The realty sector has been one of the worst hit sectors in the recent past due to variety of reasons. The bad times for the realty sector commenced with rising cement and steel prices, coupled with the Reserve Bank of India raising the interest rates to combat rising inflation. Thereafter, the global financial crisis brought with it an economic slowdown. All of these reasons resulted in a quick slump in demand for residential and commercial properties.

During the last year a lot of realty firms had raised money from the capital markets and through private equity with RBI policies making it tough for the realty firms to raise bank finance. However, these alternative funding sources have dried up since the global financial crisis broke out. Realty firms finding themselves at the receiving end of the bloodbath on Dalal Street made matters worse for the realty sector.

These things clearly signaled a serious crisis for the sector which resulted in the industry leaders in the sector requesting for a Government intervention. The realty firms expected the Government to take steps to bring in more liquidity into the sector by easing lending norms and also requested for a reduction in housing loan interest rates to boost the demand.

The RBI provided a breather for the sector last weekend by announcing a slew of measures especially for the real estate sector apart from 100 basis points cut in the interest rates. One of the most important announcements includes Rs 4,000 crore refinance facility for National Housing Bank. The RBI has also decided to grant "priority" status for housing loans upto Rs 20 lakh and for loans given by banks to housing finance companies for on-lending to individuals for purchase or construction of homes of upto Rs 20 lakh.

As per the existing RBI norms, every bank is required to set aside 40 percent of its deposits for lending in the priority sector. As a part of the policy announcements on Saturday, the RBI has also clarified that banks can classify housing loans up to Rs. 20 lakh as "priority sector" advances, subject to a ceiling of five per cent of their total priority sector limit. The above moves are expected to provide a life line to the realty firms who operate in the low-cost housing segment. This measure would also help the housing sector and the realty firms which operate in the nonmetros or the Tier II cities.

The other major measure announced by the RBI on Saturday has been the relaxation of asset classification norms for commercial real estate advances. It may be recalled that the RBI had, earlier this year, issued a directive requiring the banks to classify advances to a property developer as a Non Performing Asset (NPA) the moment the advance was restructured. This directive of the RBI had made raising bank finances difficult for developers whose loans were classified as NPA by other banks.

The RBI has now relaxed the asset classification norms for commercial real estate advances, by granting concessional treatment to commercial real estate advances which are restructured upto June 30, 2009. This one time measure grants a relaxed treatment of non-classification as NPAs to second restructuring done by banks of real estate advances before June 30, 2009. This step would surely relieve the realty firms of the liquidity crisis. This move would also encourage the banks to increase their exposure to real estate sector. The 100 basis point rate cut should also ease the cash crunch situation if the banks lower their lending rates.

Though some of the realtors have voiced their opinions on the measures announced by RBI not being sufficient, these measures are intended to boost the demand for low-cost housing and also ease the cash crunch situation which the realtors are facing. These measures together with the Rs 30,700-crore fiscal stimulus package unveiled by the Government aimed at guiding the economy away from a possible downturn.

This form of mortgage unlocks the revenue potential of a house for senior citizens
A mortgage is a form of hypothecation of a property to a banks or housing finance company as a security for a loan. A common form of security banks insist on is a mortgage of the house for which the loan is being availed of by the borrower.

Mortgage is the transfer of interest in a specific property to secure the payment of money advanced. The transferor is called a mortgagor, the transferee a mortgagee, the principal money and interest secured are called the mortgage money, and the instrument by which the transfer is effected is called a mortgage deed.

In case of a reverse mortgage, the property owner surrenders the title of the property to a financial entity. The financial entity doesn't pay the entire amount to the owner upfront. On the contrary, it pays out a regular sum each month for the agreed time. The owner gets to stay in the property along with his spouse for their lifetime. Thus, the owner can ensure a regular cash flow in times of need and enjoy the benefit of staying in the property. After the owner's death, the property is transferred to the institution, and not to the heirs. Reverse mortgage is a relatively new concept in India. The concept is quite popular in developed countries to generate cash flow.

The arrangement will be available to those above a specific age, for example, 60-65 years. The aim is to turn the immovable property into a 'liquid' asset that generates a return while it is used by the owner. The amount paid out each month is for a specific period of time. The financing institution has to bear the risk of the individual outliving the agreement. At the expiry of the agreement period, the monthly payments to the owner stop.

The monthly payout depends on the value of the property, terms of the agreement and the rate of payment. The valuation of the property is to be done by professionals. The entire payout mechanism - calculation and computation - depends on the law of probability.

On the death of the owner, the spouse can continue living on the premises. Only in case both the husband and wife die during the tenure of the scheme, the institution will sell the property, take its share as per the terms and distribute the rest among the heirs.

As a concept, reverse mortgage is of immense use in unlocking the otherwise illiquid asset. Hitherto, immovable property was treated as one of the most illiquid assets. Reverse mortgage tends to unlock the liquidity potential of this asset. It helps the owner get a decent return from his immovable property, without having to part with it. The owner can continue to be in possession of the property during his lifetime

Here are some tips to help you use energy more efficiently at home

• Switch to low energy lighting throughout your home that uses one fifth the energy of normal light bulbs. CFL bulbs are a good energy-saving option. Use movement-sensitive lights areas like hallways so that every time you pass by or leave a room, the lights automatically sense it and turn on or turn off. Always turn off your computer and television. Never keep them on standby as this consumes more energy.

• Don't forget to switch off broadband connections, speakers or printers. They're all mini-energy guzzlers which, taken as a whole, amount to a lot.

• Look for refrigerators and washing machines having the highest energy-efficiency rating.

• As regards cooking appliances, microwaves are the most efficient as they cook fast.

• Get batteries that can be recharged rather than recycled.

• Install solar panels on your roof top. In climates like ours, a solar heating system can provide 50 to 75 percent of domestic hot water use.

• The energy (natural gas, propane, electricity, etc) needed for hot water heating can be reduced by 60 to 90 per cent by using a solar water heating system to pre-heat water before it enters your existing traditional water heater.

• Costing far less than a new conventional heating system, solar air heating systems usually pay for themselves in 3-6 years. They typically last for 18 to 35 years and require minimal maintenance.

• Get a switch installed which checks your power usage. This will automatically turn off the power if the usage is more than the prescribed load.

The good times are back for buyers in the real estate market. Some developers have begun to drop prices far more than the 10-20% done so far. And with interest rates clawing back to single digit levels, there looks to be good buying options emerging.

Four days ago, Bangalore based Alliance Group launched a premium mixed development project in Chennai’s Annanagar Extension at Rs 3,100 per sqft. That’s about 45% less than the rate (Rs 5,800/sqft) at the peak of the real estate boom.

The strategy is said to have worked. The company says in less than 60 hours over 300 units were sold. This at a time when sales for developers are down by almost 60% compared to last year.

The project comprises of over 2,000 housing units with a multiplex, and retail space.

Manoj Namburu, chairman of the Alliance Group, said that a similar marketing strategy was being considered for an upcoming project near Electronics City in Bangalore.
An industry analyst said that this discount would be on the peak price, and the actual discount to the prevailing price may be in the range of 20 per cent.

Developers are looking to cash in on the lower interest rates, and as many have put on hold their expansion plans they can afford to lower prices. Besides, if developers start seeing cash flows now, then by the next two quarters they would have created adequate liquidity, which would then enable them to re-start their expansion plans.

DLF was amongst the first major developers to bite the bullet and lower prices by 20% in Bangalore a month ago. But that clearly wasn’t sufficient to interest buyers. The company has now returned all buyer deposits and has deferred the project indefinitely. Only around 50 units had been sold. Their Cochin and Chennai projects too have met the same fate.

Bigger price drops is probably the answer to correcting the lean demand situation.

If you apply for a loan jointly with your spouse, you can get a higher amount and maximum tax benefits

A joint loan is often considered a tool to enhance loan eligibility. When a borrower's income is clubbed with that of his spouse or parents, their combined income is taken into consideration by the lender. Thus, they are entitled to a larger loan and can afford a bigger house.

Banks insist that all co-owners be co-applicants. But the reverse is not necessarily true. All co-applicants need not necessarily be coowners. Some banks may have hesitations to allow brothers or sisters to apply jointly. The lender may be unwilling to take the risk of a family dispute in future that could impact the repayments due to him. That's the same reason why banks do not allow friends or distant relatives to apply jointly for a loan.

Only owners and co-owners are eligible for tax benefits in respect of home loan repayments. If you are neither the owner nor the coowner of the apartment, you will not be eligible for any tax benefits on the loan repayments.

Home loan borrowers can claim tax deduction benefits on the interest portion of the loan under Section 24(b) of the Income Tax Act. In case of a self-occupied property, the deduction on interest payable is limited to Rs 1.5 lakhs. The principal portion of the loan paid is eligible for deduction under Section 80C. Tax deduction benefits on the principal component under Section 80C is up to a limit of Rs 1 lakh.

Consider the scenario, where both husband and wife contribute towards EMI repayments. How are they eligible for tax benefits on their repayments? You will get tax benefits in the proportion to your share in the loan. Since a home loan is huge amount, the interest and principal repayment components tend to exceed the deduction limit. By applying jointly for a home loan, the co-owners can claim tax deductions in the proportion of their holding in the loan and avail maximum tax benefit.

If you apply jointly, you can increase your loan eligibility and get maximum tax benefits.

How you can avoid paying capital gains tax
There are some provisions in the Income Tax Act that make it possible for you to reduce your capital gains tax liability. The Act contains provisions regarding tax of capital gains arising out of transfer of a residential property. Capital gains tax is leviable on sale or transfer of a house. What constitutes a sale and transfer has been specified under the Income Tax Act.

Capital gains tax is computed on the indexed cost of the asset purchased, which is deducted from the sale amount received by the assessee. The indexed cost is computed according to the indexation rates notified by the Income Tax Department for each year.

The income from the house should be chargeable to tax under the head 'Income from House Property'. Other immovable properties, although owned by an individual, are not eligible for this exemption. The capital gains should arise from the transfer of a long-term capital asset. The house must be held for a period of more than 36 months before the date of sale or transfer. The house may be self-occupied or rented out.

In order to avoid the capital gains tax, an assessee can either purchase a house within a period of two years after the date on which the transfer took place, construct a house within a period of three years after the date of transfer, or should have purchased a house one year before date of transfer. In these cases, instead of the capital gains being charged to income tax as income of the previous year in which the transfer took place, will be dealt with in accordance with two provisions.

One, in case the capital gains is more than the cost of the house purchased or constructed, the difference will be charged as income of the previous year. In case the new house is sold within a period of three years of its purchase or construction, for the purpose of computing capital gains in respect of the new asset, the cost will be zero.

Two, in case the capital gains is equal to or less than the cost of the new asset, it is not charged to tax at all. In case the new house is sold within a period of three years of its purchase or construction, for the purpose of computing capital gains in respect of the new asset, the cost will be reduced by the amount of the capital gains.

The part of capital gains not appropriated by the assessee towards the purchase of a new house made within one year before the date of transfer of the original asset, or which is not used by him for purchase or construction of a new house before the date of furnishing the returns of income, should be deposited by him in specified bank. The amount should be deposited before the due date for filing income tax returns.

The proof of this deposit should be attached with the income tax return. The amount used by the assessee to purchase or construct a new house together with the amount deposited will be deemed to be the cost of the new house. In case the amount deposited is not used in full for the purchase or construction of the new house within the period specified, the unused amount is charged as income of the previous year in which the period of three years from the date of the transfer of the original house expires. The assessee will be entitled to withdraw the amount in accordance with the provisions of the scheme.

This benefit is available only for individuals and Hindu Undivided Families (HUF).

Investment begins at home. Though the real estate sector has seen a deep correction, a house is probably one of the best investment avenues one can seek today. Despite the global economic slump, which has hit the property prices too, real estate still remains a prized possession.

If falling interest rates and cooling off property prices are prompting some to take a leap and grab their dream houses, there is also no dearth of those who want to sell their house to overcome the recession blues. And, given the importance attached to this most prized asset class, taxman has provided tax incentives for both the buyer as well as the seller of the house.

Buying A House
If your dream house has now come within your reach, check out the following before taking the plunge.

(a) It is always advisable to go in for a home loan. Interest paid on home loans can be deducted from your taxable income up to a maximum of Rs 1.5 lakh.

As this deduction is applicable to each individual owner of the house, this can be a double bonanza in the case of joint ownership. Thus, if the joint owners equally bear the interest burden, then each owner shall be eligible for a deduction up to Rs 1.5 lakh
However, it is important to note here that where more than one owner claims deduction, the total deduction cannot exceed the actual interest paid by the joint owners.

For example, if the annual interest liability on the house property is Rs 2 lakh and the property is jointly owned by husband and wife, then each gets a deduction of Rs 1 lakh only.
Similarly, where the annual interest liability is Rs 4 lakh, then each owner gets a deduction of Rs 1.5 lakh only, taking the total deduction to Rs 3 lakh

(b) It is not only the interest repayment but even the principal re-paid can be claimed as a deduction under section 80C. The limit here is restricted to Rs 1 lakh provided the loan is borrowed from a recognised financial institution

Owning More Than One House

It is not unusual to see people own more than one house these days, especially by those who like to invest in real estate. It has in fact become a common practice to buy and let out houses, which also adds substantially to one’s income, given a high demand for rental premises.

If the subsequent houses are also purchased through borrowed finance, the entire amount paid as interest can be claimed as deduction from taxable income. Ceiling limit of Rs 1.5 lakh is not applicable in case of subsequent properties as these are deemed to be let out.

Thus even if the same are vacant, the owner shall be required to disclose a notional rental income that the property would have derived had it been actually let out.

Selling A House

Selling a house is rewarding - from tax perspective - provided the same is held for at least for three years before transferring the title. Holding a property for three years and more makes it a long-term capital asset and eligible for various tax incentives under the Income Tax Act.

Gains arising from the sale of a house are treated as income and are thus taxable in the hands of the seller of the property. However, if the sale proceeds are utilised for either buying or constructing another property, the same shall be exempt from taxes.

However, one needs to keep in mind the following to avail of these tax incentives.

(a) If the new house is intended to be bought, the same should be purchased one year before or within two years of selling the existing property

(b) However, if the new house is to be constructed, ensure that it is done within three years of sale of the earlier property. It is not necessary to begun construction only after selling the earlier property. However, the construction must be complete within three years of sale

(c) For the interval between the sale of the existing property and buying or constructing another property, the sale proceeds need to be deposited in the ‘capital gains deposit account scheme’ with any nationalised bank. The proof of this deposit should be submitted along with the return of income to claim an exemption from capital gains tax

For those who do not wish to acquire another house from the sale proceeds of the existing property, capital gains tax can be avoided by investing the sale proceeds in the capital gains bonds issued by NHAI or REC within six months of sale of the property. The maximum investment permitted in such bonds is Rs 50 lakh, and these bonds can be redeemed only after three years from the date of investment.

Rental Accomodation

Tax incentives are available not only for the owners but also for those who have rented accommodations. In case of salaried employees who receive a house rent allowance (HRA) from their employers, the least of the following three options can be claimed as an exemption under section 10(13A):
(a) HRA actually received from the employer
(b) Rent paid in excess of 10% of the salary
(c) 50% of the salary (metros) or 40% of the salary (non-metros).

In case of self employed individuals or those employees who do not receive an HRA, the least of the following three options can be claimed as an exemption under section 80GG:
(a) Rs 2000/- per month
(b) 25% of the total income
(c) Rent paid in excess of 10% of total income.

Currently, the economy is going through a slowdown across the board. Due to the slowdown, the prices of property went through a correction. Many experts believe this is the right time to invest in property. Interest rates on home loans have also come down in the last few weeks after the Reserve Bank of India (RBI) cut the policy rates (repo rate, reverse repo rate and cash reserve ratio) drastically during the last four months.

Analysis of condition of economy

Currently, the economic conditions are not good across the world. Many developed countries are in a much worse situation as they have a dip in their real GDP during the last couple of quarters. For example, US, UK, Germany and Japan are already in recession. India is in a better condition.

In India, the economic growth rate has come down from nine percent last year to less than seven percent this year. Analysts and experts are predicting that the bottom of recession has not yet been reached and we may see a further dip in this growth number in the months to come.

Analysis of home loan rates

Home loan interest rates peaked during the middle of last year. They started coming down after the RBI cut the policy rates drastically in the last four months.

Here are some reasons why home loan interest rates are expected to come down in the short to medium term:

Some banks have not yet passed on the full benefits of previous rate cuts to their borrowers. They are taking a cautious approach towards reducing the loan rates and fresh loan disbursals.
The inflation rate has already come under control due to lower commodity prices in the global market The government will pressurise banks to reduce the interest rates on home loans

• For those borrowing now

Looking at the current scenario and expectations of the near term, it is clear that home loan interest rates are not going to go up. It will have a tendency to go down in the near future. Therefore, it is recommended to go in for a floating interest rate home loan scheme. The banks have not reduced rates substantially on fixed interest rate home loan products. Thus, fixed interest home loans come at significantly higher interest rates than floating interest rate loans.

However, it is good to look for banks which provide the option to switch from floating rate loans to fixed rate loans by charging a small fee. Other factors that borrowers should look at include pre-closure or pre-payment penalty, processing fee etc.

• For those who have already borrowed

Some banks have not yet revised the interest rates downwards for existing borrowers in some cases. Such borrowers can consider a switch option. However, they should weigh the cost of the switchover with respect to interest rate differential before making such a decision. The cost of the switch includes pre-closure penalty, processing fee of new loan, registration charges etc.

Many banks provide software that calculates the exact difference in terms of total cost between the old loan and new loan. You can analyse the comparison and look for loans with faster recovery of switchover costs by way of savings from the interest component of EMIs payable under the new loan.

While choosing the flooring, there are a few points you must keep in mind

People generally tend to ignore the flooring in their bedrooms, even as they attend to every other detail in the room. This should be carefully chosen to give a complete appearance to the bedroom. The flooring which you are going to buy should not just be attractive, look-wise, but useful too. So, apply your skills to judge the best option for your bedroom.

If your time schedule is very hectic, choose flooring that requires less maintenance and is durable as well. Your budget must also be taken into account. So, first set your budget then decide on the kind of flooring you want.

The prevailing and popular types of bedroom flooring are:

Flooring tiles: This type of flooring gives an elegant look to your bedroom. Its look is versatile and the installation is also easy. The tiles come in a variety of designs and styles, and in different materials like ceramic, vinyl, linoleum, and natural stones. Natural stone tiles are made from granite, marble, slate etc. In the market, one gets a large range of ceramic tiles like glazed, matte finish and porcelain tiles. Both these tile varieties are durable and require less maintenance.

Linoleum flooring: It is also known as natural flooring. The word linoleum is a Latin word and is derived from two words - linum (flax) and oleum (oil). This kind of flooring is the best choice for those who really like to walk barefoot at home. Linoleum flooring provides excellent support to the feet. Nowadays, because of its beautiful designs and colours, it is gaining popularity. It is durable and economical. It also has a water-resistant property and stays good even when put to rough use.

Marble flooring: It gives an elegant and luxurious look to your bedroom. Earlier, it was mined mainly in Italy but these days it is readily available in our country, China, Mexico, and Spain. For keeping marble floor for a longer time, extra care is required. You get marble in two colours - black and white.
These marble comes in tile and slab form. And a combination of both types gives a very stylish and attractive look to your bedroom. Marble is well known for its low heat conduction properties. That's why it does not warm up quickly. Thus, it is one of the most popular choices for a bedroom as it adds a soothing and cooling touch to the bedroom. However, in winters one must use rugs over it to prevent that extra cool touch.

Laminate flooring: Laminate flooring has some great characteristics due to which it is set apart from other hardwood floors. In the market, one can get a number of options in laminate flooring, differing in thickness level. People are opting for laminate floors in their bedrooms as they are stain-free, scratch-resistant, and waterresistant. It is preferable to choose thick flooring, as it is more durable and stable. To make this floor last for a longer time, you can go in for wax treatment to seal the joints. Laminate floor provides a warranty cover for a period ranging from five to 15 years.

Vinyl flooring: As it is affordable and attractive, vinyl flooring is increasingly becoming the choice of a majority of people. You can get a wide variety in vinyl PVC flooring. It comes in different patterns and styles. So, according to your choice, you can buy them for their bedrooms. Vinyl flooring has multiple advantages. It is quick to install, maintenance-free, and easy to clean. It stays in a good condition even when put to rough use.

Wood flooring: This type of flooring gives a warm, natural look to the bedroom. Due to its versatile nature, it goes well with all kind of furnishings. Since wood is delicate, it is important to maintain the floor. You can go for a special wood cleaner which is easily available.