BANGALORE’S central business district (CBD) has emerged as the second best office location in Asia in terms of its annual rental growth performance, according to a study by Cushman & Wakefield.
The Office Space Across the World 2009 report states that Bangalore CBD, which is a new entry in this year’s top 10 list, recorded an 18% annual rental growth in December 2008. With 58% growth in CBD rentals, Kuala Lumpur was the number one location in Asia. Kolkata closely follows Bangalore with a 17% rental growth. Bangalore’s annual CBD rental per sqft is $26 while it is $31 for Kolkata. NCR, Mumbai and Chennai have slipped into negative growth, the report says.

Cushman & Wakefield said, the relatively new markets of Bangalore, Kolkata, Pune and Hyderabad were not as inflated as the more mature markets of Mumbai and Delhi where price points defied the low operational cost advantage that developing economies boast of. Hence, scope for rental correction was much less in the former. At $134 per sqft annual rental, Mumbai CBD emerged as the sixth most expensive office location in the world.

The earlier you buy property in your earning years, the better it is for you financially. Here are the list of questions you should answer first to get the best deal

The high economic growth in the past five years has brought about a big change in the life of the average person. Many young people are joining work early and earning high salaries. Many of them are either single or newly-married with lower financial commitments. There is higher disposable income in their hands. Home loans are relatively easy to get and mortgage rates are getting cheaper. So, the journey of wealth creation now starts in early 20s.

Property as an asset

Easy availability of home loans, declining loan rates and tax concessions imply that with the right amount of planning you can easily buy that dream home early in life. When you analyse it thoroughly, the first house purchase is not just to fulfill your dreams but also to provide for a secure place to live in through the golden years of your life - after retirement.

Due to the improved living conditions and access to better medical facilities, life expectancy is increasing. This has led to a situation where you will be spending approximately the same number of years in retirement that you would have spent in your active working life. Having a house where you can stay comfortably in then becomes a necessity rather than a choice.

Arriving at the budget

Starting early provides you with the ability to finish off the first housing loan while you are in your early 40s. This gives you the added luxury of buying a second house for investment purposes. However, to get all this right requires proper planning. Hence, a lot of thought and planning has to go into the buying process. It requires long-term financial planning.

The right financial planning practice starts with asking a few questions. These questions throw up many surprising answers and help in understanding your needs better. For example, do you have enough cash resources to cover expenses for at least the next two months? It seems like a simple question, but is a very relevant one. It helps you provide for contingencies before you venture out to invest or take a housing loan.

Some questions you have answer while buying a house:

What type of house do you need?

The kind of house you need will be based on a host of factors like proximity to schools, offices, shopping centers and medical facilities. Making a list of all the items you need in your house in the order of priority. This helps your selection process because it weeds out choices that do not find favour.

How will you fund the down payment?

Even though banks are funding a substantial part of your housing costs, you will have to arrange for your contribution upfront from your personal savings. This will be no less than 15-20 percent of the value of the house. You also need to cover at least a part of the closing costs. So, the first step towards owing your own house is saving up for down payment.

How big a loan should you avail?

If you are buying a house with borrowed funds your home specifications will depend upon how much you can borrow and how much you can raise as down payment. The mortgage lender will work out your loan eligibility in both scenarios. The quantum of loan can be either linked to income or to down payment. It pays to be prudent and limit your EMIs to no more than 35-40 percent of your net take-home pay if you do not have other loans.

What should be the loan tenure?

Another major decision you will have to make will be the length of loan tenure. Generally, the longer the loan the costlier it becomes. A five-year difference in the loan tenure could set you back by a couple of lakhs. So, the general philosophy should be to pay back the loan as early as possible. If you have an early start, you will be in a position to settle your first loan and be eligible for another housing loan for your second house.

Insurance and taxes

These are expenses that are not factored in the calculations before buying the house. These increase the cost of ownership. For any home loan borrower, it makes sense to get insurance so that in the unfortunate event of his untimely death the loan can be settled with the insurance. Further, a home insurance to cover your home and its contents will stand you in good stead.

Asking the right questions to yourself before buying a house will help you get the maximum value for your money

Some factors you need to consider to arrive at the ideal home loan tenure:

Loan tenure is the duration of the loan. In case of housing loans, generally, the tenure is long - may vary anywhere between five and 20 years. Most borrowers prefer to go in for a longer tenure rather than a short one. The repayment through EMIs depends on the tenure of the loan and amount. Longer the loan tenure, lower the EMI. Shorter the loan tenure, higher the EMI. Of course, going by the same logic, for shorter loan tenures, the interest amount paid is also less as against the longer tenure loans, where the interest amount increases.

Present income

A number of factors influence the determination of loan tenures. The first and foremost one is the income of the borrower - i.e. the disposable income of the borrower. The reason is that it is from this part of the income that he would be repaying the loan instalments. So, if the net disposable income of the borrower is low, it is advisable to go in for a longer tenure loan rather than opting for a short tenure one. This way, the EMI portion is reduced. The loan amount is spread over a longer period of time. The immediate burden on the borrower is low. This is despite the fact that the borrower is required to pay interest for the extended period of borrowing.

Future income

Another important element to be considered is the future income of the borrower. In case the borrower is expecting an increase or reduction in the income levels in future, he has to decide on the tenure accordingly. For example, in case a person is to retire in another five years' time, he may look at a maximum of a 5-year tenure, and may not like to stretch it beyond his retirement age. Similarly, a 30-year-old can think of having a longer tenure loan stretching up to 10-20 years, because gradually his income would also rise. In the initial years of employment, the income levels are low. The income increases over the years (so does the expenditures). So, one may opt for a longer duration loan and reduce the present burden.

Interest rate

Then comes the element of interest. Generally, the short tenure loans attract lower rates of interest as compared to the long tenure loans. This is because a bank can estimate interest rate movements in the near term more accurately than over a long term. So, in case you have adequate liquidity and resources to repay the loan amount, opt for shorter duration loans vis-avis the longer duration ones and thus take advantage of the lower interest rates.

Loan tenure

Yet another factor influencing the loan tenure is the amount of loan. The amount borrowed determines whether you should opt for a longer tenure or shorter one. In case the amount borrowed is huge, go in for a longer tenure loan.

Objective – investment or own use

Another factor that influences the loan tenure is the objective of the loan. Whether you intend to take the loan to purchase a property for your own use or as an investment option is a key question. Generally, if you are borrowing for the purpose of buying as an investment, go for a shorter duration loan to avoid the exit charges payable in case of early termination of the loan and to maintain liquidity of capital.

All these factors are interlinked and need to be analysed in totality to arrive at the ideal loan tenure.

A joint venture in a good location will yield higher rentals and lower the costs

The new Master Plan came out with regulations that made it easy for people looking to invest in property for commercial activities. They could now look at various options to put up a structure that would work out commercially viable. One such option is joint ownership by amalgamation of property. In joint ownership, all the owners consolidating their properties will jointly own the land. However, their share and ownership in the built area will be to the extent of the share of land contributed by them.


Investing in joint ownership

Shop owners looking at expansion can lower their cost of construction and capital investment by this method. With the cost of land high and limited resources, you can get quality property and also distribute the cost and risk. An investor can bring in lesser capital but build a state-of-the-art building.

Another alternative is to go for joint development after amalgamation of properties. In joint development, the owners will only provide land to the builder or developer. He will bring in the funds and bear the cost of construction. In return, he will be given a share in the property developed. This portion can be rented out by him.

Capital gains tax will be applicable only on his portion of the property. The builder can also take up his portion on a lease basis till he recovers the cost of construction. Once the lease period is complete, the ownership will pass back to the owners.

The ratio of sharing between the owners and the developer depends on the location of the property. The land rates in K G Road and Sampige Road are very high, ranging from Rs 12,000-20,000 per sqft. The cost of construction for a commercial complex comes to Rs 1,500-1,600 per sqft. So, in these areas, the developer will be able to make up the cost of construction even by taking a lower built-up area ratio.
Who will benefit from a joint venture?

People in the retail business, IT sector, and corporates could get into such an arrangement. The owners could also build offices where they are rented out to multiple tenants. This will also work well for people who have clients regularly coming to visit them in their offices. It is good to go in for such a venture for businesses where the products have to displayed, like textiles. In such a case, location and presentation become very important.

Advantages

There are various advantages that small shop owners can avail of through amalgamation:

• High profile tenants:

When there is a bigger area, a state-of-the-art building can be constructed. This will pull in bigger clients due to greater visibility and a quality structure. A good location will ensure good clients. This in turn increases the rental potential of the building.

• Shared utilities:

The cost incurred for utilities used in the structure will be lesser since it will be shared. There will be a common generator, common staircases and elevators etc. Space saved: Instead of constructing different structures, amalgamation results in efficient use of space by having one superstructure and common spaces.

• Better quality:

The quality of construction and use of space will also be better in case of a large space.

• Higher FAR:

On amalgamation, an additional FAR of 0.25-0.5 is given, depending on the site area. With higher FAR, you can build more, garnering higher returns.

The floor area ratio (FAR) depends on the width of the road. Broader the road, higher will be the FAR. But to use the FAR and the additional FAR given, it is necessary to have a larger area. If there is 40x60 or even a 100x100 site, there has to be 16 percent space on the right and left and 20 percent in the front and back portions.

The higher FAR cannot be achieved in the space left. The site area should be at least 10,000 sqft or more to make best use of the FAR given.

The Reserve Bank of India (RBI) has left all the key rates unchanged in its recent credit policy. Taking into account the global economic crisis, inflation and growth expectations, the RBI has chalked out its monetary policy. What is a monetary policy?

The RBI announces a monetary and credit policy statement that aims to rein in economic turbulences. It manages money availability, inflation, money supply and interest rates, through its policies and norms.


Here are the key rates that the RBI toggles:

Cash reserve ratio:

Banks are required to retain a portion of funds with the RBI. When the RBI increases this percentage, the amount available with banks comes down. Increasing CRR draws out money from the banking system and controls prices. Home loans become dearer.


Repo rate:

It is the rate at which banks borrow from the RBI. If the RBI reduces the repo rate, it will be cheaper for banks to borrow money. If the repo rate goes up, borrowing gets expensive.


Reverse repo rate:

The RBI can borrow money from banks for a good rate. This is the reverse repo rate. Banks prefer to have their money with the RBI for a competitive rate as money is safer there. When the reverese repo rate is hiked, banks find it attractive to have their money with the RBI, and hence money is drawn out of the system.