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.