Blogs

What is a No Objection Certificate? Why is it Important for the Home Loan Process?

Posted on by HomeCapital Team

Why is a No Objection Certificate important? Why should you preserve it and how it helps you in the future to get credit?

A NOC (No Objection Certificate) is a legal document that you obtain once you have paid off all your loan amount. It is proof that you now own the property. There is no lien on your property (no third party can stake a claim).

A No Objection Certificate is issued by a housing finance company, non-banking finance company, or a bank, to declare that the person has no outstanding dues, and all the loan amount has been paid to the lender. Sometimes it is also called “No Dues Certificate” or “No Objection Letter”.

Once you have obtained the NOC it is a loan closure – you have paid all your home loan EMIs and have cleared all your outstanding loan dues.

Is it important to get a NOC for a home loan?

As mentioned above, no objection certificate is obtained from the lender. If you have previously taken a loan and you are applying for a new home loan, then a NOC can definitely help. It is good for your credit score. It shows that you are a safe bet. You don’t owe any money to someone, and you will be able to comfortably repay the loan amount you are applying for.

If you have never taken a loan that requires you to pay EMIs, then, of course, you don’t have a NOC. Nonetheless, you can maintain a good credit score by using your credit card often and then making the payments on time.

Why is it important to get a No Objection Certificate letter from the lender?

When you take a home loan you hand over the property papers to the lender. This is a safety vault used by the lender just in case you are unable to pay the loan back. Then the lender can use the property papers to auction the property and recover the losses. These papers or legal documents remain in the lender’s custody till the closure of the loan.

Once you have paid back all the loan amount you naturally want to get your papers back. You want the property to be in your name whether you want to sell it, own it, or enable your children to inherit it.

A NOC is also a guarantee that you have paid all your dues. The lender will issue you a no objection certificate only when all the dues have been paid and once you have obtained the NOC letter, you have documented proof of that.

What if you don’t take your No Objection Certificate on time? Suppose, in the future, there is a confusion or accounting error on the lender’s side and they claim that you need to repay some dues, and to make matters worse, with retrospective interest. They may even take legal action against you for not settling your dues, which you have.

But once they have issued you a No Objection Certificate, they themselves have given you proof that all your dues are cleared, and no money is left to be paid. Then, even in the future if there is a mix-up on their side, you can show them the NOC. The No Objection Certificate is indisputable proof that nothing remains on your side to be paid.

The process of getting your NOC

The most important requisite is that you should have paid all your dues to the lender, and you have all the receipts with you. Once no EMI is left, you need to write a letter to the lender asking them to return all your original documents, invoice copies, and of course, the no objection certificate. Ideally, it shouldn’t take more than a few days for your lender to return all your original documents, receipts, and the NOC.

The Nonbanking Finance Corporations make the process of obtaining a No Objection Certificate even easier. Just log onto their website and then log into your customer portal. You will be able to view all your loan details and download your documents directly. The No Objection Certificate must also be there, ready to be downloaded after your last EMI has been successfully processed.

Conclusion

If you are still paying your EMIs, getting a No Objection Certificate is still a long way from here, especially when you have years or months of EMIs to pay. But getting a NOC is a less discussed topic, although it is one of the most important steps that you need to take once you have paid back your loan. Unless you have taken your No Objection Certificate, your property doesn’t fully belong to you.

How to negotiate a better mortgage rate?

Posted on by Pradumna Kamani

Your mortgage rate is the interest rate that you agree to pay when you take a home loan. It is called loan interest rate; these days the term mortgage rate is also catching up.

You may have the impression that since the home loan rate or the mortgage rate is decided by the bank or the lender you may not have enough say in deciding what rate you pay or whether you can negotiate or not. This is not the case. In many ways you can negotiate a better mortgage rate.

Why should you negotiate your mortgage rate?

Once you take the mortgage you will be paying EMIs for years to come. The EMI includes your principal amount and your interest rates. This is calculated based on the home loan amount you have taken, the tenure you have chosen to pay back the entire amount along with the interest, and your mortgage rate.

By the time you have paid the entire loan amount along with the interest, you will be paying two times more of what you have taken, or even more. For example, if you have taken Rs. 30 lakhs, there is a possibility you will be all in all paying back almost Rs 60 lakhs in the coming 20-25 years. How much total you pay back depends a lot on your mortgage rate.

Most of the homebuyers don’t look beyond the current lender they are negotiating with because they are not aware that they are in a position to negotiate their mortgage rate.

By negotiating your mortgage rate, you can potentially save thousands or even lakhs of rupees in the long run.

What to do to be able to negotiate a better mortgage rate?

To be able to negotiate a better mortgage rate you need to be in a position to do so. Negotiating doesn’t mean offering to pay your own interest rate while your lender offers its own. It simply means creating an environment that makes you an attractive proposition for the lender where you may get a lower mortgage rate. Here are a few things you can do.

Talk to multiple lenders

When you are in a hurry to buy a property and may even be worried whether you will get the loan you are looking for or not, you want to grab the first opportunity that comes your way.

Remember that just as you are eager to get the mortgage, the lender is also eager to give you the mortgage. You will be a newly acquired customer for them who will be giving them back lots of money for their investment. There are scores of lenders over there who may offer you better mortgage rates.

Even a difference of a few hundred rupees can mean a lot. For example, if a lender gives you a saving of Rs. 500 every month, over the period of 30 years, you will be saving Rs. 1,80,000 (a hypothetical example).

Hence, don’t rush. Negotiate with multiple lenders.

Maintain a good credit score

Of course, this is a long-term solution, and it may take years of using credit and then paying it back on time to build a good credit score. But a good credit score gives you bargaining power. In fact, many people take credit (or use credit cards) and make sure that they make all the payments on time so that by the time they need to take the mortgage, they have a great credit score. Lenders want to know if you take money, you return it with regularity. This makes you a good customer. As a good customer with a good credit score, you have the bargaining power that the others don’t.

Negotiate with the lender you’re talking to

The mortgage rate of a lender isn’t written in stone. On many occasions they are open to negotiations. As mentioned above, just like you need a mortgage, the lender needs a customer like you. They may accommodate you if you negotiate with them convincingly and present a good reason to give you a discount or move the decimal value of your mortgage rate a notch down.

Prepay a big chunk of your mortgage

The more money you owe the higher interest you pay. The inverse is also true. Suppose you have taken a Rs. 50 lakh mortgage. After a few years you come across spare cash of Rs. 10 lakh and you use this amount to make a big payment against your mortgage. This can considerably reduce your EMI burden. This is also advantageous in case you plan to transfer your home loan to another lender midway who is offering you better terms towards your mortgage.

Increase your EMI

What is the mortgage rate? It is the interest that you pay for keeping the mortgage rate with you for a specific number of years. You are paying the lender interest for all the months and years you are using the money. The lower is your EMI, the longer is your tenure, and the higher is your mortgage rate. This also works inversely. The higher is your EMI, the shorter is your tenure, and consequently, the lower is your mortgage rate.

Conclusion

You can negotiate your mortgage rate during various stages of your home loan period. You can negotiate when you are getting a new mortgage – with the same lender or by talking to multiple lenders. You can transfer your loan to another lender midway if the other lender gives you a better mortgage rate. You can use your good credit score as leverage. There are multiple proactive steps you can take to negotiate a better mortgage rate.

All you need to know about advance payments while buying a home

Posted on by HomeCapital Team

Bayana, goodwill deposit, token money, and booking amount, are all different names of advance payments when buying a home. There are multiple forms of advance payments. Let’s learn more about the concept below.

Planning to purchase your new home? Don’t be surprised if you have to make an advance payment in different forms. One of the commonest advance payments is the booking or the token amount that you pay to the developer. Just as you need a commitment from the developer, they too need a commitment from you that you are serious about purchasing the property and as a result, he should go ahead with the formalities or even the construction of the property.

Not every bit of advance payment money is to be given to the developer although, if the developer is also helping you with legal documentation, you shall be paying a major amount of advance money to the developer.

You pay some smaller amounts for different reasons, and they may also be considered to be forms of advance payment although they may not be included in the final amount that you pay to the seller or the builder.

Token money for the booking

Every property seller – whether a house owner or a builder – wants to validate the buyer’s intention before going ahead with legalities and documentation. Payment of a certain amount validates a buyer’s intention. Many builders don’t even talk about terms and conditions before they have received the token amount. This token amount may be around Rs. 50,000-Rs. 2 lakh and it is adjusted to the total money the buyer pays eventually.

The stamp duty

Stamp duty is paid to get the legal ownership of the property you are buying. When you get the property registered, you will also be paying stamp duty. This may not seem like an advance payment, but this is definitely an additional payment that you need to bear. The stamp duty is a form of government tax levied on all property transactions. How much stamp duty you pay depends on the region in which you buy the property or get registered in your name.

Advanced TDS payment

Any property that costs over Rs. 50,00,000 attracts this mandatory tax of 1% that must be deducted from the total sale price the buyer pays to the seller. This money needs to be deposited separately along with the PAN details of both the buyer and the seller. In order to make a TDS payment, Form 26QB must also be submitted.

Home loan advance payment

You can choose to make such a payment, or you can deny and explore other property options in the market. What is a home loan advance payment? Sometimes when you are buying a property there is an ongoing mortgage on the property. The property owner may ask the buyer to arrange for the advance payments before the sale can be successfully executed. Sometimes the property is difficult to sell unless the lender has provided a “No Objection Certificate” or an equivalent document stating that the loan has been paid off and there are no pending charges against the property being sold. Again, it is up to you whether you want to make the home loan advance payment or not.

Conclusion

Why is it important to know about all the major and sundry advance payments that you need to make when buying a property or a home? You can arrange for finances accordingly. These advance payments may not be a part of the loan that you get approved from the lender to purchase the property and you may need to make extra arrangements. Having an idea of all the advance payments that are required before you can own the property can help you make the arrangements or save your own money before proceeding to buy a property.

Ready Reckoner Rates Hiked by 5% Across Maharashtra

Posted on by HomeCapital Team

The Maharashtra government has announced an average hike of 5% in the ready reckoner rates (RR) for properties across the state. As per the revised ready reckoner rates, the highest increase will be in the Thane municipal limits at an average of 9.48%, Pune city at 6.12%, and Greater Mumbai at 2.34%. The revised rates will come into effect from Friday, April 1, for the financial year 2022-23.

What are Ready Reckoner Rates?

Ready reckoner rates are the standard rates of any real estate property on the basis of which the market value and the stamp duty of the property are calculated. The increase is likely to result in a rise in the prices of real estate in Maharashtra.

The new rates were announced by the inspector general of revenue and controller of stamps in Pune. The rates have been revised on the property registration documents of 2021-22 and 2020-21.

The ready reckoner rates are generally published on March 31st of every year. No changes were made by the government in the rates last year while in 2020-21, the government increased the rates in September 2020 as against that from 1st April 2020.

Reason for the hike in ready reckoner rates

The government has taken a decision to revise property rates this year. This is because of the changes that have happened in various cities across India during the last two years as accounted for in the property registration documents.

Overall, Maharashtra is seeing a 5% increase across the state (excluding Mumbai) while for municipal corporations, the rates have increased by 8.8%. The rural areas have seen an increase of 6.96%. In the Mumbai municipal corporation, the rates have been increased by an average of 2.94%.

Impact of the hike in ready reckoner rates

The real estate developers’ body CREDAI has raised concern about the industry going through very tough and challenging times with the effects of the pandemic and due to input material price hike by about 40%. The state government had refrained itself from hiking the RR rates for the last two years due to the pandemic. Industry experts opine that this would be the reason they considered hiking it this time. The industry is still grappling with various situations in spite of increased traction. The increase in premiums, TDR, and FSI rates will further increase input costs and directly impact the buyers. In such a situation, many are of the opinion that an increase in the RR rate was highly uncalled for and unwarranted.

Real estate developers use big data to minimize costs

Posted on by HomeCapital Team

Real estate developers are hiring tech companies and harnessing big data to mitigate the impact of rising input costs through accurate forecasting of demand and placing orders with the right set of vendors – and at the right time.

The companies are doing predictive analysis, using procurement data of the past five years and expected demand from the upcoming projects, to aid decision-making and conserve costs.

Need for big data in real estate

The field of real estate has been undergoing a lot of changes in the past few years. A new trend that is taking shape among many developers is the use of big data to maximize efficiency and minimize costs as well as improve construction quality. The prices are changing frequently nowadays. But a substantial amount can be saved by ordering at the right time and from the right place.

Real estate developers said that the cost of steel has more than doubled and cement cost has increased by nearly 38% in the last two years due to which the cost of construction has moved up by at least Rs. 500 per sq ft.

The construction industry is constantly changing, and developers are using new technologies to keep up with the demand. Real estate developers have started to adopt tech and use advanced technologies in cost management to gauge the demand and plan their procurement strategies accordingly.

BIM (Building Information Modeling) technology has allowed developers to stay ahead of the curve by pre-empting the needs of a project, as well as creating accurate models for how much material will be needed at different stages during construction.

Role of big data in real estate

The construction industry is feeling the strain of rising oil prices and disruptions in supply. Materials have skyrocketed, leading to cost overruns at various projects- including residential ones.

The use of advanced techniques such as predictive analytics has allowed the industry to more accurately predict future events. These models are now being applied not only for raw materials prices but also in determining their movement with great accuracy.

The input costs have been on the rise in the past few years. This trend is now accelerating as a result of Russia’s invasion of Ukraine. In order to avoid steep cost increases for products, businesses must use forecasting technology that will help in understanding future demand, essential items to buy at the moment, inventory required, cost of raw materials, and other important elements. The AI and machine learning in the real estate sector has allowed it to predict consumer demand with great accuracy by studying data from all over.

The cost of construction in India has been on the rise for some time now. A recent survey by CREDAI NCR found that input prices, such as labor and materials have gone up by about 30% to 40% while that of a few items required in construction has more than doubled in the past two years.

Conclusion

The use of predictive analytics tools can help to reduce costs for any residential project by evaluating data, identifying pricing trends, and various risks. As a result, resource consumption can be predetermined which will lead to greater efficiency in the long run while also conserving resources now!

All you need to know about floor area ratio

Posted on by HomeCapital Team

Floor Area Ratio, or FAR: what it means, how it is calculated, and why it is important to know? The floor area ratio of a building is the total covered area divided by the size of the plot of land on which the building is being raised, multiplied by 100.

How is it calculated?

Suppose you are building a house on a plot of 1000 ft² (hypothetically). If you cover the area of 700 ft² and leave the remaining 300 ft² uncovered, the ratio is 700 ft² divided by 1000 ft² multiplied by 100, that is 70%.

This doesn’t necessarily mean that you build just a single floor. If you build multiple floors of 700 ft², this adds to your floor area ratio. For example, if you decide to build three floors of 700 ft², your ratio is going to be (700×3)/1000 x 100 = 210%.

This is not calculated randomly. You cannot decide on your own how much area you are going to use when constructing a house or a developer constructing a building. Different cities and districts have differently permissible FAR.

How does floor area ratio affect you as a buyer or a property owner?

It depends on whether you are buying a property in a multistoried building (for example a gated community) or a freehold property.

The planning authority of the city decides how much-built area is available for constructing houses, apartments, and facilities, whether it is a single-storied construction or a multistoried building.

If you live in a colony or an area where you have freehold houses, an increase in the permissible floor area ratio will increase your property value because it means that more floor areas can be constructed, consequently, creating more living spaces and more facilities, or more plot area can be covered, allowing residents to build additional rooms.

Although it isn’t necessary, in a multistoried building or in a gated community, the increase in the permissible ratio means that the developer can build more apartments and more floors. This creates a high-density residential settlement – more residents share the common benefits such as parking areas, recreational facilities, lifts, and a common playing area for the kids. This may decrease your property value. 

On the other hand, if an increase in the permissible floor area ratio results in the development of more facilities, such as a tennis court, or a cafeteria, this may increase your property value.

Since in almost all the cities and towns it is the authorities that decide the floor area ratio, carefully study the laws of the district of the city before investing in property, especially when you are buying an apartment in a multistoried building. This will help you calculate the final price of your property.

Do you have direct control over the floor area ratio?

Not in terms of permissible limits, but profits are known to have doubled when the planning authority increased the FAR of a particular city. Neither the landowner nor the builder can randomly decide how much floor area ratio the construction site is going to have.

How does the municipality decide what FAR your construction may have? It uses multiple factors such as population density, other construction-related activities going on, the growth aspects of the area, and the nature of the land on which the building is to be constructed, or something that has already been constructed.

What all are included in the floor area ratio?

Is the parking included in the floor area ratio? What about the staircase? The elevator shafts? The unoccupied basement? These are not included in this ratio. The floor area ratio is the part of the building where people live or work. Suppose there is a residential building and flats have been constructed on five floors. There is a boundary wall that surrounds the plot area of the building. Between the boundary wall and the main building, there is a parking lot and a driveway. The parking lot and the driveway are not included in the floor area ratio.

Maybe there is a garden and playing area for children. These places too are not included either. If there is a basement for parking, that is excluded. On the other hand, if your residential complex has a community hall, it is included in the floor area ratio.

Why is it important to know what is included in the floor area ratio when constructing a building or when evaluating the value of a property? This helps design the establishment. This also tells you actually how much living space or working space you are going to have inside the building.

Why do municipalities have a floor area ratio?

Mostly to control population density in urban areas. It allows local governments to divide the city into various zones and control the density of the population in those zones. This is because the ratio of living areas available decides how many people can live in a building and consequently, in the district.

Conclusion

The floor area ratio may have different significance for different stakeholders. For a buyer it may affect the quality of life; for an investor, an increase or decrease in floor area ratio may have an impact on the market value of the property, for a city administration or municipality it is all about how much population they are going to have to manage, and for a builder, it may affect how much living space can be eked out and how spartan or luxurious can the construction be.

All you need to know about home loan balance transfer

Posted on by HomeCapital Team

What is a home loan balance transfer? It is the facility that allows you to transfer your existing home loan (the outstanding amount) to another lender. You may opt for a home loan balance transfer if you are getting a better interest rate, or the lender is eager to accommodate a longer tenure.

Thinking of transferring your home loan balance to a new bank or a new lender? Why should you consider this? What are the benefits? What do you need to consider before you take this big step?

Once you have taken a home loan from a bank or a lender it doesn’t mean you’re stuck with them for the next 25-30 years. Although there is nothing wrong with remaining with the same bank or the same lender, if you want to proactively monitor how much money you are paying back and you are constantly looking for better options, you may consider transferring your home loan.

Primary reasons for a home loan balance transfer

Repaying the home loan is a big commitment. You pay back the money for 20-30 years. By the time you have paid back the principal amount and interest, you have paid almost 2.5 x the loan amount that you have taken. This is the standard rate based on the current ongoing home loan rates offered by different banks and financial institutions.

Even a difference of 0.5% in the interest rate can make a very big difference in the overall payment. You can always approach your current lender and renegotiate the interest rate. If you are finding better options somewhere else, you can consider a balance transfer.

What you need to know about home loan balance transfer

If another bank or lender is offering a better interest rate and transferring your loan to the other bank or lender won’t add to the overall amount that you’re going to pay, you can transfer your home loan. Additionally, if the other bank or lender is offering a longer tenure, which you desire, despite restrictions like monthly income and age, even then you can weigh your options.

Calculate your overall savings

Before you initiate the process of transferring your home loan, calculate properly whether you are actually saving money. The home loan balance transfer request is treated as a fresh home loan application by the lender. This means, there will be a processing fee, administrative charges, and other charges associated with the new home loan application. Go for it only if your overall savings are significant.

The length of the remaining tenure

It isn’t very profitable to opt for a home loan balance transfer during the later stage of your tenure. Most homebuyers pay their interest component during the early stages of their tenure. Hence, if you decide to go for a home loan transfer at the later part of your tenure, there isn’t much to gain. You should also keep your home loan tenure for the same length otherwise your interest cost will be higher. Make sure that your overall EMI burden throughout the tenure is reduced before finally deciding on a home loan balance transfer.

You want to borrow additional money

Sometimes there are also provisions for a top-up on home loan balance transfer. Granting home loans is a business for banks and other financial institutions and if it is financially viable for them, they definitely welcome you transferring your home loan balance to them. As an incentive, in case you need it, they also offer a top-up loan facility. So, you don’t just get to transfer your home loan to a better interest rate or better tenure terms, you can also get another loan that you can use to renovate your property or for other necessary expenses.

What are the documentation requirements for a home loan balance transfer?

Carrying out a home loan balance transfer is almost the same as getting a new loan, so whatever documents you need to compile the first time, you will also need to get them even this time. These may include:

  • Residential address proof.
  • Official address proof (if applicable).
  • Application form (duly filled) with attested passport-size photographs.
  • One of the government-granted identity proofs such as the Aadhar card, voter ID card, or PAN card.
  • Age proof.
  • Income proof
  • Bank statement of the last year, of the bank from where the existing home loan EMIs have been withdrawn.
  • Property documents that may be currently in possession of the current lenders.
  • Salary slips for the last six months.
  • Form 16 documents for the last three years.

Conclusion

The decision to transfer your home loan balance is crucial: it can save you lots of money, it can reduce your financial burden, and it can also help you streamline your monthly expenses. Nonetheless, on many occasions it can be a tedious exercise, so you need to tread with caution. A home loan balance transfer should only be done when the benefits are quite significant.

What Differentiates a Luxury Home from a Comfort Home?

Posted on by HomeCapital Team

A home, be it a comfort home or luxury home, is something that an individual builds once in a lifetime. Owning a home is a special feeling that brings a sense of achievement and satisfaction. It involves a considerable investment, but it’s worth it when you start living there. A well-designed home is an example of imagination coming to life. But, the definition of a well-designed home differs from person to person.

For an individual, a home so comfortable and full of necessities will be a well-designed home, but on the other hand, a person who loves grandeur will want the house to be full of lavish luxury. The question is, what differentiates a comfort home from a luxury home.

1. Location matters when choosing your comfort home

This is one of the most significant factors that differentiate the two. Usually, a luxury home will be in the city’s posh areas, facing the sea or the main roads, leading to a comparatively higher price. These homes seek glamour, but on the contrary, a comfort home will be in a more serene location, away from the hustle and bustle. A comfort home will seek hush, and hence they will be found in colonies and inner societies. Luxury homes are often located closer to amenities such as supermarkets or malls, gardens, gyms, parks, etc.

2. Housing plan

A luxury home seeks space while a comfort home seeks coziness and simplicity. The designs of the lavish homes are inspired by balcony lawns, huge rooms with a surreal and mesmerizing view, duplex houses, vast sitting rooms, etc. The space in luxury homes is equally distributed for frequent and rarely used rooms and areas. A person chooses to have small rooms built with apt dimensions and minimalistic design in a comfort home.

3. Design and interiors

A comfort home is inspired by the idea of simplicity and minimalistic designs. Hence, you would often see that a comfort home does not possess unnecessary artifacts and showpieces. In comparison, a luxury home is decked up with paintings, muses, extraordinary sculptures, and interiors that give away the bling. For a luxury home, the smallest of the details like the doorknobs, handles, curtain styles, and switchboards will matter. While you find plain colored walls in a comfort home, you are bound to find rounded corners and arches in a luxury home. Classy but straightforward curtains are put up on the windows of a comfort home but made of velvet and all things royal curtains are often preferred at a luxury home.

4. Kitchen

Making it one of the most attractive places of your dream home, the kitchen becomes the most prominent part of the home plan. A well-designed kitchen can definitely up the game of the house by adding to the beauty of the place. A luxury home aspires to a kitchen full of facilities that every chef ever dreams of. It has appliances like a chimney, double ovens, dishwashers, refrigerators, branded and designed vessels, and high-quality stone platforms. On the other hand, a kitchen of a comfort home will be the definition of simplicity and style that comes with tidy and basic kitchen appliances. A comfort home kitchen will have a stove, storage of just the right size, and compact furniture.

5. Security

Basic security appliances are a must for all buildings and homes because you cannot compromise on safety. However, if you note, in the majority of the cases, luxury homes will have more appliances fixated as compared to comfort homes. These appliances may range from numerous CCTV cameras placed at various angles to alarms linked to the breaking of doors and windows. Some homes might as well have alarms linked to fire systems and elevators and power circuits.

6. Other amenities that make a comfort home

While the luxury homes focus on a large play area, lavish bathrooms with jacuzzies and sauna present, libraries, gymnasium, and home theatres, the comfort homes focus on a subtle interior. A comfort home will have minimum amenities and it will focus on keeping space open as much as possible. Further, some luxury homes are often smart homes that have motion sensors, light times, and automated curtains.

Be it a comfort home or a luxury home, it is a place that defines you and it brings about a sense of comfort, belongingness, and love. While each one of us has a dream of owning a home one day, by connecting with HomeCapital, you can come to a step closer to achieving your that dream. 

Maharashtra government extends stamp duty waiver period

Posted on by HomeCapital Team

The government of Maharashtra has extended the stamp duty waiver period for investors from one year to three years on the resale of the property. The bill also extends the tax-free benefits to those who sell their properties at a higher price than what they bought them for, but only if this is done within three years of purchase. Stamp duty is payable only on the price difference in such sales instead of the whole amount as before. Suppose if the rate in 2022 is say Rs. 50,000 and in 2025 it is Rs. 55,000 then additional stamp duty @ 5% will have to be paid only on the difference of Rs 5,000.

The Maharashtra government has announced that they will be extending the stamp duty waiver period for investors up to three years. This new rule means people interested in purchasing property can enjoy lower taxes when buying or building houses.

Expected impact of stamp duty waiver extension

In an effort to boost investor confidence in the real estate market, the Maharashtra government has extended the waiver period for stamp duty. Earlier, the investor would sell their properties within a year of buying them to earn the benefit of the waiver. With the new bill, investors can earn a stamp duty waiver on a resale made within three years of purchasing their property. The stamp duty is paid only on the price difference of property instead of the whole amount in such deals.

Reason for  stamp duty waiver extension

Generally, it takes a minimum of three years to complete the project, and the same is mandatory in the conditions and regulations under RERA. However, due to the pandemic and general slowdown, there was an impact on the profit earned through such deals.

While explaining the bill, the authorities said they had received several representations from the real estate sector indicating losses in this current scenario. The purpose is to encourage sale-purchase deals while boosting investment amount with extension for waiver period increased up three years. The extension will benefit the State and earn high revenue through the stamp duty collection. Further, the push to the construction business will bring in more job prospects for youth in Maharashtra.

Factors affecting home loan tenure

Posted on by HomeCapital Team

Your home loan tenure is the total repayment period of your home loan. If you will be paying your entire home loan of Rs. 40 lakh in 25 years, your home loan tenure is 25 years.

What EMI are you comfortable paying? How much money can you afford every month to pay the installment of the home loan you have taken without getting into a crunch? Your EMI depends on your tenure. What home loan tenure you choose to pay back your home loan keeps your EMI manageable and, in many instances, also reduces your overall interest rate.

A tenure makes it easier for you to take a home loan

The entire purpose of tenure is to enable you to repay your home loan along with interest as conveniently as possible. Whether you desire to repay your home loan in 20 years, 25 years, or 30 years, depends on how much EMI you want to pay, how much interest you are comfortable paying, and how many earning years you have got with you.

Please remember that it is a big responsibility – paying back your loan – for many years. You will be consistently paying your EMIs, month after month, for many years. Hence, you need to borrow wisely, and you need to be careful about the tenure that you choose. The purpose of home loan tenure is to make it easier for you to repay the money that you have taken, in smaller chunks.

Choosing the best home loan tenure for you

The first instinct is to choose the longest possible home loan tenure. This is because it distributes the money you are repaying over a longer period. Although this is going to lower your EMI you need to keep in mind that your home loan will be costlier because you will be paying interest for all the months you are taking to repay.

Every financial institution or bank that provides you a home loan gives a calculator that allows you to try out various parameters and decide what’s the best tenure for you. You can use sliders or text boxes to enter different values and recalculate how much interest you need to pay for the tenure you have chosen, or what will be the home loan tenure depending on the EMI that you’re comfortable paying.

These are the things you should consider before settling with the best home loan tenure:

Your current incoming and outgoing cash

How much are you earning every month, and how much are you spending? Until you move into your new property, you may be paying rent, so you need to consider that too.

Aside from that, there are monthly household expenses, travel expenses, and operational expenses if you are self-employed and you need to spend money on sustaining and growing your business. What about school or college fees if your kids are still studying?

Use a spreadsheet to list all your monthly expenses in one column and all your incomes in another column and then decide your EMI. If you want to pay less, you may need to increase your home loan tenure. If you want to shorten your tenure, you can maybe curtail some of your expenses and pay more EMI.

The value and the scale of the property

Your EMIs depend on the amount of loan you are taking and how much loan you take depends on how much money you need to spend on the property you are considering buying. When evaluating a property, weigh in all the options. Would it deliver the value you’re expecting? Could you go with something less expensive so that it would make your home loan tenure more manageable? One should not compromise on their aspirations and dreams but they should also remember that they should not overcommit themselves and in the process, end up prolonging the tenure unnecessarily.

Make a bigger down payment

Home loans normally comprise 75-90% of the property cost. The remaining 10-25% is the down payment that you make. This means if you are buying a property worth Rs. 50 lakhs, the maximum loan that you’re going to get is 40 lakhs. This is where you can adjust your home loan tenure.

If you have made enough savings to pay Rs.15-20 lakhs instead of 10 lakhs, then do so. It will help you shorten your home loan tenure considerably. You can also opt for HomeCapital’s home down payment assistance program that provides interest-free credit to home buyers to pay the additional down payment to the developer.

The home loan tenure may impact your retirement

If you have a job, eventually you will retire. This means you won’t have a monthly income and you will survive on your pension or at the most provident fund. Hence, it is advised that your home loan tenure should expire 5-7 years before your retirement. Optimize your tenure accordingly.

Conclusion

There are multiple ways you can optimize your home loan tenure. You can use different parameters to calculate in advance what is going to be the duration of your tenure. Use the calculator. Talk to your financial advisor. Do your own calculations. But definitely spend an ample amount of time before you finalize your tenure.

Can you alter your tenure in the future or is it written in stone once you have taken the loan? You can change it. You can increase or decrease your EMI. You can make a lump-sum payment of multiple EMIs. You may be able to do so after a few years, but you can definitely shorten or lengthen your home loan tenure.