Tips To Manage Home Loan EMIs Under Financial Crisis

A home loan is nothing but a long-term financial commitment. Life is not a bed of roses. Hard times can be at the door at any moment. One needs to be prepared for combat with all such situations which can be nerve-testing such as- a sudden job loss, loss in business, temporary outflow for prolonged disease etc. Being in home loan repayment tenure, all these temporary issues can be wisely handled albeit.

Bank will instantly label you as a defaulter with a single skip in EMI repayment. Of late, the government of India fortified the laws governing non-performing assets (NPAs), by giving more power to the financial institutions, to recover the NPAs. As a result, defaulting on EMIs will be observed more rigorously from the time forth.

What happens if you default on home loan EMI?
Based on a healthy credit score banks will sanction your home loan approval. Failing EMI repayment can hit the credit score. It will get in the way of future loan application. Banks generally wait for two EMIs to be missed. Banks are more interested in recovering the fund rather than getting into legal proceedings or property auctioning. As a last resort, a legal notice will be sent to the borrower and the loan will be classified as a Non-performing Asset (NPA). If the borrower unable to pay, then, the authorized officer will ask for the physical possession of the mortgaged property, by serving a demand possession notice to the borrower.

Ways to manage home loan EMIs during financial distress
“Cheap home loans shouldn’t be the only factor for borrowing a cumbersome loan amount. Before borrowing home loan it’s wise to have an assessment of your capacity of repayment counting your monthly expenses and also securing enough savings for unforeseen happenings. A proper assessment can actually safeguard you from an extreme financial crisis,”- suggested Mr. Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

Here are immediate pointers on how one can manage their EMIs under financial stiffness-

Inform the bank about your situation– When in an unfavourable situation,inform the financial institution about your issues. Considering your situation most lenders would try to help you out than to take any strict action.

Consult financial advisors or credit bureaus for help– If you find that the situation is anyhow not favourable for repayment, you can always take assistance from financial advisors or credit bureaus for further guidance. They will definitely help you in maintaining a good credit score.

Quick repayment– Quick repayment of the principal amount shortens the tenure as well as reduces the interest burden of the borrower. A double EMI repayment is permissible on annual basis.

Careful spending– Apart from credit obligations, there should be a certain upper cap on your monthly spending. Have some savings for emergency situations.

Home loan insurance– Taking an insurance against home loan reduces borrower’s obligations towards the loan repayment. It can even help you to pay up to 3 interests in case of job loss.

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New Real Estate Marketing Trends in 2018

For a long real estate market in India is awaited for a complete restoration. While an increased market price and unreliable market sentiment made the buyers fence-sitters, policy changes and structural reforms made the slowdown even nutrient. Right now, real estate market is betting big on 2018 to have a modified arrangement with better transparency. It requires a modification in the marketing strategies of the developers to bring in complete standardization in the real estate business practice as the developers need to dispense their on-hand inventories for making their financial ranking stable as well as speeding up the overall market sales.

First things first– buyers are no longer gullible. They know about all the forums and platforms to be knocked while having a quick and effective redressal. Thus, developers need to uphold the quality and the actual offerings of the buildings rather than focusing on marketing strategies. For real estate purchase buyers have a comprehensive, online market study before visiting the seller/agent. Followed by the overall change in market behaviour real estate companies have to adapt to the changing market demands. Online promotion is an effective marketing strategy for the builders. Through all their online promotional activities an approach should be innovative enough to hook up the buyers.

Here are potential new trends that might replace the traditional marketing strategies in this year

Personalization of property– People are running out of time these days. So a property seeker likes to visit multiple projects in a single day. Thus, developers should adopt Personalized messages or images of the property in order to leave a positive and unique impact on the buyers’ mind.

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Emerging market behaviour– With so many power boosters “affordable housing sector” is showing the prospect of growth. As government needs to provide 2 million low budget homes by 2022, developers will have a huge investment opportunity lies before them. Thus, they need to employ both the online and offline marketing channels to pull the mass target audience.

Brand videos on YouTube– Visual media platforms have a huge role-play in luring buyers. It takes just a few minutes for a video to get viral. Nothing is more effective than a 360° property video to attract the prospective buyers.

Sponsored events– Sponsored events and more collaboration with the related industries are majorly required for brand development and reach to the buyers.

Emotional connect with the brand image– No advertisement with an emotional backdrop has succeeded ever for brand image establishment. The uniqueness of the proposition attracts the buyers the most. Unconventional advertisements are the biggest crowd-pullers.

“It’s not easy to distract the buyers with over-sized promises against an average offering. Effective marketing strategy along with honest offering is the mantra of ruling the market. Either one of these can’t be taken for granted,”- said Mr Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

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About 45% Buyers Looking To Invest In Real Estate After Full-Length RERA Implementation

The market needs some more time to absorb the Real Estate (Development and Regulation) Act, 2016 (RERA) as still there are states and UTs those have not notified their respective real estate Act. States will have to carry out the regulations followed by the establishment of respective state RERA Authorities. RERA aims at organizing the real estate sector with the better transparency in operatives.

2018 market looks quite promising as RERA has already set the stage in the favour of the homebuyers in most of the states. Rolling out of RERA indicates approx 45% residential investment in the first half of 2018. With the steady confidence boost by RERA market sentiment is on its recovery path. The market is about to witness steady-going sale volume in the recent future.

“The successful implementation of RERA will reinstate the trust of the buyers at large. With the assurance of timely project deliverance along with the quality check RERA will significantly boost the demand of the real estate sector very soon,”- said, Mahesh Somani, Chairman- National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

Since RERA is the legal protector of the consumers in their real estate purchase, buyers will now have quality real estate products delivered on time. Currently, developers are offering attractive pay packages and discounts to steer clear their inventories. Again, investing in the ready-to-move project is favourable from the buyers’ standpoint as it is exempted from the GST (Goods and Service Tax) regime. Once, the consumer sentiment gets consolidated there will be no gridlock in new project launches. A balanced demand-supply proportion is likely to fuse the oversupply volume as well.

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From May 1, 2017, the Act has been brought into action by the central government. It was the time when the market was undergoing the demonetization overhung. Thus, implementation of RERA made the realty sale graph even tender.Whilst no policy change or structural reform barely create any dent in the uninterrupted demand-supply chain of the affordable housing segment. During this massive slowdown, affordable housing sector contributed 17% of the total sale across the major cities of the country. It’s worthwhile mentioning, being the most incentivized sector affordable housing sector is expected to return a voluminous profit by the end of 2025. Buyers are in demand for budget housing ranged within Rs. 50 lacs at large. Alongside the inflation rates appear to have neutralized and lending rates have started declining as well.The availability of budget housing units and a sharp price correction in HIG segment opens a brighter market prospect for the buyers willing to purchase with self-finance.

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10% Lower Stamp Duty On Residential Property Registration

Big news for property buyers! Stamp duty paid during property registration will come down at least by 10%. A circular was issued by the Maharastra government’s Inspector General of Registration and Controller of Stamps on Jan 2, 2018. The circulation states: “The built-up area will be calculated now as carpet area multiplied by 1.1, the previous ratio was 1.2. Also, stamp duty for open balconies adjacent to the flat shall be charged only 40% of the total sale price.” This circulation was signed by Anil Kavade, Inspector General of Registration & Controller of Stamps, Maharashtra.

As per the market experts, the reduced stamp duty will bring down the tax burden on the homebuyers. The circular reads, “The rate mentioned in annual valuation rate is of built-up area.”

If the documents bring up the carpet area, then the valuation must be made by the drawing of the built-up area i.e. – 1.1xcarpet area or carpet area = built-up area / 1.1”. It also explains, “If open balcony adjacent to the flats/offices/shops/industrial use is shown in documents and plans with it, then its valuation should be made at the rate of 40 % of the sale price.”

The enforcement of the Real Estate (Regulation and Development) Act 2016 has brought significant change is carpet area calculation. The new carpet area under RERA is as follows-The area covered by external walls and areas under services shafts, exclusive balcony or veranda area and exclusive open terrace area shall not be included in the carpet area calculation. This has brought a significant change in property valuation as well.

Explaining the new stamp duty circulation, Advocate Vinod Sampat said, “It is good news for home buyers as the overall stamp duty will come down in the new calculation. The percentage-wise change will be up to 10-15 % as the calculation earlier was based on 1.2 multiplied by carpet area; now it has come down to 1.1. Also, the balcony that is open won’t be charged completely only 40 % will be levied on it, this will also bring the total valuation of the property down. This means the prices will automatically come down be while calculating the stamp duty.”

“Stamp duty charges vary from the state-to-state basis. Lowering the stamp duty is a welcome move by the state government of Maharashtra to encourage residential absorption volume under RERA compliance. Also, the new carpet area calculation under RERA will cater the homebuyers the actual possession area which they are putting their hard-earned money on,”-said Mr. Mahesh Somani, Chairman- National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

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Indian Real Estate Sector is On Its Recovery Path

Starting from the end of 2016 to the entire 2017 Indian real estate industry had witnessed some significant policy changes and reforms. These have changed the face of the industry and will set to benefit the industry in long-run with global-scale performance. With the transparent transaction process and better accountability, the sector is expected to increase investment opportunity riding on better consumer confidence and strict transactional security.

The reforms began with an abrupt demonetization announcement of the PM. As soon as the announcement was aired, all the higher currency notes (500 and 1000) have been wiped out of the market. Among the other major sectors, real estate was the worst affected sector as a large number of real estate transactions used to get performed in cash. This is one major reason why the sector had been largely criticized as the haven space of black money parking.

Then the elephant arrived in the room, the Real Estate (Regulation and Development) Act 2016 (RERA). This is supposed to be the biggest reformation Act, exclusively formed for controlling the real estate business process. The Act came into effect from May 1, 2017. Being a consumer-centric Act, RERA promises to minimize project delivery delays, abrogate fly-by-night developers and agents and provide home buyers with the detailed information about the project features and progress of the projects they have invested in.

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RERA was followed by the introduction of the goods and services tax (GST) which a unified tax that subsumed all the 12 existing indirect taxes into one. Until then, both the developers and the consumers had to pay multiple and often varying taxes which caused confusion. GST brings clarity to the transactional process. With input tax credit benefit to the developers, it has reduced the cost of construction as well.

The sector will also benefit from the amendment of the Benami Transactions Prohibition Act. It aims to prohibit the black money circulation in real estate. Along with which the central government is aiming to make Aadhaar linkage compulsory for all property transactions for keeping the sector free from the unaccounted inflow.

The affordable housing scheme of PMAY also looks promising. Named as “Housing for All by 2022” a successful execution of this programme is projected to contribute $1.3 trillion to the Indian economy in the coming time. The affordable housing program is till date the biggest government incentivized housing sector and it will generate a large volume of employment along with the construction progress. All these new policies, if implemented well then will return the biggest ever revolution in the sector.

“One of the most important features of this revived realty market is top-of-the-line investment security for the homebuyers which will boost the market sentiment and inflow respectively. Real estate industry will be reaping benefits of the reform-driven environment and several positive institutional drives. It’s expected that the improved investment flow will return healthy gains to the stakeholders as well,”- said Mr. Mahesh Somani, National RERA Committee, Head- East Zone, National Association of Realtors India (NAR).

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