of interest charged. The more the money you borrow, larger will be your EMI outflow. Hence, it is always advised to borrow as little as possible and avoid defaulting.

Shorter the tenure of the loan, greater will be the EMI due every month. If the tenure of the loan is short, the borrower will be debtfree sooner and is a good option in uncertain or volatile conditions. A borrower's monthly EMI outflow comes down significantly, in case of a longer tenure. However, long tenure loans are associated with higher cost of borrowing.

The higher the rate of interest, higher will be the EMI. Hence, home buyers shop for lenders who offer a low rate of interest for their home loan.

EMI and prepayment

In the initial years of the loan tenure, a major portion of the EMI goes into servicing debt. In other words, the borrower's contribution towards the interest component is very high and principal repayments are low. Since prepayment penalty is a percentage of the principal outstanding, early prepayment could cost you more in terms of prepayment penalty.

Before deciding to prepay your loan, take into account the tax benefit you could be losing. Further, weigh the consequences of repaying ahead of schedule.

Flat rate and reducing balance

The method of EMI computation can impact the EMI a bank levies on you. When the EMI is computed on a flat rate basis, the interest rate on the loan amount is calculated over the full duration of the loan. It does not matter how much you have repaid. A flat rate loan is higher because it does not take into account principal repaid.

In case of reducing balance, interest computation is made on the loan amount outstanding. In case of annual rest, principal repayments are accounted only at the end of the year. In case of monthly rests, the principal on which interest is charged goes down every month. The borrower is most benefited by interest computation on daily reducing balance method.

Bargain for low EMI

If you are paying double digit interest rate, perhaps you must explore the switch option. Many lenders are offering close to eight percent interest rate to new borrowers. You can always negotiate for a lower rate. An unblemished repayment record, no history of defaulting and a stable income level will work in your favour. It is always advisable to stay out of further debts if you find it difficult to make EMI repayments.

One of the most attractive features of a housing loan is that it helps in reducing your income tax liability, and thus makes it easier and cheaper to build a fixed asset. A housing loan makes you eligible for tax rebates under Section 80C and Section 24 of the income tax regulations.

A joint housing loan comes with the twin benefit of increasing the overall loan eligibility and the income tax rebate that can be claimed by both co-applicants individually under Section 80C and Section 24. The mandate in claiming the income tax rebate is that the co-applicants of the housing loan should also co-own the underlying residential property.

Who are eligible?
A joint home loan can only be availed by a minimum of two and maximum of six applicants. A borrower cannot take a joint home loan with just any person. In general, the lender defines the relationship between co-borrowers eligible to take such a loan. A joint housing loan is given to married couples or close blood relatives like parent and child.

Some banks allow brothers to take a joint home loan provided they will both be coowners of the property. Usually, banks insist that all coowners of the home must be co-borrowers in a joint home loan. Generally, friends or unmarried couples living together are not allowed to take joint housing loans.

Ownership structure

The ownership structure of the property is a very important factor in case of a joint loan. Ownership of the house makes one eligible for the tax benefits. The tax benefits are applicable in ratio of ownership in the property and therefore the ownership of property should be carefully decided keeping in mind the re-payment capacity of both the borrowers.

In case a person is just a coborrower of a loan and not a co-owner in the property, he cannot claim the tax rebates. On the other hand, if the coowners are equal owners of a property but if the share of the loan is 2:1, the tax benefits can also be availed in the same ratio. Usually, banks do not accept split EMI payments (two or more cheques for the same EMI). The EMI in joint accounts can be made through a joint account owned by coborrowers or by splitting EMIs in a financial year in the proportion of loan share.

Income tax benefits

The income tax benefits are applicable in proportion to the ownership structure. For example, if the ownership in a property is 60:40, a loan of say Rs 50 lakhs will be split as Rs 30 lakhs and Rs 20 lakhs respectively and this ratio will be applicable while calculating tax benefits on interest/principal repaid on this loan. Therefore, it is advisable for joint owners to procure an ownership sharing agreement stating the ownership proportion on a stamp paper as legal proof of the ownership.

The case for the housing loan gets stronger in case of joint applicants. Banks consider the earning potential of co-borrowers and decide on the eligibility of the loan. Therefore, the loan eligibility increases in case of joint loan account.

The joint account holders (owners of the property) can claim income tax benefits individually. The housing loan benefits that fall under Section 80C and Section 24 of Income Tax Act make each borrower eligible for a maximum deduction of Rs 1 lakh and Rs 1.5 lakhs associated to principal repayment and interest payable on the home loan respectively. For example, a husband and wife, both of whom are tax payers with independent income sources, get tax deduction benefits, with respect to the same housing loan to the extent of the amount of loan taken in their respective names. The maximum deduction in such a case would Rs 2 lakhs on the principal repayment and Rs 3 lakhs on interest payment.

There are some conditions to be met in order to make a valid transfer of property in a housing society
In order to transfer a flat in a cooperative society, some formalities need to be complied with. A housing society is a society with the objective of providing its members with plots, houses or flats. It can also be existing to provide its members with amenities and services. A society can be a co-operative society that is registered or deemed to be registered under the Society Registration Act.

A member of a housing society is a person joining in an application for the registration of a co-operative society that is subsequently registered, or a person duly admitted to membership of a society after its registration, and includes a nominal, associate and sympathiser member. An associate member jointly holds a share of a society with others, but his name does not stand first in the share certificate.

A member wanting to transfer his shares and interest in the capital or property of a society should give 15 days notice of his intention to do so to the secretary of the society in the prescribed form, along with the consent of the proposed transferee in the prescribed form. On receipt of this notice, the secretary of the society will place it before the meeting of the committee held next, pointing out whether the member is prima facie eligible to transfer his shares and interest in the capital or property of the society or not.

In the event of ineligibility of the member to transfer his shares and interest in the capital or property of the society, the committee will direct the secretary to inform the member accordingly within three days of the decision of the committee. If the committee is satisfied that the member is prima facie eligible to transfer his shares and interest in the capital or property of the society, it will direct the secretary to inform the member within three days.

Procedure to transfer interest

An application for transfer of shares and interest in the capital or property of the society should be made in the prescribed form, along with the share certificate

An application for membership of the proposed transferee should be made in the prescribed form

• Valid reasons for the proposed transfer should be furnished
• All the liabilities of the society should be discharged
• Transfer fee should be paid
• Entrance fee of the proposed transferee should be paid
• Premium (to be fixed at the general body meeting) has to be paid. This will not apply to transfer of shares and interest of the transferor in the capital or property of the society to a member of his family, his nominee or his legal representative
• No objection certificate required under any law, an order or sanction issued by the government or a financing agency should be furnished

The managing committee or the general body cannot refuse any application for admission to membership or transfer of shares and interest in the capital or property of the society except on the grounds of non-compliance of the provisions of the Act.

If the decision of the committee or general body meeting, on the application for the transfer of shares and interest in the capital or property of the society is not communicated to the applicant within three months of its receipt, the transfer application will be deemed to have been accepted and the transferee will be deemed to have been admitted as a member of the society. Any transfer made in contravention of the Act, rules or the bye-laws will be void and will not be effective against the society.

The transferee will be eligible to exercise the rights of membership on receipt of a letter in the prescribed form from the society.

Infrastructure and development in the city’s outskirts will make localities here hotspots in the months ahead

Many of Bangalore's suburbs have become a part of the city and the creation of Greater Bangalore is testimony to this expansion. Various infrastructure and investment initiatives have made the outskirts of the city more attractive to both investors and buyers alike resulting in a sudden spurt in demand for residential and commercial property in these areas.

What is driving realty in the suburbs?

With the go-ahead for highrise constructions in the city and the FDI policy in real estate, major global real estate players have entered the realty scene. Huge spaces around Bangalore which were primarily isolated barren lands, are being developed for mammoth gated communities, villas, resorts and built-to-suit office spaces within tech parks, and SEZs.

Improved connectivity is the major factor that is driving property investments on the outskirts. A host of infrastructure projects were completed and some are in various stages of completion, driving the demand for property in the vicinity.

In North Bangalore, the coming up of the international airport, the widened Bellary Road with its signalfree access, and the mammoth proposed Peripheral Ring Road project have given rise to a host of tech parks, huge residential complexes and plotted layouts. In the south and south-east of the city, the Metro Rail project, widened Hosur Road, almost complete elevated expressway to Electronic City and the slew of road widening works on major arterial roads here have spurred high-rise residential enclaves, malls and office spaces.

Why invest in outskirts?

Widened roads which spell increased FAR, an impetus for more commercial property development and improved connectivity have spurred people into moving to quieter and less congested neighbourhoods along the highways. Also, the non-availability of residential dwellings and large office spaces in the Central Business District drove people into investing in land available for a relatively lower cost in the outskirts.

According to Rahul Pai, a real estate consultant, more people are buying property in the suburbs mainly because property prices here were affordable to most and those in the city were at a premium. Presently, there is a huge supply in the market with expansive residential gated communities available along Sarjapur Road and even in Devanahalli. With the real estate prices undergoing correction and with banks lowering their interest rates on home loans, this is the best time to buy either a plot of land or an apartment in these areas. An apartment bought from a reputed builder can give upto five percent rental returns and the capital appreciation is atleast six percent in this market scenario. In North Bangalore the property appreciation is pegged at a little more at eight percent after a couple of years when the markets pick up once again, he points out.

According to global property consultants Cushman & Wakefield's report, Bangalore recorded 18 percent growth in rentals after Kuala Lumpur (58 percent). The highest rental growth was witnessed in the Bangalore markets with the CBD/off CBD region recording 18 percent appreciation over last year owing to limited Grade-A supply coupled with relatively low vacancy and no scheduled supply, at Rs 86 per sqft rental.

While the suburbs recorded an average 14 percent annual increase in rental values at Rs 58 per sqft, the Sarjapur-Marathahalli ORR stretch projected an annual increase of nine percent in rental values costing Rs 48 per sqft.

For landowners, joint development of either a residential or commercial project works well

Owners of land and sites have several options before them to use their property lucratively. While those owning small sites often opt to build a house for their own use, others prefer to wait for capital appreciation and sell the plot at a later date for a tidy sum. The present realty situation has given rise to one more option that is proving to be very popular among large landowners - that of joint development.

As R Balaji, CEO, Propmart, puts it, "joint development of property can lift up the realty market in the city and it is heartening to see this kind of activity picking up especially in the central business district (CBD) and prime neighbourhoods like Koramangala and Bannerghatta Road."

What joint development means

In a joint development venture, the landowner enters into an agreement with a developer who will construct the building. The joint development of the property could be about a commercial or a residential building, depending on what the landowner wishes to use his land for.

This joint venture of property development works out well for both. While the developer gets the land easily, based on the percentage worked out, and can construct a building of his choice, the landowner on the other hand gets to continue owning a part of the built space. If it's a residential complex, the landowner stands to own his share of the number of apartments as agreed upon. He has the authority to sell the apartments at any rate he desires. In a commercial complex, he again benefits by owning some floor space in the building which he could rent out, lease, sell or use for personal benefit.

Residential or commercial?

According to Qasim Tanga, Director - Leasing & investments, AQ & Z Consulting, "An in-depth feasibility of the project, whether it is residential/commercial, will have to be undertaken based on several market drivers. These would primarily include demand & supply, target customer, average prevailing rentals, flat size for residential and floor plate size's for commercial, total cost of project, break even and finally return on investment (ROI). For family owned properties, advice from a reputed consulting firm can give immense clarity and bring about balanced expectations for both the joint development partners. The landlord should thoroughly assess the credibility of the developer and check if he has undertaken similar joint development projects before. "Most importantly, after evaluating both the qualitative (good will, reputation etc) and quantitative (joint development share, ROI, time frame of completion etc) parameters both the parties should share a feeling of trust and common objective, as this would ensure the smooth execution of the project."

Joint development good for landowners

"This is a very good time for landowners to go in for joint development with developers instead of leaving their land idle and waiting for appreciation," says Balaji. "And in a market like this, only the landlords stand to gain," he adds. This is because there is no risk involved for the landowner who only sells his land and gets ready-built space in return.

In a joint development venture, the share in the deal is based on the land value prevailing in the location. Also, the developer will assess the viability of the deal. Balaji explains that if a developer has to give more than 50 percent of the share to the landlord, he will mostly strike down the deal as unviable. But, if the project is in a premium location like Bannerghatta Road or the CBD, the builder will go in for the deal because of the profit he can make by selling the apartments or office space. Plus, the landowners too will not sell unless they get more than 45 percent of the share.

"Even those owning a 60x40 site can go in for a joint development venture with small developers who specialise in small property development," Balaji points out. "Owners of small plots could also opt to take a bank loan against the property and construct a building on their own which they could rent out, lease or sell when the market picks up," advises Tanga.

Some tips to help you decide if switching to another bank will work well for you
Many public sector banks have lowered their lending rates. The new eight percent rate is bound to be frozen at this level for a year. This is a lucrative deal for people contemplating to buy their own home as property prices have also corrected. To remain competitive in the market, it is predicted that other banks may soon follow suit.

Some borrowers seriously contemplate switching their banks when there are no signs of a rate cut. Is switching the lender a wise deal? Akash has taken a Rs 40 lakhs loan at a floating rate of 13 percent a year ago. The loan tenure is 10 years. Should he switch to a bank offering 10 percent floating rate? For Akash, balance transfer or switching to another lender seems to be the only way to benefit from the current lowering interest regime.

Ensure substantial EMI difference

Switching a lender for a 0.25 or 0.5 percent rate difference may not be a great idea. The actual benefit you get from switching the lender may not be substantial in terms of monthly EMI outflows.

Consider the outstanding principal amount is Rs 35 lakhs. At 13 percent floating rate, the borrower owes Rs 55,138 for a tenure of nine years. At 12.75 percent, the EMI due to the lender could be Rs 54,636. Considering other switching fees, the benefit of switching might be insignificant.

Factor in penalties

Most banks charge a prepayment penalty if the borrower decides to switch his lender. This amount could be as much as two percent if the borrower decides to refinance rather than repay the lender with his own savings. Two percent of an outstanding principal amount of Rs 35 lakhs means a penalty of Rs 70,000.

Switching comes with a fee

The new lender may charge a processing fee to take over the loan. It can be about 0.50 to one percent of the total loan amount. Apart from this you may incur some stamp duty and other expenses. Do not forget to takes these additional expenses into account when deciding on the merits of switching. Your new lender may also ask you to obtain a fresh set of NOCs, which may come at an additional cost.

Do your investigation

All lenders do not reduce their rates at the same time. If you switch to a lower rate and realise that your old lender had just reduced rates, your entire switching exercise might be a waste. Explore if the new lender has always systematically passed on rate cuts to his customers.

Do not switch frequently

Some people may be tempted to switch if their lenders hike their rates too often. However, switching lenders very often can only mean loss in the form of penalties and fees. Moving from a floating to a hybrid loan may not be a bad idea.

Balance transfer ideal in initial period

If you are at the fag end of your loan tenure, it makes little sense to switch. This is because a huge chunk of your EMI repayment goes towards the interest component in the initial years.

Buying real estate can be one of the biggest decisions in a person's life. Whether one buys a home or a business location, it is immensely valuable to know what to look for and what to avoid at all costs. So many rides on a new home because this is where you relax, have fun, sleep, eat; in short, it's the place central to your life.

When you are looking at a house or any space for that matter and considering whether to buy it, it helps to look at it with "Feng Shui eyes." From a Feng Shui perspective we can discern many kinds of properties where some possess intrinsic good fortune and benefits everyone who lives within the chi that is all pervasive and abundant.

Feng Shui lays down practical guidelines that enable one to select good property - property whose chi is not afflicted by hostile hills, whose luck is not blocked by harmful structures and whose yang energy is vibrant and strong. There are also Feng Shui formulae that enable one to custom design his or her luck. Not all Feng Shui afflictions can be cured, however a professional Feng Shui consultant should be able to tell you what you can expect from this location, such as good financial or business opportunities, prosperity and health.

Look at the terrain and what surrounds your property. Look at the way roads are laid out. Are any of the surrounding roads pointing directly at any part of your house? Next look for nearby natural water features and check the orientation of different units to the water. As a general rule water in front is always better than water behind.

Observe the design features of house facades and elevations and ascertain whether they appear threatening? House facing a field is excellent Feng Shui as this makes up what is known as "bright hall" effect bringing in benign chi which can settle and gather momentum before entering your home. Facing a river that flows past the home even at some distance is excellent Feng Shui and it's not surprising that homes and apartments located at water fronts always fetch a higher real estate value.

It is always best to look at potential property during the early morning hours and the best time would be during the hour of the dragon between 7am and 9am. You can also view property at the hours that correspond to your own animal sign as per Feng Shui astrology.

They are simple guidelines but if you can investigate at least these few matters you will not go far wrong. There are many things you can do to activate the Feng Shui luck of your home after you buy it. But before you commit to buy, it is really necessary to get certain things right. It's important to know that every house has "Feng Shui flaws" and that no house is perfect. However, you should be aware of what you are buying so that you are knowledgeable about what kinds of problems might be associated with the house. The good news is most Feng Shui flaws can be corrected.

Reduce carbon dioxide emissions, conserve energy, and make the air in your home healthier
The atmosphere in our homes determines the state of our health. Homes appointed with several appliances that consume a lot of energy, emit carbon dioxide into the air making it unhealthy to breathe. An energy efficient home is one that conserves energy and improves the quality of the air inside. Prudent use of energy can make the environment greener and the air a little more pure.

Harnessing the sun

Solar panels and water heaters are wonder gadgets that harness energy from the sun and save on precious electricity. Though the initial cost of installation is high, solar water heaters cut down your power bills to half.

The lights on your porch, driveway or garage can be run with solar panels installed on poles, similar to the ones on the city's streetlights.

Showers usually require less hot water than regular baths. Additional savings can be achieved by installing simple water-saving shower heads. This will reduce water consumption to a great extent.

Energy saving appliances

Most kitchen appliances today come with an energy saving label and cut down your utility bills hugely. Look for this symbol before purchasing refrigerators, ovens and dishwashers. It makes sense to exchange your old appliances for the newer energy efficient ones in the market today. Modern washing machines come with monitored, pre-set water controls. Wash only full loads of clothes when possible and clean your dryer's lint filter after every load.

Simple usage tips too can cut down on your energy consumption. Use heat-generating appliances such as washers, dryers, mixers or ovens during the cooler hours of the morning or evening. This also reduces the load on your air conditioner in the summer.

Electric cooktops are energy drains. LPG is a huge fuel saver and since gas stoves today come with different burner sizes according to the pan size, use the appropriate burner for your pan size. Also, flat bottom pots make better contact and conduct heat from the elements more efficiently than pots with warped or rounded bottoms. Copper-bottom pans and pressure cookers save on fuel by heating fast. Pressure cooking not only saves on time and energy, the steamed food is healthier.


Ceiling fans can save energy in both the summer and winter. In the summer, fan blades should revolve in a counter-clockwise direction. Since moving air feels cooler, using ceiling fans in the summer allows you to raise the thermostat temperature on your air conditioner, hence reducing the energy workload. In winter months, set your ceiling fan at its slowest speed and reverse it in order to gently push warm air down from the ceiling without generating a breeze.

Replace incandescent bulbs with compact fluorescent bulbs. Fluorescent bulbs put out approximately four times as many lumens per watt. For example, a 25 watt fluorescent bulb provides as much light as a 100 watt incandescent bulb. Fluorescent bulbs also last about ten times longer.

Use an exhaust fan to pull excess heat and humidity out of the kitchen and bathroom in the summer. However, also remember that exhaust fans can rapidly pull the heat away from your house in the winter.

Keep television sets and computers switched off when not in use instead of leaving them on standby mode. The latest integrated digital televisions (IDTVs) have the capacity to receive digital signals without the need for a set top box, so they use one power supply instead of two. Unlike many set top boxes, IDTV's can be switched off without losing their settings and so don't have to be left on standby.

Invest in energy efficient printers instead of conventional ones.

Decor with conservation

Thick drapes and curtains insulate the home and keep it warm in winter. In the summer, keep drapes and curtains closed on the sunny side of the house. In the winter, open those drapes and curtains on sunny days to take advantage of the sun's heating power. Close all drapes, blinds or shades at night in winter to make use of their insulating properties.

Go in for sun-protective blinds and shades in summer to prevent the home from heating up.

Skylights not only look elegant and bring in the beauty of the night sky indoors, they also save on lighting costs. Modern skylights come with remote-controlled shades to keep the harsh sunlight away in summer.

In Another Jolt To Gurgaon-Based Realty Major In The South, BBMP Says Project Is Illegal
BANGALORE’S civic authority has come out with a public notice warning future buyers from buying apartments in DLF’s Bannerghatta Road project in a move that extends the Gurgaon-based realty player’s nightmarish run in the southern markets.

The Bruhat Bangalore Mahanagara Palike (BBMP) cautioned prospective buyers from purchasing apartments in the project in a strongly worded and unprecedented buyers beware’ public notice on Thursday. “Prospective buyers are advised against purchase of such illegal apartments as such apartments are liable for all lawful action that will be initiated against such illegalities including demolition,” it said.

DLF’s apartment complex — Westend Heights at New Town, BTM Extension — had claimed, in its ad seeking bookings, that it had got the Bangalore Development Authority approval to build up to four floors while the project comprises 18 floors. The BBMP public notice points out that BBMP was the only competent authority to approve building plans in its jurisdiction and that DLF had not obtained any approval or sanction from it. The company has already been at the receiving end of irate buyers for its Chennai project from where many have even exited. In recent months, DLF even reduced prices.

A senior BBMP official told ETthat DLF had not sought approvals from the agency. “The job of an agency like BDA is to create residential layouts. All accompanying activity like registration, approval of construction plan, issuance of khata, payment of taxes, issuance of occupancy certificate and the like will be done by BDA till the said layout is handed over to BBMP subsequent to which the layout would be under BBMP limits,” the official clarified. He said BTM extension was part of the BDA, but in 2007, the area was handed over to BBMP subsequent to which all the paper work had to be carried out after permission from BBMP. But the Delhi-based builder has apparently overlooked this, the official said.

In a press statement, DLF Southern Homes Karnataka says the project will commence only after obtaining detailed plan approval from BBMP and other relevant clearances, for which application is in process. DLF has obtained due approval for the developmental plan through its subsidiary Annabel Builders & Developers for S+4 level from BDA, it says. It has paid khata amount of Rs 14.6 crore to BBMP towards betterment charges on August, 2008. “The intention of obtaining Khata from BBMP is in itself an indication that DLF would seek approval for building plans from BBMP,” it says, in its clarification.

DLF executive director (southern region) J Subrahmaniam says, DLF has sought bookings from buyers after seeking legal opinion. “At all stages, we have kept the buyers informed about the project approval status,” he added. DLF’s immediate priority will be to reach out to the 500-odd buyers and appraise them of the situation. DLF claims that it has not seen any rush for cancellations or buyers seeking exit from the project.

Brokers and realtors that it is a normal practice for builders to market their projects before they get all the approvals. A public notice from the government has literally sent shudders down the spine of city realtors, who are possibly witnessing one of the worst times. “This incident will further depress buying sentiment. Getting approvals in any city is an arduous task. Even the best of projects can drag,” said one realtor, who did not wish to be identified.

Home loan repayments are huge commitments that most families face. Sometimes, there is a huge difference in interest rate between what the borrower currently pays his bank and what another lender offers. In such a scenario, people consider either prepaying their loan or switching the lender. Switching to another lender offering better rates is called balance transfer.

Expenses involved

A balance transfer of the outstanding loan from one bank to another can result in savings of a few thousand rupees, month after month in your EMIs. Borrowers must exert due diligence before exploring the balance transfer option. The existing lender charges a penalty for prepayment and the new lender may seek processing fees. These expenses must be taken into account while weighing the benefits of a balance transfer. Some lenders may levy additional switching charges that must be taken into account as well.

When it works well for you

It makes sense to go ahead with a balance transfer if your net gain is more than one percent. This is after factoring in the prepayment penalty of two percent and loan processing charge of 0.5 to one percent. Since lower rates are applicable for a new borrower (rather than existing borrowers) shop for competitive rates and a good lender. After the switching exercise, you shouldn't get a rude jolt that the new lender has increased the rates. So find out if any rate hike is on the cards before switching.

Investing in a budget apartment works as a hedge against inflation

Budget apartments have become a good choice for end-users and investors. In the range of Rs 20-30 lakhs, they bring affordability and easy repayment of home loans on the same platter. Lack of space in the city and high land cost has led developers to come up with such options in localities away from the city. Localities around Whitefield, HRBR Layout, Lingarajapuram, Sahakarnagar, Hennur Road, Hegde Nagar, K R Puram, and Hosur Road are witnessing the rise of budget apartment projects.

There are some projects in the range of Rs 8-10 lakhs also, with an area of 500-700 sqft. Such options are coming up on Bannerghatta Road, Hosur Road, Sarjapur Road, and Whitefield. Price is the main factor that works in favour of a budget apartment - for both investors and end-users. There is no recession for budget options. Anyone can afford to buy them.

For end-users

For an end-user, a budget apartment works out well from the price and the repayment angles. A joint loan of Rs 25 lakhs can be easily paid in 15 years at an interest rate of nine percent with a comfortable EMI of Rs 25, 350.

Investors

Investing in a budget apartment while looking at a resale, after two to three years, will work out well. New apartment projects that are under construction and will be completed in three years' time are ideal.

How it works as an investment?

An investor who doesn't have adequate cash flows right now can invest in a budget apartment. He can buy at a lower level and get the benefit of appreciation at a later date. This works as a hedge against inflation. The capital appreciation expected on a budget apartment after two years is 20-25 percent. Once the market picks up, you can expect a rental return of five to six percent.

How banks arrive at eligibility of home loan applicants
Vijay is a maintenance engineer with a private firm. His monthly takehome salary is around Rs 35,000. With many public sector banks offering singledigit interest rates, Vijay feels this is the best time to invest in his dream house. A two-bedroom house on the outskirts costs about Rs 16 lakhs. Will any banker lend him this money? Is he eligible for a home loan of Rs 16 lakhs?

There are numerous factors that banks take into consideration when computing your loan eligibility. Age of the applicant, his salary, repayment/credit history, savings, profession, location of property, health condition and other debts have a direct bearing on the loan amount sanctioned. Some professions are categorised as negative or risky by the lenders. People in such professions may find it difficult to get a loan sanctioned. On the contrary, some jobs are considered more stable with lesser probability of default. They are on the preferred list of most lenders.

It is imperative that the property an applicant wishes to purchase falls within the geographical limits as defined by the bank. As a thumb rule, banks will lend to applicants who can set aside 40 percent of their monthly income towards their home loan repayments. Based on this, an individual's loan eligibility is calculated. It is assumed that a person who earns more can set aside more money towards his EMI repayments.

How does a bank compute your loan eligibility?

Most loan eligibility calculators available on the Internet are based on a formula. The home loan eligibility, in lakhs, is arrived at by dividing the amount available for the loan repayment with the borrower by the loan installment per lakh for the given tenure.

The simplest way to increase your loan eligibility is by increasing the loan tenure. Consider Vijay's case. At 9 percent rate of interest and for a tenure of 10 years, banks will sanction him not more that Rs 12 lakhs. However, for a greater tenure of 20 years his loan amount shoots up to Rs 18 lakhs. However, the longer the tenure of the loan, greater is the cost of borrowing.

Applying jointly, with your parent or spouse, increases your loan eligibility. The incomes of both applicants are combined when computing the loan eligibility. You can almost double your loan eligibility with a joint loan.

How interest and tenure determine the EMI
An equated monthly instalment (EMI) is the general mode of repayment of home loans. EMIs are the fixed instalments a borrower needs to pay over the tenure of the loan in order to repay the loan as well the related interest for the period to the bank. The loan amount plus the interest for the loan tenure divided by the tenure (in months) gives you the EMI.

The amount of EMI is decided upfront, in advance, and usually remains so during the currency of the loan. The amount of EMI to be paid depends on the amount of loan, tenure of loan, rate of interest, and mode of calculation of interest. Longer the tenure, lower is the EMI. Shorter the duration, higher is the EMI. But at the same time, it is to be noted that in case of longer duration loans, during the initial period, the interest component is more and the principal component is less. Over the years, it gets reversed, and the principal component becomes more while the interest element becomes less. This is because, in the initial phase, the loan amount outstanding is more as compared to the later period.

The shorter the tenure, lower the interest rate because of the reduced risk the bank takes. Because of the shorter tenure, the EMI is higher as the loan and interest are to be repaid over a shorter time span. The longer the tenure, higher the interest rate because of the increased risk the bank takes. However, the EMI is lower because the loan and interest are spread over a longer span of time.

Depending on the present and future income and expenditure levels, you can choose an appropriate loan tenure. The income of the borrower is also important. This means both the present as well as the expected future income of the person. A borrower should be able to pay his EMIs without compromising on his standard of living.

The age of the borrower is important in this case. In case you decide to borrow at an early age, you can opt for the longer tenure loans, where the EMIs would be lower. Although the amount of interest paid would be higher as compared to the other options, you can have the benefit of availing the loan for a longer period of time. However, if you are borrowing at the later years of life, you may have to opt for a shorter tenure.

This is an emerging segment and a large number of buyers are in the market now.

Every market shift throws up challenges and creates opportunities. The present economic slowdown has posed several challenges for developers to come up with attractive offers to sell their apartments. On the other hand, it has given rise to extremely good opportunities for investors and homebuyers. Banks too have pitched in with loan offerings tagged with low interest rates. In other words, the era of affordable housing has arrived.

Changing market dynamics

In Bangalore, the real estate market rode the crest of a booming IT segment for almost a decade. Whitefield, Devanahalli, Yelahanka, Hebbal, Sarjapur Road, and Bannerghatta Road, that were once considered suburbs without good connectivity and basic amenities, were included as part of Greater Bangalore. Road development and other infrastructure projects such as the international airport, the Metro Rail, elevated road, and underpasses improved connectivity to these localities, sending realty prices upwards.

New segment of home buyers

From October 2008 onwards with the global economic downturn, the real estate sector began going through a correction and prices fell up to 30 percent. This brought in a fresh segment of homebuyers and investors into the market, waiting to make the most of what was on offer and within their EMI structure.

Those employed in government services, bank employees, teachers, double income couples who had pay cuts but steady employment, singles with good income, all became prospective homebuyers. Homebuyers who were not wooed by developers earlier are now ready to buy homes because they fall within their budget. Now that prices of property have come within their budget, they have the money ready for a purchase.

Win-win situation

Gauging the rising demand for smaller and affordable homes with premium facilities, established builders have announced projects on the outskirts of the city promising homes available for prices ranging between Rs 20 lakhs and Rs 40 lakhs. This works out well for both developers and homebuyers. For those buying their first home, they still get a good deal with banks offering home loans of 85 percent of the value.

A few real estate developers, who have large land banks in the peripheral areas, have earmarked projects in Bangalore North and South for affordable housing. This kind of affordable apartment options are being made available in the range of Rs 20 lakhs to Rs 40 lakhs depending on the floor area. Currently, three affordable housing projects, one in the north zone and two in the south - one near Mysore Road and the other on Sarjapur Road - are coming up on the city outskirts giving real estate development a boost.

Investment prospects

The fact that homes have become affordable now should come as a boon for those who had been planning to buy a home before the downturn. In the current market scenario buying a flat, both as an investment and a potential place to live in, should be the objective for a family having a collective take-home monthly income of Rs 60,000-75,000. They can look at investing in a flat in the range of Rs 25-33 lakhs where their combined EMI works up to around Rs 20,000-30,000.

People, especially first home buyers, are buying affordable homes now because you can get a decent 1,000 sqft, two-bedroom apartment easily for Rs 25 lakhs. Even two years down the line, this can fetch a 20 to 30 percent appreciation if they desire to sell it to buy a bigger apartment.

Home loan borrowers have experienced a rollercoaster ride of highs and lows over the past few years. The interest rates hovered around six to seven percent about four years ago. Until a few weeks ago, they had touched 13-14 percent. Today, some banks offer a modest eight percent home loan interest rate. The fluctuations in interest rates have an impact on a borrower's EMI dues and loan tenure.

Scenario 1: When rates go up

Increase in the interest rates translates into greater burden on the borrower. The borrower has to pay more from his pocket towards his home loan. When rates go up, the borrower has the option to either increase his EMI or tenure. Increase in EMI keeping tenure constant means greater cash outflow every month towards your loan. Increase in tenure keeping EMI constant amounts to increasing the number of years you'll be repaying the loan.

Scenario 2: When rates go down

A reduction in rates is good news that borrowers yearn to hear. When interest rates go down, the monthly EMI amount comes down automatically. Otherwise, the borrower can keep the EMI constant and bring down his loan tenure. This way he will be free of debt sooner.

Scenario 3: When you switch

When a borrower switches from fixed to floating, or vice versa, the EMI and loan tenure depends on the principal outstanding. The new rate of interest applicable after you pay the conversion fee also determines the quantum of loan. The borrower could fix at a higher rate or float at the prevailing market rate. It is up to the borrower to adjust the EMI or tenure of the loan to his convenience.

A home office should be comfortable and spacious

Designing a home office offers a convenient space to work from home. This room should be sophisticated and offer all the top-end facilities that you would require to work comfortably.

Space

While constructing your house, you can pick a space that has an attached terrace or opens out to the outdoors. If it is located on the second floor, it should offer a good view and provide good natural lighting and ventilation. A sliding glass door can lead to the terrace. Blinds are helpful to control the amount of sunlight falling into the room at different times of the day. The terrace can have recliners to relax when you want to take a break. Potted plants in both corners of the terrace will keep it looking simple and cheerful. If you have a large expanse, then you could design your home office on one side with a wall partition. On the other side, you can decide to have another room, maybe a bedroom or a study cum library. The partition can have two doors that can open into the room.

Furniture

If you have a casual, eco-friendly theme in your home, a huge wood and wicker chair will be comfortable and sober. A contemporary desk in wood with drawers designed aesthetically will allow space for storage and look good. The surface should be expansive to accommodate a desktop or laptop, personal memorabilia, a telephone, a pen stand, an artifact or a plant in a vase. Chest of drawers for storage on both sides of the desk can be used to keep important files, folders, and books pertaining to your field of work. Small artifacts can be placed on top or you can place a fresh flower in a tall vase with a small glass bowl with coloured glass pebbles. Contemporary artifacts in wood will give a modern, stylish look. Keep the wall colour neutral since you need many pieces of furniture in this room. A painting with a simple subject or theme in bright colours will enhance the wall space above the cabinet. A small wicker basket can be used to keep the latest copies of magazines. Another one can be used to throw any waste.

If you have business associates coming down frequently to discuss project proposals, then additional seating is required. A plush, comfortable sofa with leather, suede, or silk upholstery will allow you to carry on discussions or watch a presentation. On the wall opposite to your desk, where there is a wall partition, a wood cabinet can be designed to place an LCD TV and a music system. This can have sliding doors from the side or from the top to conceal and lock it at times when you don't use it. The space on top and by the side of this system can be used to keep a bust in marble or a small bamboo plant.

Flooring

Vitrified tiles are popular these days and give a clean, contemporary feel. To distinguish the seating area from the rest of the space, there can wood flooring only for this area. The flooring in the rest of the space can be done using vitrified tiles. Marble is another option that gives a smooth, sophisticated look.

Some rights a buyer of property has been given by the Transfer of Property Act

Abuyer of a property has some rights and liabilities. According to the Transfer of Property Act, a buyer of a property is entitled to some rights and has some responsibilities, which need to be fulfilled statutorily.

• Interest of seller

A buyer is bound to disclose to the seller any fact about the nature or extent of the seller's interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest. An omission to make such a disclosure is fraudulent.

• Payment

The buyer is liable to pay, at the time and place of completing the sale, the purchase money to the seller or such person as he directs. The payment should be as per the agreed terms and conditions. Where the property is not sold free of encumbrances, the buyer may retain out of the purchase money the amount of any encumbrances on the property existing at the date of the sale, and should pay the amounts so retained to the persons entitled to it, to get the encumbrance released.

• Charges

The buyer is liable to pay all public charges and rent which may become payable in respect of the property, the principal money due on any encumbrance subject to which the property is sold, and the interest due. Once the ownership has been transferred to the buyer, the buyer is liable to pay all the statutory charges like municipal taxes, property taxes, cess, electricity and water charges etc.

• Loss or damage

After the ownership of the property has passed to the buyer, he has to bear any loss arising from damage or decrease in value of the property, not caused by the seller. The buyer becomes liable for any loss or damage to the property as soon as he becomes the owner and the seller ceases to be the owner of the property.

The buyer is also entitled to a charge on the property, against the seller, to the extent of the seller's interest in the property, for the amount of any purchase money paid by the buyer in anticipation of delivery. In case of a default by the seller the buyer has a right to get back the advance paid plus reasonable interest. He may also compel the seller for specific performance of the agreement.

• Benefit of improvements

The buyer also has some rights given statutorily by the Transfer of Property Act. In case the ownership of the property has passed to the buyer, he is entitled to the benefits of any improvements that increase the value of the property, and to rent and profits from the property. Any benefits or increase in value of the property accrues to the buyer only and not the seller.

All these rights given by the Act can be enforced as they are bestowed by the statute. However, the operation of such rights and liabilities may be modified by the contracting parties, subject to mutually agreed conditions.

Here we compares a short and long tenure loan to analyse the impact of tax benefits

The repayment of housing loans is through equated monthly instalments (EMIs). Some banks provide an accelerating or step-up EMI facility to borrowers. The step-up EMI facility intends to reduce the repayment burden in the initial years and helps in increasing the loan eligibility of the borrower. The facility helps young borrowers particularly. They prefer borrowing early but at the same time do not have high incomes and can't afford higher EMIs in the initial years. However, over time, as their income increases, they can afford to pay higher EMIs.

In this facility, the EMI portion is recovered in parts. During the first few years, a lower EMI is to be paid by the borrower. During the latter part of the loan tenure, the EMIs are increased, so that a higher EMI is payable during the later years. This way the burden of repayment in the initial years is reduced for the borrower.

The step-up facility involves a lower outgo in the initial periods. Borrowers who are likely to earn more in future can avail this facility to get higher loans and adjust their cash flows over a period of time. In this process, the borrower takes on a higher interest rate risk if the loan is based on a floating rate of interest. A rise in rates would mean that a portion of the interest would remain unrealised and added to the borrower's principal.

Since a large part of the initial instalments go towards interest payments, the borrower can avail of tax benefits for a longer period. Interest on the loan is a cost. However, tax benefits reduce the cost of borrowing. This way the borrower can deploy his savings in other investment schemes.

The principal repayment under the step-up loan may start immediately, thereby reducing the interest rate risk for the borrower. In other cases, the EMIs for the first few years are just enough to cover the current interest rate. The process of step-up can be in different phases. In some cases, two phases are offered - one at a lower rate and the other at a higher rate. In other cases, the step-up can be a gradual process. It can be done yearly, every five years or some other frequency. Some banks also offer the step-up facility with a fixed interest rate, but the rate of interest on such loans is higher than that on a floating rate loan.

The borrowers need to understand that in the step-up facility, the interest rate risk exposure is quite high. In the initial years, the interest component is more and the principal component is less - lower EMIs in the initial years would mean that lesser of the principal is being repaid. This deferral of principal to the later part of the loan tenure will increase the interest cost of the loan. This may turn out to be costly in case of a floating rate loan where the interest rate increases. The higher interest rate would have to be paid on a higher outstanding principal loan amount. In case of a rise in interest rates, the difference is recovered through higher EMIs towards the end of the loan tenure.

How a home loan’s tenure, interest amount and EMI are linked? Here is how....
The repayment of a loan taken to buy a house is made through EMIs (equated monthly instalments). EMIs are the fixed instalments which a borrower needs to pay over the tenure of the loan to repay the debt as well the related interest for the period to the bank.

Usually, the EMIs remain constant over the tenure of the loan. The loan amount plus the interest for the loan tenure, divided by the tenure of the loan (in months) gives you the EMI. The amount of EMI to be paid depends on and varies with the amount of loan, tenure of loan, and rate of interest. One of the important parameters governing the EMI is the tenure of the loan. Nowadays, you can avail loans for various tenures - between five and 20 years, and in a few cases upto 25 years as well.

Arriving at tenure

Here are two most significant factors that determine tenure:

1) Age: If you decide to borrow early, you can opt for a longer tenure loan - 15 to 25 years. This way, your monthly EMI payment would be less. Although the amount of interest paid would be higher as compared to other options, you can have the benefit of availing the loan for a longer period of time. However, if you are borrowing towards the end of your career, you may have to opt for a shorter tenure.

2) Income: This means both the present as well as the future income. You should be able to repay his EMIs without compromising drastically on your quality of living. The cash flows available after payment of EMIs should not entail a dent in the living standards. As such, a judicious planning of cash flows is required.

Tenure and interest

The longer the tenure, higher will be the interest rate. This is because of the increased risk the bank has to take. Also, the interest amount in absolute terms is higher, because of the longer tenure. However, the EMI is lower because the loan and interest are spread over a longer span of time.

The shorter the tenure, lower will be the interest rate. This is because of the relatively lower level of risk the bank takes. Also, the interest amount in absolute terms is lesser, because of the shorter tenure. However, the EMI is higher because the loan and interest are to be repaid over a shorter span of time.

Tax benefits

You should try to avail the maximum tax benefits available under the Income Tax Act. Presently, interest upto Rs 1.5 lakhs per annum paid on housing loans is deductible from the taxable income of a borrower. You should structure the housing loan amount and tenure so that your annual interest component paid in the near future is Rs 1.5 lakhs per annum. Of course, this would be contingent on other factors as well, like your annual income and savings potential.

Some rights a mortgagee of property has in the case of a mortgage contract

A mortgage is the transfer of interest in a property to secure payment of money advanced. The transferor is called a mortgagor. The transferee is called a mortgagee. The principal money and interest secured are called as mortgage money. The instrument by which this transfer is effected is called mortgage deed. The provisions related to mortgage of property are contained in the Transfer of Property Act.

A mortgage can be of various types. These include simple mortgage, mortgage by conditional sale, usufructuary mortgage, English mortgage, mortgage by deposit of title deeds and anomalous mortgage.

A mortgagee can take possession of mortgaged property in case of default. Under the Transfer of Property Act, if there is default in payment of mortgage money, the mortgagee can take possession of mortgaged property and sell it without intervention of a Court only in case of English mortgage. In addition, a mortgagee can take possession of mortgaged property where there is a specific provision in the mortgage deed and the mortgaged property is situated in Kolkata, Chennai or Mumbai. In other cases, possession of property can be taken only with the intervention of a Court.

English mortgage


It is a type of mortgage where the mortgagor binds himself to repay the mortgaged money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a provision that he will re-transfer the property to the mortgagor upon payment of the mortgage money as agreed. This is also called registered mortgage.

This is the safest form of mortgage for a bank. No documents of the property are required to create this kind of a mortgage. The borrower just needs to enter into a mortgage deed with the bank which needs to be stamped and registered in order to make it enforceable. However, this is an expensive way to create a mortgage as charges have to be borne by the borrower for stamping and registration. Further, the mortgagor binds himself to repay the money at a certain date and transfers property absolutely to the mortgagee subject to the condition that he will re-transfer it to the mortgagor on payment of the mortgaged money.

A mortgagee has a right to sue for the mortgage money in these cases:

• Where the mortgagor binds himself to repay.
• Where the mortgaged property is wholly or partially destroyed or the security is rendered insufficient. The mortgagee must have given the mortgagor a reasonable opportunity to provide further security to render the security sufficient and the mortgagor has failed to do so.
• Where the mortgagee is deprived of his security due to a wrongful act or default of the mortgagor.
• Where the mortgagor has failed to deliver possession of the property to the mortgagee.

If a suit is brought, the Court may stay the suit and all proceedings until the mortgagee has exhausted all his available remedies against the mortgaged property, unless the mortgagee abandons his security and re-transfers the mortgaged property.

Section 67 of the Act gives the mortgagee the right to foreclosure or sale. As per this provision, in case the mortgage money has become due to the mortgagee, before a decree has been made for the redemption of the mortgaged property, the mortgagee has a right to obtain a decree from the Court that the mortgagor be absolutely debarred of his right to redeem the property, or a decree that the property be sold. This suit to obtain a decree that the mortgagor be absolutely debarred of his right to redeem the mortgaged property is called a suit for foreclosure.

Fall In Interest Rates, Property Prices Makes It Tempting To Invest In A House, But Do A Reality Check
WITH interest rates on a downward spiral and prospects of getting a good deal on a house, the real estate sector could witness some buying in the coming months.

Though property consultants recommend waiting for a few months for the right price, some home seekers may be tempted to kick off their house hunting expedition soon.

Time for short listing

While there is no need to rush into a decision, you can start looking out for a house right away. Once the market bottoms out, home-seekers will start making a beeline for properties and loans. If you have identified your ideal home beforehand, you will be a step ahead. You can jump at the earliest opportunity available — in terms of price and interest rate. Lack of buying activity means that the market is skewed towards the buyer at the moment.

You can start quoting a price that seems reasonable to you. Try quoting a price that is 50% less than the highest price of a property in the locality commanded in the past. Another method of determining a property’s price is to ascertain, if you want to buy it in five years later, too. If the answer is in the affirmative, you can consider sealing the deal. Approaching an agent posing as a seller could be a good idea to determine the real price of the house — chances are that the selling price would be considerably different from the buying price quoted to you.

Identify your needs and capacity

Your heart may be set on a plush residential complex replete with state-of-the-art facilities, but that should not make you lose sight of your basic needs. For instance, if the well-equipped complex is not close to a railway station/bus stop, and you do not own a private vehicle, then commuting could turn out to be a nightmare. Hence, when you commence your house-hunting mission, it is advisable to keep a list of must-have attributes ready. In addition to quality of construction, evaluate the existing infrastructure. Finding a perfect house is nearly impossible, but comparing short listed properties will help you zero in on one that meets majority of your requirements.

This apart, the present and future market drivers, financial ability and personal investment objectives should be borne in mind. A ruthless assessment of your financial situation — current as well as future — is essential; factor in possible pay cuts and job loss. If you are planning to sell your old flat and buy a new one, it is better to do so only after securing the sales proceeds. Though bridge loans meant for such funding gaps are available, in the current scenario, it is better to steer clear of avoidable liabilities.

Consider old flats

If you are not fixated on ‘ultra-modern’ amenities, you can consider buying an old flat. If you locate a well-maintained house in the desired locality that boasts of robust ancillary infrastructure, there is no reason why it should not be considered. After all, the strain on your budget will be minimal. The difference in prices of new and resale properties would depend on various factors, but would usually be a third less than that of a new property. However, a comparison between the new and old houses should also cover renovation costs, the latter would necessitate.

Check if the property is already mortgaged

Many times, builders start developing properties after mortgaging the same to institutions that extend finance to the project. If it is mortgaged, you must insist on getting a no objection certificate (NOC) from the lender or satisfy yourself that your rights under the purchase contract are not subservient to the lenders. You must insist on an Occupation Certificate, sanctioned building plan and the Building Completion Certificate.

Get clarity on refund

While signing the contract, the buyer should enquire about the time frame within which the project will be completed and the penalty that the builder would be liable to pay in the event of delay.

The builder would be legally liable to render a refund, if it can be proved that he has not met his part of the pact. This would include unreasonable delays in construction, flawed construction, flawed title or evidence of previous claims on the property or the land on which it stands.

Buyers should enquire about the portion of advance paid that will be forfeited and the time frame within which the balance will be refunded, in case they choose to cancel the booking.