NHB ’s move to boost funding for home loans
Apr 11, 2014
Source : The Times of India


BANGALORE: There is some good news for prospective homebuyers. The National Housing Bank (NHB) is focusing on bridging the demand-supply gap. Recently, the NHB decided to use a significant portion of its tax-free bonds’ proceeds to shore up long-term fixed-rate mortgage loans, especially for the low income and middle income housing in urban areas and suburbs.

NHB raised Rs 4,000 crores in tax-free bonds in 2013-14 and another Rs 3,200 crores in low-cost funds from overseas last fiscal. It will use these funds to refinance banks and housing finance companies (HFCs), which in turn will roll out longterm fixed-rate loans of up to Rs 10 lakhs to borrowers. The tenure for these loans will have to be 15-20 years.

NHB is trying to develop the long-term fixed-rate mortgage market. It plans to use the proceeds of the tax-free bonds (fixed rate for 15 to 20 years) largely for better asset-liability maturity matching. The product will cater to the low income and middle income households who can be protected against the volatility in the floating rates, which is also a credit risk for lenders.

The banks and HFCs offer most of their home loans on the floating rate, which is linked to the base rate or benchmark prime lending rate, as lenders don’t have recourse to long-term funds. This tends to pass on the short-term risks to borrowers. This in turn leads to a sudden spurt in either the EMIs or the repayment period, and sometimes even both, whenever the Reserve Bank of India (RBI) increases the benchmark rates.

It is to be noted that even though some banks and HFCs do offer fixed rate loans, it comes at about two percentage points higher than the floating rate loan that is now at 10.50 to 11 percent. As such, it acts as a disincentive to homebuyers and stops them from opting for a fixed rate loan.

As the Consumer Price Index (CPI) based inflation rate has remained above 10 percent in the past two years, the RBI maintained a tight monetary policy. In effect, this move has kept the mortgage rates high.

The NHB has underlined the housing shortage of 18.70 million units and that 90 percent of it is in the economically weaker sections and low income group segments. As such, the potential in these segments is huge and untapped.

In addition, the NHB recently announced a reduction in interest rate on its special refinance scheme to 8.25 percent from 8.50 percent, for loans up to Rs 5 lakhs. For loans up to Rs 10 lakhs, the NHB decided to cut the rate to 8.50 percent from 8.75 percent. The scheme is aimed at ensuring long-term fixed-rate refinance at affordable interest rates to build or buy a house in an urban area. This scheme is targeted at the low income and middle income segments.

Further, the refinance extended to primary lending institutions including banks, HFCs and lenders in the cooperative sector is for 5-15 year tenures at fixed rates.

Latest Realty News

Realty market poised to attract investments
Apr 11, 2014
BANGALORE: As the country heads towards the general elections with policy uncertainties expected to get resolved once a new government assumes office, it seems that the Indian real estate sector is yet again high on the wish-list of the investors, both, domestic and international. If the investments and the policy announcements since the second half of 2013 are any indication, there has been a clear indication that the phase of over-cautious market sentiments is getting over. Furthermore, there
Retail hubs in emerging areas of Bangalore
Apr 11, 2014
BANGALORE: With availability of land and prices at a premium in the city center, growth is shifting towards the peripheries, where connectivity has led to the opening up of localities. With commercial and industrial realty development taking place in the Outer Ring Road (ORR) corridor and beyond, rapid residential expansion has followed. This has led to the emergence of retail in these developing areas.
Godrej Properties– M S Ramaiah Group to build 100-acre township in Bangalore
Apr 09, 2014
BANGALORE: Mumbai-based Godrej Properties has partnered family members from the M S Ramaiah Group to develop a 100-acre township in North Bangalore, sources privy to the development said.
Should you make 20% down payment for your home
Apr 05, 2014
BANGALORE: Pragnya and Atul Abhayankar are couple based in Mumbai. Having reached middle management positions in their respective corporate careers and lived on rent for five years, they have managed to save enough to buy their first home. But even after having done extensive homework on the property and the home loans that they are eligible for, they are still unable to arrive at a decision.They are unsure about whether or not to put down 20 per cent of the total value of the property as down p
Commercial growth spurs demand for residential options in Bangalore
Apr 05, 2014
BANGALORE: With an uptake in commercial development in the north, several micro-markets are opening up for residential real estate development. Localities close to the NH7 have benefitted from the upgraded 22 km highway, with seamless link to different parts of the city via the Outer Ring Road (ORR). The north is witnessing several standalone housing projects as well as integrated developments offering residents a self-sufficient neighbourhood.
IT drives demand for commercial space in Bangalore North
Apr 05, 2014
BANGALORE: The growth in Bangalore’s commercial realty market began from the Central Business District (CBD), and expanded into the extended or Secondary Business District (SBD), south and south-east Bangalore. Over a period of time, corporates with long-term occupancy plans relocated to south-east and east Bangalore, owing to better connectivity and the availability of IT parks. With the establishment of two prominent tech parks and the location of the international airport, Bangalore north has
Home loan helps save on income tax
Apr 05, 2014
BANGALORE: The deduction you can claim against the payment of interest on a home loan from your taxable income is a major saving. This is especially so as the interest component is higher than the principle amount in the initial years of the home loan tenure. The amount of interest paid can be availed as a deduction under Section 24 of the Income Tax Act under the head ‘Income from House Property' while assessing the total income for the year.
No cheques for property tax
Apr 03, 2014
BANGALORE: The BBMP will not accept cheques for payment of property tax from this financial year. Reason: In 2013-14 , about 8,000 property-tax cheques bounced. Not to be a loser again this year, the civic agency has banned citizens from paying property tax by cheque. Payments can be made in cash or by demand draft.
Airline, capital market models drive property sales in Bangalore
Apr 03, 2014
BANGALORE: City-based developers are thinking out-of-the box to market large-scale housing projects. And the strategies appear to be working.
Bangalore: Spurt in demand from US-based NRIs
Mar 29, 2014
BANGALORE: The availability of many investment options, favourable exchange rate, better pricing, flexible repayment options and professional property management services are all nudging NRI techies in the US, Bay area to look at Bangalore as an ideal destination to invest in.

Latest Realty News Of State

Realty Talk's