home loans

The following post is a sponsored post.

R. Vaithianathan of Tata Capital Housing Finance talks about smart cities and online buying.

R. Vaithianathan of Tata Capital Housing

The housing space is abuzz with talks of growth. With the government focusing on affordable housing and housing-for-all, and recent announcements in the Union budget regarding real estate investment trusts, the outlook has turned positive for the sector. The impetus on smart cities adds to the sentiment. R. Vaithianathan, managing director, Tata Capital Housing Finance Ltd, a housing finance company which has a significant focus on project financing and affordable housing, talks about the shape that this space is likely to take, and why it is investors who are buying properties online, the new method of buying properties.

What is your idea of a smart city? How do you see it taking shape?

As of now, we, too, know only as much as what is in the public domain already. Full details are yet to be received. The government, however, is very much focused on the housing sector and this is evident through the various interactions that we have had with the government and regulators. According to reports, a few cities, such as Vishakhapatnam, Allahabad and Ajmer, have already been identified to be developed as smart cities. We have an affordable housing wing, for which we have an 80-member strong team. We participate in housing loans of below Rs.15 lakh, wherein the cost of house is below Rs.25 lakh. These are mostly on the periphery of metro cities, and not in the metro cities because houses in metros are not available at that level. Low-income housing is available in such locations, where we are participating either by funding projects or giving housing loans to salaried as well as self-employed people. Once more detailed rules and regulations come in regarding smart cities, given that we have the expertise of funding projects and retail loan granting, we can participate by having dialogues with the government or authorities or development agencies concerned.

How do you define ‘affordable`? Even your organization concentrates on tier 2 and 3 cities when it comes to affordable housing.

A lot of migration takes place from villages to cities. After 2-3 years, they start looking for housing that they can own. But they cannot afford to buy houses in the heart of cities. They will go maybe 30-40 km away from the city, where a little bit of infrastructure is available, such as road connectivity and rail transportation. We are focusing on that niche segment of customers, which consists of, say, office boys in corporate organizations, self-employed people such as welders or auto mechanics, or clerical staff in government organizations. They can’t buy in metro cities yet need to be nearby. We are working to provide houses to them. This is affordable housing for us.

What will happen to property prices in and around (the catchment area) smart cities as and when they come up?

We will have to wait and watch. If smart cities themselves have a plan for affordable housing—Rs.50 lakh in metros and Rs.40 lakh in non-metros, as per the Reserve Bank of India—participation by housing finance companies will be fine-tuned accordingly. If a smart city exists, then the peripheral areas will definitely have an ecosystem for low-income people who will work in the smart cities. That again will be an opportunity for affordable housing developers to participate in. Real estate is a price-sensitive sector and there will some kind of impact.

How is the home loan space evolving for non-banking financial companies (NBFCs)?

In the latest Union budget, NBFCs have been given the benefit of the SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002). This means that we can act like banks in case of legal disputes over properties. So, slowly a level playing field is getting established. We are operating in a segment that requires specialists to judge the income of an individual. If there is a salaried person, then you have a Form 16 to judge the income from. But we also judge on the basis of ability and capacity to pay. We mix these two to take a call rather than relying only on papers and data. NBFCs have their own strength, and housing finance companies have their own. We have been growing and will keep growing.

Some advertisements show low interest rates on home loans. One by your firm says home loan at 7.99%. Isn’t this misleading?

In such a case, the agreement—which the customer signs with the finance company—very clearly mentions that the loan availed is at, say, 10.15% or 10.25%. The developer, who is part of that particular offer, signs another agreement at the time of selling the property mentioning that for a fixed period of time it will be giving concession to the customer by way of subvention. So, the customer is very clearly aware that the rate of interest paid to the housing company is as per the agreed rate and the developer will pay the difference back to the customer.

Many companies are going online to sell properties. Who are the buyers?

This is a new channel of selling properties. Many people now are tech-savvy and stay far away, maybe overseas. They have the money and are looking for a reliable brand with which they can invest. Online buyers are mostly looking for investments for, say, 5-6 years, with a reliable builder who can assure on-time delivery. So, a brand has huge impact on online sales. Local residents may prefer to check the property physically. The time when land documents and records will be in dematerialized form is not too far away. The process of documents going online has already started.

For flexible EMI options on Home Loans visit http://tatacapital.com/consumer-finance/home-loans.htm

Source: http://www.livemint.com/Money/55LgimWc7oXwAZHFRJJrHP/Online-homebuyers-are-mostly-looking-for-investments.html


In a recent notification, the Reserve Bank of India (RBI) has noted that

It is understood that some banks are furnishing a copy of the loan agreement only on request made by the borrowers. In this connection, we advise that not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the bank and the borrower with regard to the terms and conditions on which the loan is granted.

The RBI has therefore directed all Scheduled Commercial Banks and Financial Institutions to

…invariably furnish a copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.

While the RBI does a decent job of posting such notifications on its website, it’s certainly not the most effective way to reach the intended recipients – the people who take the loans. After all, how many among you take time off every week to read up on the RBI’s website?

Maybe it’s time the RBI started a consumer-education initiative; a weekly front-page column in a few leading newspapers should be a good start. What do you think?

Previous issues of Know Your Rights:

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Public Service Announcement

From a recent RBI circular:

Guidelines on Fair Practices Code for Lenders

Earlier, Banks/FIs were advised that loan application forms in respect of priority sector advances up to Rs. 2.00 lakhs should be comprehensive and should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non-acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.

The RBI now says:

With a view to achieving greater transparency and in the light of experience gained, it has been decided that the above instructions will be applicable to all loan applications in respect of all categories of loans irrespective of the amount of loan sought by the borrower.

Banks/FIs were so far advised that in the case of small borrowers seeking loans up to Rs. 2.00 lakhs the lenders should convey in writing, within stipulated time, the main reason/reasons which, in the opinion of the Bank/FI have led to rejection of the loan applications.

The RBI has amended that to:

On a review, it has been decided that in case of all categories of loans irrespective of any threshold limits, including credit card applications, Banks/FIs should convey in writing the main reason(s) which, in the opinion of the Bank/FI have led to rejection of the loan applications.

Necessary modifications in the Fair Practices Code based on the above instructions, with the approval of the Board, should be carried out by April 30, 2007. The modified Fair Practices Code should be placed on the Bank’s/FI’s website and also given wide publicity.

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How to Calculate the EMI for Your Home Loan?

by Vinaya HS on January 2, 2007

in Finance

What is the EMI I have to pay on a 20-year Rs. 20 lac housing loan at 9.5%? By how much does the EMI change if I opt for a 14-year housing loan at 9%? What is the toal interest amount I end up paying over the term of the loan? How is the EMI I pay split between the prinicpal and interest repayments?

If these are questions that have played tricks on your mind, the Indian Home Loan EMI Calculator is for you. It’s an Excel workbook I designed to test my understanding of finance (and Excel). The model works well and validates the figures given in popular finance magazines such as Outlook Money and Money Today.

Download the Indian Home Loan EMI Calculator.

Using this EMI calculator is quite simple. You will find 6-worksheets inside the workbook: one each for a loan term of 10, 12, 14, 16, 18, and 20 years. First select the appropriate worksheet. For example, for a 16-year loan tenure you should select the worksheet titled “16 Years.” On the top-left corner is a section titled Loan Parameters. You will have to key-in two figures:

  1. Principal (or Loan Amount) – The amount of loan you wish to apply for
  2. Rate of Interest – The interest figure quoted by the bank

Once you have entered these two values, you will instantly see the loan repayment schedule (with principal and interest components) alongwith summary figures such as Total Interest paid and Total Amount Paid Back.

At a beginner level, leave the other two parameters viz. Repayment Time and Compounding Factor at the default setting. By default, the workbook has repayment schedules worked out for a loan amount of Rs. 20 lac at 9% interest.

Let me know if you have any difficulties in using this workbook. Suggestions for improvements are most welcome.