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.