Blogs

Tax Relief for your new home: Differential between Circle Rate and Agreement Value hiked to 20%

Posted on by HomeCapital Team

The good news continues for new home buyers. The latest relaxation in the income tax rules reduces the tax burden of both, developers and buyers. It will make selling properties easier for the developers and make homes more affordable for buyers. This measure, along with the previous few, is aimed towards rejuvenating the real estate sector and making home-buying more affordable. As per an Anarock report, there are around 5.45 lakh homes, priced up to ₹1.5 crores, sitting unsold in the top 7 cities across the country. The situation looks equally bleak for higher-priced properties. Though this measure will remain in effect until 30th June 2021, it will greatly benefit new home buyers.

So, what’s the good news?

Section 43CA of the Income Tax Act caps the differential between circle rate and agreement value at 10 percent. Earlier the difference between the circle rate and agreement value could not be more than 10 percent. This threshold limit had been increased by the government from the earlier 5% level in the budget 2020. This meant that the developer could sell a property at up to 10% lower price than the circle rate. Anything more than the limit was taxable for the buyer as well as the seller as this difference is considered to be additional income. But with this latest development, the government has doubled the differential and raised it to 20% for new homes valued at up to ₹2 crores. Developers are expected to pass on this benefit to new home buyers and quickly move their unsold inventory.

But how does it help the homebuyers? Before we look at the benefits for home buyers, let us first understand what circle rate is and how it determines the price of a house. 

What is Circle Rate?

‘Circle Rate’ is the minimum price set by the government below which no property can be registered in the government’s records. It is also known as ‘Ready Reckoner Rate’. These rates are based on the current market values of the areas. E.g., Mumbai has 19 zones for which circle rates are specified. They are fixed by the Stamps and Registration Department of the city. The circle rate for a commercial property is always higher than that of a residential property.

When a property is being valued, the circle rate is compared with its declared transaction value. Whichever of them turns out to be higher is then considered for stamp duty calculation and payment. If you’re curious about how the circle rate is calculated, the following factors determine the circle rate.

  1. Existing market value of the area.
  2. The level of amenities and other facilities in the area.
  3. Whether the property under consideration is residential or commercial.
  4. Whether the property is an apartment, row house, bungalow or a plot.
  5. Open Parking – Area of the parking slot x 40% of the area’s circle rate.
  6. Covered Parking – Area of the parking slot x 25% of the area’s circle rate.
  7. Floor rise
  • 0% up to 4th floor
  • 5% for apartments between 5th and 10th floors
  • 10% for apartments between 11th and 20th floors
  • 15% for apartments between 21st and 30th floors
  • 20% for apartments above the 31st floor

All these considerations together help in calculating the area’s circle rate.

How does it help new home buyers?

With the differential now doubled, developers can now sell their properties at 20% lower than the area’s circle rate without incurring additional tax burden. They can now offer increased discounts, which would mean home buyers will have to pay less for their new homes. It is an added incentive over and above the recent rationalization of risk weights by the Reserve Bank of India. Let’s look at a simple example to see the effect of this move.

With 10% DifferentialWith 20% Differential
Circle Rate (In ₹)1,00,00,0001,00,00,000
Agreement Value (In ₹)90,00,00080,00,000
Total Savings (In ₹)10,00,00020,00,000

The table above clearly shows that this new move can potentially double the savings in the home buying process. This coupled with additional offers and discounts from individual developers will make your new home pocket friendlier.

Additional assistance for home buyers

An overwhelming majority of new home buyers avail a home loan while buying a house. While a loan is relatively easy to procure, most face an unexpected obstacle, down payment. But even that barrier is now easily surmountable with HomeCapital, India’s first home down payment assistance program. It shares the burden of your home’s down payment in a straightforward manner.

Now that the differential between circle rate and agreement value has been doubled, it could significantly reduce the cost of your new home. That, coupled with HomeCapital’s home down payment assistance program, will further help you to save more money. The signs are all there. With this latest income tax relief, the series of consumer-oriented relief measures from the government have aligned at the right time for you to fulfill a cherished dream, buying a new home. If you were waiting for the right time, this is it.

Understanding Loan-to-Value Ratio, Loan Eligibility, and Their Importance

Posted on by HomeCapital Team

While most finance companies and banks offer a free loan eligibility calculator, an understanding of some key terms and their importance can avoid complications.

Home buying involves a lot of financial planning and requires an understanding of jargons and technicalities associated with the process- for instance, loan eligibility, down payment, a good credit score etc. Thus, understanding some basic terms related to the process helps simplify the steps for the potential borrowers. This article covers two crucial terms of the Home Loan process, namely, the Loan-to-Value (LTV) ratio and Loan Eligibility criteria.

Let’s understand what the Loan-to-Value ratio is and how it impacts loan eligibility.

Loan-to-Value (LTV) Ratio

Shyam and Vicky are colleagues at a multinational firm and are house hunting to purchase their dream home. They both planned their finances, narrowed down a few properties and are looking forward to clearing their respective home loans.

While Vicky received 70% amount, Shyam received a home loan approval for 80% amount.

This is where LTV and loan eligibility criteria become crucial.

What is the Loan-to-Value (LTV) Ratio?

For Financers:

A loan-to-value ratio compares the amount you wish to loan against the assessed value of the property you want to buy. Lenders use LTV to determine their risk of financing a loan and whether to approve or deny a loan. LTV is used by financing institutions to calculate that they do not sponsor a higher amount than the actual price of the property.

In simple terms, higher LTV means a higher risk of borrower default.

For Buyers:

Do you ever wonder why financial institutions do not sanction the entire value of the asset as a loan?

This is where LTV comes into the picture. A loan-to-value ratio indicates how much property a borrower owns and how much they owe against their loan amount. LTV’s are often part of a more extensive process that includes:

  • Credit scores: A good credit score can help borrowers acquire a higher LTV loan.
  • Flexibility for EMI payments: Another vital aspect that financers pay attention to are your current liabilities. Simply put, they assess the amount of debt you already have on your overall income. The lesser the debt, the greater are the chances of a higher LTV loan approval.
  • The quality and condition of the property assessed: It is an indicator of how accurately the property (being bought) is valued. It helps one understand the actual value of the property and rule out over assessment against the pledged loan amount. By doing so, financers reduce the risk of faulty loans.

How to Calculate the Loan-to-Value (LTV) Ratio?

Let’s understand this by an example:

Shyam wants to buy a home with an agreement value of 54, 00,000. He has 5, 40,000 as down payment and the Payment on possession is 5, 40,000. Thus, he needs a loan on the remaining 43, 20,000.

LTV  = (loan amount/assessed property value) x 100

= (43, 20, 000 / 54, 00,000) x 100

= 80%

The LTV ratio in Shyam’s case is 80% because the actual amount of the loan is 80% of the assessed property value.

What does it mean for the home buyers?

Remember, a higher LTV means a threat for the lenders as they are taking more risk. Thus, a higher down payment reduces your risk of loan rejection with a lower LTV ratio. In simple terms, the LTV ratio plays a crucial role in assessing your eligibility for the home loan.

LTV and Home Loan Eligibility

According to RBI guidelines,

LTV ratio in case of home loans 30 Lakhs or less can go up to 90% of the assessed value. An LTV of 90% means a user needs to down payment only 10% of the property value from his/her pocket and avail loan on the remaining amount.

For loans between Rs. 30 – Rs. 75 Lakhs, LTV ratio, can go up to 80%

For loans above Rs. 75 Lakhs, the LTV ratio is 75%.

A higher LTV increases a borrower’s risk as they would need to pay larger instalments.

A lower LTV ratio can help them negotiate better terms and conditions with the financers.

For instance, a borrower can discuss for lesser interest rates, higher loan tenure etc. Other factors that determine a user’s LTV are his income, age, credit history and debts (liabilities).  

Finance companies do a thorough eligibility check for all loan applicants, determine loan-to-value ratio based on RBI guidelines and offer loans accordingly.

Thus, understanding your loan eligibility and checking your LTV ratio could not only help you narrow down your choices but is also a practical and time-saving step before you apply for a loan.

Understanding your cash flow for Ready-to-move-in versus under-construction houses

Posted on by Pradumna Kamani

Most of us planning to buy a house often wonder- Should I buy a ready-to-move-in-house or an under-construction apartment? What are the cash and loan parameters in both scenarios? These can be mind-boggling questions, often leading you to go to a financial consultant, who takes a massive cut for all the services rendered. Buying a house is not a huge deal. All you need is planning and understanding of the basics of the cash flow algorithm for both ready to move in versus under-construction houses. Read on to know the fundamentals of cash flow for buying a home.

Ready to move in houses

These properties are ready for possession in the immediate future, and the buyer can move into them without any delay. So as a buyer, you need to have some ready-cash to be paid as a down payment and the capability to immediately start repaying the home loan taken because for such houses the EMIs start as soon as you get possession of the house. These properties work out well for those who have enough savings that can be paid as part of the down payment and have a regular income that can support the monthly EMIs.

Another essential parameter for getting home loans is the credit score. Lenders always check the buyer’s credit report to understand their creditworthiness and give a loan accordingly. A score above 750 is considered ideal and helps in getting a loan quickly and on favorable terms. So always keep track of your credit report before applying for a home loan.

For those of you who do not have enough money to make the initial down payment, you can take HomeCapital Down Payment Assistance Program. In this program, you get up to 50% of the down payment amount at no cost interest that you pay in 12 monthly installments. However, the HomeCapital Down Payment Assistance repayment starts from the next month. You would need to repay both the home loan EMI and HomeCapital EMI simultaneously. Thus, it requires you to have enough savings and a steady income.

Under construction Houses

When you apply for a loan for under-construction houses, you need to immediately pay the down payment amount. You can use your savings to pay up the money or else avail of the HomeCapital Down Payment Assistance here too.

The parameter to consider here is the home loan. For under-construction houses, there is a concept of Pre-EMIs, which the property developer gives this option under Construction Linked Plan. This essentially means you start paying back the home loan’s interest as soon as it gets approved. This is the reduced payment made towards the loan amount as it does not include the principal component. It helps in reducing the payment burden while the house is under construction. However, this does not contribute to home loan tenure. Also, in this case, the full EMI starts only after you get possession of the house. So as a buyer, you have enough time to collect funds towards the repayment of the loan. 

Thus, under construction houses are beneficial for those who do not have sufficient funds to immediately repay the home loan.

Conclusion

Home buying is one of the must-dos for most people and people put in their life’s savings into it. Thus, it is vital to make a sensible decision while buying a property. Buyers have the choice of either buying a ready-to-move-in house or an under-construction property. For first-time buyers under-construction properties are a bit easier on the pocket as the full EMIs start only after the property is ready for possession, giving you enough time to assimilate some funds. And there is always HomeCapital to help you with any financial constraint.

Be a financially responsible homeowner. Be smart.

Posted on by HomeCapital Team

Homeownership is thrilling and comes with great benefits. Since property usually increases in value, it symbolizes success, stability and is considered a valuable investment. While owning a home is linked to satisfaction, security, and comfort, it comes with great responsibility.  Whether it’s your first or fifth home, homeowners must be equipped with the nitty-gritty of the process to avoid any potential pitfalls in the future.

Importance of preparing ahead

The most crucial step to avoid any financial mishaps is – an early preparation.

Home buying is a goal, and to reach any goal, one must design a plan and execute it with utmost care. That’s why it’s crucial to plan your finances ahead of the big decision. While the thought could be overwhelming (especially for first-time buyers), one must carefully plan and understand their investment options for assets they own.

Pre-requisites of a fine-tuned financial plan involve:

  • Understanding of your current finances
  • Setting up goals
  • Investing to reach those goals

In short, a robust financial plan reflects where you are today, what your current finances can afford, and your chances of expanding through assertive investments.

Here’s a checklist of financial responsibilities one must adhere to:

1. Insuring: 

A responsible homeowner pays his/her mortgage on time, every time. 

While budgeting and saving are two pillars of financial preparedness, a reasonable insurance plan is the first step to securing your investment. An all-encompassing home insurance policy is the safest plan to protect yourself from a financial setback. 

Takeaway: A comprehensive insurance policy that may seem an extra expenditure is your protective gear against disasters and unforeseen calamities. Insurance is thus, a necessity.

2. Budgeting:

Homeownership comes with its inherent challenges and responsibilities. While closing in on your dream home, you must understand the additional costs of maintenance and prepare your finances accordingly. From periodic pest control to sewer, water, trash collection charges, you must maintain a list of recurring and regular maintenance tasks to budget and save realistically.

Takeaway: Understand your home maintenance needs. Sketch a plan for systems that need regular, seasonal maintenance and occasional repairs. Program your maintenance plan on a daily, weekly, monthly, and annual basis. 

3. Reserving:

Just like budgeting, saving, and investing are the pillars of a homeowner’s financial credibility, preparing for setbacks and turmoil is another equally important aspect of the home buying manual.

Click here to understand how sound financial planning can reduce your burden while buying a home. 

4. Pursuing:

Always remember – even the most planned checklists can fail.

Financial struggles and difficulties are part of life. However, how to react to these challenges, and seeking expert help is of utmost importance. Every homeowner must understand the importance of asking for help. Staying behind on payments, financial scams, can happen to anyone. Therefore, it’s imperative to seek professional help before it’s too late. If planning a budget and keeping a credit record is overwhelming, expert help can do wonders with their effective programs and plans.

For instance, HomeCapital helps you by customizing and developing a budget/debt reduction plan to overcome your challenges and offer you a peaceful and comfortable experience while deciding on the down payments. Likewise, you can rely on financial advisors to help you understand the nitty-gritty of the entire process.

Takeaway: Realize the importance of professional help. Stay aware and seek help as early as possible.

The Bottom Line

Yes, it could be overwhelming, but the benefits of homeownership certainly outweigh the short-lived challenges in the process. As long as the homeowners prepare for the responsibilities that come with buying a house, the personal and financial benefits are incredible.  

Takeaway:  Homeownership can be a big commitment, but a little research into your dream home project could make it easy and simple. Understand your financial obligations, plan your savings and research your dream home based on facts. Remember, a responsible homebuyer prepares well ahead of the decision.

  • Work on reducing your Loan to Value (LTV) Ratio. Look out for a higher Down Payment Assistance to reduce your credit risk.
  • Scout for reasonable home loan rates. With a sound credit score, you should eye for 6.9% – 7%.
  • Check your PMAY-CLSS status and understand the benefits you can avail from the scheme. 

Weigh your investment benefits against the risks involved. Make a rational comparison and then put your money into buying the dream home. Or potentially wait till you have enough resources to do so.

A first timer’s guide to safe homebuying in current times

Posted on by Pradumna Kamani

Living in one’s own home gives you a sense of security that is unmatched. Ask someone who is living in a rented space today while a pandemic rages around us. It provides not only financial but also physical security. Plus, there hasn’t been a better time for homebuying than today. Property prices are at an all-time low, and so are the interest rates. The government has also made homebuying easier in the past few years. But owing to the current situation, there are certain things one needs to keep in mind for one’s safety. 

Safety is paramount to becoming a first-time homeowner, especially in the current scenario. And there are various aspects to it. 

Physical safety:

Owing to the contagious nature of the Covid-19, keeping oneself safe has become extremely important. But taking the right precautions and doing the right kind of research can reduce the chances of your susceptibility.  

Digital Research

While making your homebuying decision, extensive research is vital. But stepping out to shortlist potential properties is a luxury one cannot afford now. The perfect way to stay safe is to stay at home. And to do that is to move your research online research.

Online Portals: There are multiple portals available to help you search for all the available properties meeting your homebuying criteria. They offer numerous features like EMI or loans calculators, credit rating checks, price trends, checking the RERA registration of your property etc. which makes buying even more effortless. Portals like HomeCapital even show you property options that they can help you arrange for the down payment.

Online homeownership communities like the HomeCapital Community helps first time homebuyers and homeowners to successfully navigate through the journey of homeownership. You can get answers to a lot of queries you have without having to expose yourself to outdoors, considerably bringing down your risks.

Most reputed developers are offering Virtual Tours. Simply put, virtual tours are a 360-degree view of the property that provides a panoramic perspective to the buyers without having to be physically present at the site. With the advent of technology and augmented reality, virtual property tours have become highly sophisticated. They may not eliminate the need for site visits but certainly reduce the time spent at the site, significantly reducing the risk of exposure.

Precautions for the outdoors

Technology has made homebuying significantly easier. Yet certain things make moving outdoors inevitable. In such events, taking precautions to keep one safe is highly advisable. Wearing masks at all times, carrying hand- sanitizers, maintaining social distancing etc. have become the new normal. Yet insisting upon practising these measures, while visiting a site, is a smart decision.

Keeping the number of people visiting the site at a minimum is advisable. You can always make a video for the rest of the family while doing the tour. Before visiting a site, you can request the facilitators to ensure all the doors and windows of the unit are kept open for proper ventilation. Try to consciously avoid touching your face and wash hands as often as you can. Using surface sanitizing wipes can help while opening doors or touching surfaces. Carrying your pens/ water bottles and any other peripherals are also advisable.

While buying property, there is a lot of paperwork involved. Make an effort to minimize the exchange of physical documentation and ensure proper sanitization wherever physical interaction is unavoidable. 

Digitalize all financial transactions as far as possible. Instead of cheques, choose online funds transfer facilities. States like Delhi NCR, Gujarat and Maharashtra have the option of paying E-Stamp duty online. Homebuyers can keep most consultation online and consider E-Contracts. 

Financial safety: 

Taking a right financial decision always holds one in good stead, more so during these times. Following are some measures one can take.

Choosing the right loan is imperative. There are a plethora of lenders offering you lucrative schemes owing to the falling interest rates. But one has to make a safe financial choice by ensuring proper research before choosing the lender.

Choosing the right model of payment is also very important. A certain percentage of the home cost, usually about 10%, is a down payment. While trying to save the entire amount, one might end up missing out on this perfect time to buy a house. Great home down payment programs like HomeCapital is available to keep you safe from this burden.  

Just by keeping a few essential points in mind, we can overcome these unprecedented times and realize the beautiful dream of buying a house.

Vital questions to ask during a site visit

Posted on by HomeCapital Team

Home buying can be a herculean task, especially for first-timers. Apart from the challenging task of choosing from an expansive list of properties, home buyers are flooded with tons of things to do – from looking for a reputed developer and checking out the property and its legal authenticity to getting into the unending documentation work, loan approvals and more.

All this can often overwhelm you as a home buyer. So the best way to go ahead is to take baby steps. To begin with, make a detailed checklist with all the questions to ask the developer before you start your search and then go in for a proper site visit. Here is a list of things to do before you seal the deal.

Importance of a site visit

A lot of investment goes into buying a house, and it is your right as a buyer to know what exactly you are buying and evaluate the property well before signing on the dotted line. A site visit ensures the brochure, the blueprint, and the property on ground are in line. Here is why a site visit is a must-do.

1. Quality- During a site visit, you are shown the general quality of construction of the property. Usually, a sample flat is ready to be shown with the promised furnishings and fittings. This helps you understand the finish of the house.

2. Progress- Regular site visits of the project help understand the pace and progress of construction of the property.

3. Authenticity- To ascertain if the structure of the property is legal and all the legal documents are in place.

These are some of the main reasons for a site visit. Ensure that you check all these boxes and understand the nitty-gritty about the property, its construction, legalities, and more.

And as they say, ‘Seeing is believing’ but you should also be equipped with a list of questions to ask your developer before buying a house. These questions should mainly cover the documentation work, approvals, and cost of the property. Here are some vital questions that will clarify all your doubts.

Are all the approvals and licenses in place?

Proper and legally approved paperwork for the property is essential and mandatory. So check the property documents ranging from environmental clearances, approved building plans, commencement certificates of work, and others. Know about all the documents needed for purchasing a home and ensure that the builder has all of them in place. If required, hire an attorney to help you understand the home contract and verify the documents.

 Is the property developer RERA registered?

It is mandatory for a real estate developer to be RERA (Real Estate Regulatory Authority) registered to build any residential and commercial property. It safeguards the buyers from fraud and offers greater transparency in project development and execution. So when you are looking out for real estate developers always check their RERA registration number.

What is the final cost of the property?

Often home developers mention just the property’s basic cost and do not include prices such as preferential location charges, internal/external development fees, and annual maintenance cost, which escalate the total cost of the project. Hence, ask the developer about the final price of the property.

How long will the construction take?

It is essential to know the timelines for the construction of the property as it will help you build up your funds for it and get loan approvals. Please check your state’s RERA website for the actual date of completion mentioned by the developer in the RERA certificate.

Does the contract include escalation cost?

Developing a property is a lengthy process involving not only the construction work but also a lot of back-end approvals, documentation, and inspections. This could setback the final possession date. To compensate for the time taken to complete all the proceedings, developers can charge an escalation cost. It is best to find a developer that does not include this cost in the contract.

Be a smart buyer and ask all these questions without any guilt or hesitation. Remember, it is your hard-earned money, and you have the right to know if it is being invested in the right place. And if the down payment is a challenge, approach HomeCapital, India’s first Home Down Assistance Program (DPA). We provide unsecured personal loans up to 50% of the down payment with no interest that you can repay in 12 equal EMIs.

Why Do You Need Masked Aadhaar?

Posted on by HomeCapital Team

The Aadhaar number is a unique 12 digit randomized number issued by the Unique Identification Department of India (UIDAI) to the residents of India. It is a robust way to avoid duplicates and fake identities. The Aadhaar is one of the most convenient ways of providing the Proof of Address (PoA) and Proof of Identity (PoI). It acts as a PoI for any Indian citizen and is required for any financial services transaction. 

In case you do not wish to share your complete Aadhaar card number when using it for the purpose of providing a PoI, Masked Aadhaar acts as an additional security measure. The masked Aadhaar is an e – Aadhaar card in which only the last four digits of your 12 digit Aadhaar number are visible. The first eight digits are concealed in the format: xxxx-xxxx . This measure was brought into existence post apprehensions being raised over alleged Aadhaar card data leaks.

The first eight digits are concealed in the format xxxx-xxxx in a Masked Aadhaar

What prompted UIDAI to introduce the Masked Adhaar?

According to a report by the Centre of Internet and Society (CIS) titled ‘Information Security Practices of Aadhaar (or lack thereof): A Documentation of Public Availability of Aadhaar Numbers with Sensitive Personal Financial Information’, an estimated number of around 130 – 135 million Aadhaar numbers were leaked in 2017 from four government portals. These included the National Social Assistance Programme, National Rural Employment Guarantee Scheme, as well as two websites of the Andhra Pradesh government.

Further, the CIS asserted that the data leak was mainly due to the absence of proper masking measures. This had publicly disclosed sensitive information about Aadhaar holders, which included their address, photographs, and financial data. A valid Aadhaar number is the key to open multiple levels of locks to sensitive information that is very critical to an individual.  Additionally, an exposé in 2018 showed that the entire Aadhaar database could be purchased for as little as Rs500 in 10 minutes. Post repeated apprehensions being raised over alleged Aadhaar card data leaks and people inculcating a sense of fear to use Adhaar as a PoI, the UIDAI introduced the Masked Aadhaar. 

Benefits of using a masked Aadhaar over a regular Aadhaar Card:

It possesses a number of benefits over a regular Aadhaar majorly in the scenario of data privacy. Below are the main benefits of using a masked Aadhaar:

  • Since the first eight digits of your Aadhaar Number in a Masked Aadhaar are hidden, you do not need to worry about it being misused by anyone.
  • The masked Aadhaar is a form of e-Aadhaar and is a safer option than carrying a physical copy of your Aadhaar or a photocopy, which is under a bigger threat of being misplaced or stolen and misused.
  • The masked Aadhaar has to be obtained through e-Aadhaar which is a password protected electronic copy of Aadhaar and thus cannot be fraudulently accessed by everyone.

To download your masked Aadhaar visit the website of UIDAI and follow our step by step guide on “How to Download Masked Aadhaar”.

RBI rationalizes risk weights: Your home loan will now be more affordable

Posted on by HomeCapital Team

A home loan is one of the biggest life expenses and a long-term commitment that takes dedicated efforts to fulfil. First-time home buyers save up for a long time to fulfil the ultimate dream, that of buying a new home. Over the previous few weeks, several banks have cut their marginal cost of funds-based lending rate (MCLR). Now a small change by India’s apex bank, the Reserve Bank of India (RBI), is going to have a big impact on the home buying market. RBI has tweaked the risk weight standards to reduce banks’ capital requirements to disburse large loans, like a typical home loan. So, what does this mean for the average home buyer?

What has the RBI done?

In a bid to boost the real estate sector due to the pandemic, RBI has now rationalized the risk weights for home loans, linking them to only loan-to-value (LTV) ratio as opposed to LTV and loan amount earlier. This change is applicable to all new housing loans sanctioned up to 31st March 2022. This change has brought down the banks’ capital charge requirement for home loans above ₹75 lakhs. Banks now have the leeway to sanction home loans for high-value properties without having to worry about a higher capital charge. This effectively means that banks can now offer home loans at lower interest rates.

The LTV ratio is the percentage of a property’s value that a bank can sanction as a home loan. So, if a bank is ready to grant a home loan of ₹80 lakhs for a property worth ₹1 crore, the property’s LTV ratio is considered to be 80%. As per RBI’s circular, the LTV ratios and risk weights for individual home loans have been fixed as follows.

New home buyers should consider this table very carefully as it has some significant points that can reduce their home loan burden.

What this move means for new home buyers

The table above sums up RBI’s new move quite clearly. In a nutshell, it says that if you lower your loan requirement, you can enjoy lower rates of interest on your borrowing. In case of a property priced up to ₹30 lakhs, if you lower your LTV percentage below 80, your loan’s risk weight drops to 35%. So how can you reduce your home loan requirement for a lower risk weight?

The simplest way of doing that is to pay more down payment. If you’re willing to make a down payment of ₹20 lakhs for a home costing ₹80 lakhs, your property’s LTV is reduced to 75%. This reduces your risk weight to 35%, which lets you enjoy a better interest rate on your home loan. Even by itself, this move will gain you significant savings on your new home. But when coupled with RBI’s earlier move of reducing the stamp duty rate, this is the best time for you to buy your new home.

Now’s the time to buy your new home!

In addition to the government’s initiatives, you can expect a whole lot of offers from developers with your home purchase. The recent reduction in stamp duty to 2% in Maharashtra till 31st December 2020 and to 3% till 31st March 2021 are added measures by the government to increase home sales. These incentives, together with this latest development, will lower your financial burden over the long term. As far as your initial payment is considered, HomeCapital, India’s first home loan down payment assistance program, will assist you.

HomeCapital will finance up to 50% of your new home’s down payment, which you can repay as an interest-free loan. This means that you can pay a higher down payment and enjoy lower interest rates on your home loan. While the RBI is looking to energize the real estate sector by incentivizing loans, you, as a home buyer can avail of this opportunity to fulfil a lifelong dream.

After RBI’s latest announcement, the advantages for a home buyer can be summed up as follows;

  1. Significant savings on home loans with lower interest rates.
  2. Additional offers and discounts from developers.
  3. Home loan down payment assistance from HomeCapital.

With these advantages, it is shaping up to be a good time to buy a new home. The banks have presented a significant opportunity to new home buyers with their latest move. It will surely convince more new home buyers, who were previously on the fence, to take that life-changing plunge.

GST simplified for home buyers

Posted on by HomeCapital Team

GST is a term Indians have heard for the past decade or so. It is the much-needed tax reform in our country, that was rolled out in July 2017. GST, as most of us know, means Goods and Services Tax. So any goods or services rendered come under the purview of this tax regime.

The fundamental reason for the institution of GST was to bring all kinds of indirect taxes under one umbrella and make the taxation system more uniform. But one might ask, how is it significant to me as a home buyer?
In this article, we will cover the salient points of GST that concern a home buyer.

GST and Real Estate

The most pertinent question that comes to our mind is, on what kind of real estate does the government levy GST? Only under-construction houses come under the ambit of GST. Ready to move-in homes that possess a completion certificate won’t attract GST. It does not mean they are free from any tax liability – during the computation of the selling price of a housing unit, the developer factors in the tax component paid by him.

Pre – GST

Before GST got implemented in India, a developer had to pay multiple taxes during the project’s construction. This included Service Tax, Octroi, Central Excise, Value Added Tax etc. Since the developer could not get any credit against these taxes, it would reflect in the selling price of the houses up for sale under the said projects. As the computation of the various taxes would be extremely challenging for a homebuyer, they lacked clarity.

Post – GST

On 1st July 2017, GST rolled out in our country. It removed the cascading effect of applying taxes on taxes. Additionally, since it was one tax with a digitally-driven system, it was more transparent and quicker. Thus the home buyer was now able to understand their tax liability with better clarity.

2019 GST Rate reduction on Home Buying

For making housing more affordable to the common man, in 2019, the government had announced their aim of “Housing for all by 2022″. To boost that, they announced a significant cut in the GST rates based on home categories, for the Real Estate sector. The revised rates came into effect from 1st April 2019.

Home-unit Categories for GST application

Homes fall into 2 categories – Affordable and Non-affordable/Luxury home, based on which government levies GST. An affordable housing unit should cost less than ₹ 45 Lakhs and measure up to 65sq meters in metros (Delhi-NCR, Mumbai-MMR, Bengaluru, Chennai, Kolkata, and Hyderabad) and up to 90sq meters in non-metros. Anything above this stipulation is considered to be a luxury home.

Current GST Rates

  • 1% for affordable housing – without Input Tax Credit (ITC)
  • 5% for non-affordable housing – without ITC

The GST rates in 2019 were slashed from 8% to 1% for affordable housing units. For luxury/ non-affordable housing units, the rates came down from 12% to 5%. The lowered rate would apply to all the projects that started their construction after 31st March 2019. This rate cut effectively eliminated input tax credit.

The government gave the projects under construction, on 31st March 2019, the option to choose between the new rates or the old rates with the possibility of claiming the balance as ITC.

Input Tax Credit in GST

ITC was one of the most important features of Goods & Services Tax that helped avoid tax on tax. During the construction of a project, developers would pay tax every time they purchased raw materials like cement, steel, sand etc. or services like architectural consultation, for the project. GST would allow the developer to claim input tax credit at the time of output tax payment.

For example, the entire amount of tax payable for a housing unit was ₹ 2,00,000. The developer paid ₹ 1,60,000 worth of tax while buying goods and services to complete the construction. When the time came to compute the total tax due, the amount of ₹ 1,60,000 would be considered as input tax and claimed as ITC, and the balance of ₹ 40,000 paid as output tax.

GST on Home Loan

GST does not apply to the principal amount repayment or the interest payment. Government levies GST on service charges of the bank like the processing fee, pre-payment fee etc.

Banks and financial institutions only provide financial assistance in the form of a home loan while the down payment has to be provided by the home buyer. HomeCapital offers the unique assistance by contributing up to 50% of the down payment as an interest-free personal loan.

Even though many think that its overall impact has had an exceptional effect on this sector, some experts opine that the pros and cons have balanced each other out and that there has been no substantial change. Further, it cannot be denied that it has brought about some welcome changes to home buying that had been plagued by the esoteric system of multiple taxing.

How to download masked Aadhaar PDF

Posted on by HomeCapital Team

As part of any financial services transaction, providing the Aadhar card and information therein is one of the most convenient ways of providing the Proof of Address (PoA) and Proof of Identity (PoI).

Time needed: 10 minutes.

The reader needs to know that over the last decade, the utilization and the correct method of sharing Aadhaar details has changed. This post is a step by step guide to helping you download the masked Aadhaar PDF file from the UIDAI website.

Necessary Checks:
Aadhaar linked phone

  1. Navigate to the UIDAI website

    Head on to this link for UIDAI. Be sure to get into a space where your telecom network is strong and you are able to receive SMSes.

    e-Aadhaar by Unique Identification Authority of India
  2. Enter your Aadhaar details

    Be sure to ensure that the masked Aadhaar option is ticked, then click on the Send OTP Button. masked aadhaar ticked

  3. Enter the OTP

    On your mobile you would have received an OTP. If not, then the mobile number linked to your Aadhaar number needs to be changed.

    You will also be expected to answer a short survey. The response does not really matter and you will get to download an encrypted PDF file.

    OTP on Aaadhaar Download
  4. Enter the PDF password to verify the document

    The password for this document would be a combination of the first four letter of your name (as in Aadhaar) in CAPITAL letters and Year of Birth in YYYY format.

    If for example, your name is Prasad Ajinkya and you were born in 1978, then the password of this file would be PRAS1980.

A variant to this OTP is also a unique face match approach that is sometimes presented. This is primarily useful for those citizens who have somehow misplaced their mobile numbers which are linked to Aadhaar.

The entire process is available as a video tutorial here.

Once you have the PDF in place, keep this for posterity, this PDF document is the one which you need to use in all applications.

Questions?

If you have any difficulty with respect to accessing this or have questions with respect to the process, feel free to write to us at [email protected]