Myths About NRI Housing Loans..

Ms. Sukanya Kumar, RetailLending.com

Let’s clear the air around some of the common misconceptions about home loans for Non-resident Indians (NRIs) 

There are a number of Indians who have settled abroad for better career opportunities.

For them, a property back home usually gives a sense of attachment and security, which is a prime reason for investment in real estate here by NRIs.
 
Ms. Sukanya Kumar,
RetailLending.com.
But, there are many misconceptions associated with borrowing in India for this purpose. Let’s address the more common misconceptions you might have.

Power of Attorney only to blood relatives..!

Though certain banks such as ICICI Bank or / Axis Bank insist that power of attorney should only be given to blood relatives in India, there are lenders like HDFC and Standard Chartered Bank where this is not a policy.

In other words, NRIs can give the general power to any person whom they trust, including friends and associates.

Also, there are certain banks like HSBC & Citibank that have developed mechanisms where the NRI does not need to give the Power of Attorney to a resident of India in order to take a loan, making it more convenient.

Of course, they have other requirements, including a blood relative as a local co-applicant for the loan.

 
No joint loans with resident Indians..

An NRI and a resident Indian can jointly apply for a loan, but this would be still be considered an NRI loan.

Even if the asset is jointly owned, the NRI would be regarded as the principal applicant and his income would be primarily considered while determining loan eligibility.

The EMI payments will also be made by the NRI, which he could either do through his non-resident external (NRE) account or by opening a non-resident ordinary (NRO) account jointly with the resident Indian and then issuing cheques or standing instructions from that account.

Shorter tenures and lower interest..

Loan tenure and the rate of interest for resident Indians & NRIs are the same. In case of a change in status from NRI to resident, the loan is reworked according to the revised income; the relevant interest applicable is charged and the tenure is also revised.

NRIs from Middle East can not get a loan..

 Just like other countries, NRIs from the Middle East can avail a home loan to purchase property in India. But they need to submit an extra document and that is a copy of their work permit.

 The card needs to be translated into English by Government-authorised translators.

Visiting at least once while the loan is being processed..

 To avail a home loan in India, it is not necessary for NRIs to visit the country at any stage.

One just needs to have all documents in place, including passport copies, a valid visa, a work permit, contract of employment, work experience certificate, etc., and submit self-attested copies of the same to banks.

OCI can not apply for a housing loan..

Overseas Citizens of India (OCI) are individuals who have dual citizenship, i.e., they hold a foreign passport but have an OCI card, which also makes them a citizen of India.

The housing loan norms for them are similar to what is applicable to NRIs.

The only difference for OCI holders is that they need not pay taxes in India and are not eligible to vote.

PIOs can not buy property in India..

Foreign nationals or individuals with foreign passports can avail home loans to buy property in India too, but only if they are of Indian origin. 

All they need to do is to present their PIO (Person of Indian origin) card along with other requisite documents.

While the norms have been eased for NRIs, the only important aspect that they need to keep in mind is that when they are investing in a property in India, they should approach a bank that has a presence in their country.

The city where the property is purchased should also have a branch of the bank.

About the author..



The writer Sukanya Kumar is the 
founder & director of RetailLending.com, 
a home loan advisory firm



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Providing for your children’s Foreign Education

by Mr. Lovaii Navlakhi, International Money Matters

My daughter first went abroad for her undergraduate studies in 2006. The exchange rate then was about Rs.85 to the British pound, and for the first couple of years trended lower to Rs.77.

I was happy as the inflation in fees in local cost was offset by a strengthening rupee. In her final year, the trend reversed and I recall transferring fees for the first semester at more than Rs.90. The fluctuations were too wild to be covered in the calculations a typical financial planner like me would make.

Culturally, children’s education goals rank high up, if not first for Indian parents. It is not unusual to find clients prioritizing children’s goals over their own retirement.
 
Mr. Lovaii Navlakhi,
International Money Matters
Planning for this goal is in itself quite a task. Add to it the stress of planning the expenditure in another country and another currency, and the issues multiply manifold. Here is a primer to the factors to be considered when you are in or /  likely to be - in such a situation.

Research about costs..

The cost of education overseas varies largely within the country of selection depending upon the ranking of the college, location (city or suburbs or university town), the type of course (medicine will cost much more than a liberal arts course), accommodation, food plans, local transportation costs and so on.

An undergraduate degree (tuition alone) could set you back by $ 20,000 to $ 55,000 (Rs.12 lakh to Rs. 33 lakh) a year for a four-year course in the US.

As you can see, the range is wide; and sometimes, the other costs may end up being marginally higher than the tuition costs. You may be forced to consider a college which offers higher scholarship.

Provide for additional costs..

Mobile phones, local travel in the country and visits back home need to be budgeted for. Some colleges have a trimester system and children are returning home at the end of every term, or / within 10 weeks.

Invariably, vacations will coincide with peak travel and full-fare tickets are the only option.

Consider inflation..

On average, inflation is higher for education, especially when it comes to developed nations like the US, the UK & Australia. The college itself will share the rate at which it expects its tuition fee to rise yearly.

Consider an education loan..

Apart from helping to get over a financial difficulty or /  a cash flow hardship, an education loan may instill a sense of commitment to the course, and to work later.

If the student has relatives abroad, it may be possible to obtain a foreign currency loan at a lower rate, but this may involve a commitment to work abroad. Issues regarding work visa also need to be considered.

Start saving early..

This is easier said than done, as the decision to consider an overseas option is suggested by your child fairly late. Parents today do want to provide the best for their children, which today will mean greater flexibility in selecting academic combinations which are difficult to pursue in India.

Hence, it may be prudent to start saving as soon as your child enters school. If you expect overseas education to cost Rs.35 lakh per year and expect inflation to be 10 % per annum, the future requirement for a four-year course starting 18 years later will be Rs.9 crore.

If you were to invest Rs.1.5 lakh per month from the time your child was three years and earned 12 % a year on your investments, you would meet the goal.

Currency consideration..

The savings figure itself seems stiff, but the assumption that the currency will not depreciate may seem foolhardy. If the currency was to depreciate by 5% per annum, the monthly savings will need to be ramped up to Rs.2.5 lakh per month in the above example. One of the ways to cut risks is to invest part of these funds in the currency it is intended to be spent in.

However, not too many children know in advance exactly which country they intend to study. One solution could be to invest in US dollars, as it is not only the most accepted currency, but also easily convertible and arguably the safest. You could have a portfolio built systematically over years in multiple currencies - dollar, pound and euro.

A simple way to achieve this could be through international feeder funds available for investing in rupees. In fact, in the past two years, US funds have returned 27 % per annum in rupee terms.

My son followed my daughter a few years after she completed her education. The pound had fallen to Rs.63. Considering the multiplicity of variables affecting the funding of overseas education goals, it is best that you do not leave things to chance and start planning today towards achieving that “international experience” for your child.

Mr. Lovaii Navlakhi is founder and chief executive officer, International Money Matters Pvt. Ltd.


International Money Matters offices
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A Buyer’s Guide To Green Houses In India..

A Buyer’s Guide To Green Homes In India


The tremendous rate of real estate development across the globe, and especially young, emerging nations, is imposing immense pressure on the environment and its natural resources.
With such a rapid development, there is a lot at stake when we look at important factors such as energy availability and environmental sustainability.

The real estate sector is one of the major contributors to global warming due to the extensive pollution during the construction process as well as emission of greenhouse gases during the lifecycle of the resultant buildings.

On an average, buildings consume about 20 % of the total energy available in a country, and this trend is increasing with every passing day.
Juggy Marwaha,
 JLL India.

Mounting concern for the environmental impact of real estate has necessitated the formulation of sustainable solutions. This has led to the advent of the sustainable real estate and related ‘green homes’ concepts.  
At its basis, sustainable real estate is all about using resources sustainably and addressing the demands of the present without compromising the ability of future generations to meet their own needs.

Green housing or eco-friendly homes are an integrated approach towards minimizing the adverse effects of construction and its operation on the environment and promoting healthier living for people.

It has been extensively documented that living in conventional buildings has been working against residents, both in terms of living standards and the costs of excessive energy consumption.

The process that governs eco-friendly homes is limiting the use of scarce resources such as water, energy and materials used during construction and occupation. The idea is to incorporate features that make the most of natural resources such as light and water while reducing heat gain and improving the quality of indoor air.

Green buildings not only enhance quality of life but also reduce the cost of living, as these buildings involve significantly lower consumption of energy, water and other resources.

Constraints To Faster Growth..

The first and foremost constraint for the proliferation of green buildings in India is the lack of information and incorrect perceptions. It is generally believed that green buildings cost more and take a long time to pay back in tangible energy savings. Such a perception leads to lower demand levels from the larger buyer base.

In fact, the additional cost factor is rapidly reducing as more and more developers get into the ‘green homes’ arena, since there is increased competition. Also, green homes result in significantly reduced utilities bills right from the start.

Also, many developers are deterred from adopting the ‘green mantra’ in their projects because green buildings may involve increased construction costs. They may also find it challenging to obtain the necessary technologies, source green building materials and find appropriately qualified architects and contractors in India.

Nevertheless, developers are aware that the ‘green wave’ is catching the fancy of more and more home buyers in India and want to get on the bandwagon. Unfortunately, this has resulted in a lot of residential projects which project themselves as ‘green’ without adhering to all the mandatory parameters or having obtained the necessary certification.

Know What To Look For..

The overall benefits of green buildings depend on the extent to which sustainable features are included during the initial planning and design. In some cases, such features can also be incorporated after the building is complete.

But the point is that a few green features do not qualify a building as environmentally sustainable.

Because of the increasing interest in this concept by home buyers, many developers have begun promoting projects under the banner of ‘eco-friendly homes’. While many of these projects are indeed accordingly certified by competent authorities, others are merely seeking to get on a popular bandwagon without actually delivering the goods.

To ensure that a genuinely ‘green’ residential project is not mistaken for one of the many wannabes, it is important for their developer to obtain accreditation from the green rating systems followed in India.

GRIHA (Green Rating for Integrated Habitat Assessment) is one such system which verifies all that a building has adhered to all the prescribed parameters, and that the materials and processes have been used at every stage of construction. Once all the requirements are met, the project is credited as a ‘Green Building’.

Check list for green home buyers.
.
* Does the project offer ready access to public transportation so as to reduce the need for private transport?

* Does it use have fixtures that facilitate lower water consumption, and are the systems and fixtures used in common area lighting systems certified as energy-efficient?

* Does it use solar water heaters and have sewage treatment plants, rain water harvesting and water recycling/reuse features?

*  Does it feature natural ventilation so as to reduce the need for air conditioning?

*  Does it have adequate open spaces and green areas?

* Does it offer covered car parking?

* Does it have sustainable waste disposal features?

About the author..
 Mr. Juggy Marwaha is Managing Director – South at JLL India

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Affordable properties lose sheen while luxury picks up..

Affordable properties lose sheen while luxury picks up: Magicbricks’ PropIndex reports

Buyers remained cautious but searched well for aspirational homes. Developers remained restrained but projects reached completion stages as all segments of the market prepared for a growth phase in Indian property market, aligned to the political optimism in India.

July 29, 2014: The first edition of Magicbricks’ PropIndex, Volume IV (Apr-Jun 2014) reported a largely stable matrix of demand and supply, reflecting little change in index values. However, while Delhi’s city index dropped by 4 per cent, the highest in quarter predictably the National index remained stable, up by 1 per cent.

 The highlight of the PropIndex however, was the drop in demand for affordable properties (budget range of Rs up to Rs 20 lakh) which remained significantly low at the national level (1%). Even at city levels, demand in this category fluctuated between a modest 1-5 per cent. As a result, supply in the segment led the existing demand in almost all cities, contrary to the industry buzz that the category is undersupplied and in greater demand, reports Magicbricks.  



The gap between demand and supply was most glaring in the southern cities of Chennai and Hyderabad. While an over-supply of 17-19 per cent was noted in these two cities, Bangalore also recorded an over-supply of 8 per cent. The gap was limited to 3-4 per cent in other cities like Mumbai, Pune and Delhi. While Gurgaon was the only city where demand and supply was almost matched according to the Magicbricks PropIndex.

In contrast, the demand for luxury properties at the national level inched up to almost 30 per cent for properties priced at Rs 1 crore and above. However, even though demand has moved up, the luxury segment remains over-supplied in almost all cities states the Magicbicks report. Noida, Gurgaon and Ghaziabad were the only exceptions. While in Noida and Gurgaon, supply matched demand in the category, in Ghaziabad supply lagged behind the demand by 11 per cent.

At least a quarter of the city-wise demand was for the Rs 30 to 50 lakh category, showing that the middle class remained active and willing to buy.

Rental values across cities either dropped or stabilised in this quarter as compared to the Jan-Mar 2014 quarter. This is in direct contrast to the previous quarter, where PropIndex showed rental markets had witnessed a hike of 5-10 per cent approximately. As sales enquiries rose, rental demand posted a corresponding drop. According to Magicbricks, rental values dropped by approximately 5 to 6 per cent across cities in different localities.

The PropIndex states that the  2BHK unit remained the most popular category across cities,  combined affordability and came packaged with facilities, this reflects the aspiration of urban dwellers to own a property that would match their lifestyles.

Demand preferences remained unchanged from the previous quarter’s PropIndex report, but were not evenly spread across the city. Locations near economic corridors continued to post greater demand. However, unlike the previous quarter, besides IT, the manufacturing sector too, drove demand in some cities, such as Chennai.

Ms. E Jayashree Kurup, Research Head, Magicbricks remarked, “With the recently announced Budget addressing several pressing issues of the housing sector has infused some positive sentiments in the market, the real impact of the same would be visible only after these measures are implemented.”

More details are available in the online edition of PropIndex  -


About PropIndex:

MagicBricks.com PropIndex is a tool which empowers property seekers and investors with detailed information on the movement of residential apartment prices and supply of properties in India. No credible property index can be a function of direct values as the changes are governed by multiple factors. 

MagicBricks.com PropIndex has taken this reality into account and produced an index based on listing of apartments and their capital and rental values on the website.

About Magicbricks.com:

Magicbricks.com is India's No.1 property portal. With monthly traffic exceeding 6 million visits and with an active base of over 5 lakh property listings, Magicbricks provides the biggest platform for buyers and sellers of property to connect with each other in a clear, transparent manner. 

MagicBricks.com has over 500,000 active properties posted by more than 1,50,000 active users in 300 cities and 10,000 localities. Our users include owners, agents and developers. Our vision is to be a one-stop shop for property buyers and sellers. 

With this in mind, we have innovated several product features, content and research services, which have helped us to build the largest audience pool. We are part of The Times of India Group, India's biggest media conglomerate.

For media contact
Aseem Seth
Head of Corporate Communications
CEO Corporate Office
Times Business Solutions Limited 
+91 120 663 6338
+91 99102 73367

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Dewan Housing - OUTPERFORMER

by CSEC Research, Chennai
  
DHFL’s loans grew 23.4%YoY to INR 468.6bn in 1QFY15, led by improvements in sanctions (+23.7%YoY) to INR 59.1bn and disbursements (+20.3%YoY) to INR 43.4bn.

Growth in loans was primarily led by self-employed loan segment (+45.7%YoY) and Government services (+24.4%YoY). Subsequently, their share in the overall loans increased to 28.3% and 17.5% respectively.




DHFL witnessed strong growth of 78.7%YoY in LAP segment. Consequently its share in overall portfolio improved (490bps YoY) to 16.1%.  The management indicated to sustain the LAP segment in the range of 16%-18%.

The management guided to grow its loan book at 20%CAGR over the next three years with higher growth in tier III and IV cities.

Valuation:
 The stock is currently trading at P/BV of 0.9X, P/E of 5.8X FY16E. Given its steady loan growth, return metrics and focus on consolidation of operations; we assign a target P/BV of 1.2X for FY16E, implying a target price of INR 450. We rate the stock an OUTPERFORMER

Risks:
Slowdown in housing, capital requirement in DHFL Pramerica insurance franchise and stress in project loans

For More Details
CSEC Research

csecresearch@chola.murugappa.com
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BUDGET 2014-15: Presumptive Taxation For All Resident Taxpayers


All resident taxpayers


Business
Rate
at which income is presumed
 Small Business Sales
less than
Rs. 1 crore
8 % of gross turnover/ or receipts
Plying, hiring or leasing
goods carriages
(person should not own
over ten goods carriages
at any time during
 the previous year)
Rs. 7,500 per month/ part of month for each vehicle

(1) The gross receipts of the taxpayer do not exceed Rs. 1 Cr.

(2) All deductions / expenses (including depreciation)
shall be deemed to have been allowed.

(3) The taxpayer can claim lower profits,
if he keeps and maintains specified books of account
and obtains a tax audit report.

(4) Applicable to Individuals, Hindu Undivided Families and Firms
(excludes LLP, tax payer availing deduction under Section 10AA or Chapter VI-A(C) of the Act.)

(5) Specifically excludes persons carrying on specified professions, persons earning commission or /
brokerage income and persons carrying on any agency business.


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BUDGET 2014-15: Presumptive Taxation for NRI

In the case of a non-resident Indian (NRI) taxpayer 



Business
Rate at
which income is presumed
Shipping
7.5 % of gross receipts
Exploration of mineral oil
10 % of gross receipts
 Operations of Aircraft
5 % of gross receipts
Turnkey power projects
10 % of gross receipts
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