DDA destroyed lake revived by citizens

NEW DELHI: For a parched area like Dwarka, this was a success story like no other. An over-200-year-old water body was painstakingly revived in a community effort in 2012. The water body located in Sector 23, till then filled with sewage or dry for most part of the year, suddenly came to life.

This year, however, it looks like it may return to its former state. Residents have written to the lieutenant governor, complaining that DDA has taken over the maintenance of the water body and have ruined their effort.

Diwan Singh from Natural Heritage First, who assisted the residents in the revival project, says that they approached DDA to desilt the water body this year since locals could not afford to undertake the work annually.

“Just when everything seemed to be going well, the residents have been shocked to see that DDA has gone ahead with destroying it now. It has used JCB machines to put the silt back into the water body, closed down the rainwater carrying channels, reduced the size of water body and are building artificial footpaths around it,” says the letter sent to the LG.

Residents met the CEO of Delhi Parks and Garden Society, who is the nodal officer for water bodies, to complain about the issue but are yet to hear about from him. Last week, they also met the DDA chief engineer in charge of the area but he “refused to do any desilting or preserve the surrounding area. At least 100 residents have signed the request letter to him. We have met him three times and sent several written communications to him”, Singh said.

The DDA chief engineer didn’t comment on the issue.

Residents of villages near the water body and those living in Dwarka’s highrises came together in 2012 to revive this water body. Sources say that till 1984, when DDA acquired land in the area, the water in the pond was crystal clear. After ownership went to DDA, its condition deteriorated rapidly due to flow of sewage into it and shrinking of its area.

“Last year residents pooled money and labour and carried out desilting of the water body, created rainwater carrying channels, linked the stormwater drain to the water body and looked after the area around it to prevent encroachments. Our efforts bore fruit as for the first time in several years it had water till February-end. Usually, it would dry up around the end of October. Birdlife had also improved around it with a peahen observed nesting near it and hatching four chicks. A pair of owls has been seen on the peepal tree on its banks. A birdwatcher has captured images of 40 species of birds around the water body. Monitor lizards and hare have also been seen there,” Singh said.

Source: The Times of India

Changing profile of the home loan buyer

A home will always have a deep connection with every individual and buying one’s own home is fondest dream of almost every Indian. The housing industry in India has been growing at a robust 14-15 per cent and is projected to continue to grow for the next few years.

There is an estimated shortage of around 22 million houses by 2014, and the government and apex bodies like the National Housing Bank (NHB) are playing a vital role in trying to fill this gap. The growth in this sector as well as the changing profile and consumption behaviour of the upwardly mobile population have also brought about a sea change in many aspects of the industry, and most notably the profile of today’s home loan buyer.

One of the most evident changes is the decreasing age of the home loan buyer. There has been a trend of reduction in the average age of the home loan buyer from the mid-40s to the mid-30s over the last two decades. There is also a growing segment of under-30 year olds who are buying homes and taking loans for the same.

The rising income levels of this segment coupled with growing aspirations have been major causes of this change in profile. Another major contributor to this phenomenon is the easier access to credit fuelled by banks and housing finance companies (HFCs). Most loan providers view home loans as a high growth product and have been diverting focus to it in the last few years.

Another aspect that has changed is the purpose of a home purchase. While purchasing a house for the purpose of living in it still remains the major reason, there is a growing segment of home buyers who buy a second home for investment purposes.

They also could take a larger home loan for the same as they are aware of the taxation benefits that they can avail of as a result of it. Financially savvy investors are now making use of these multiple benefits of a home loan. As long as there is a significant growth in the housing sector and appreciation of prices, this segment will continue to grow. It is estimated that the Indian mortgage market accounts for 7 per cent of GDP and about two-thirds of the savings of customers availing home loans are deployed in payment of EMIs. Attractive interest rates and ease of credit access here too contribute to the growth of this profile among home loan buyers.

A large chunk of growth in home loans is now coming from tier I and II cities, with the metros approaching a saturation point. The new segment of home loan buyers now come from high growth areas like Pune, Bangalore, Ahmedabad and other non-metro locations. As a product segment, the growth has been seen in ‘affordable housing’, with a loan ticket size in the range of Rs 25-40 lakh. Banks and HFCs offer their most attractive rates for this range, and this has fuelled its growth.

Developers have begun shifting their projects to newer non-metro locations or on the outskirts of large metros. This has helped in de-congestion of many cities and banks and HFCs also provide a pre-approval for home loans for most of these projects.

Today’s home loan buyer is an empowered individual. Not only is he spoilt for choice, both in terms of properties to buy, but also in terms of home loan providers willing to fund his purchase. He has access to information, is more financially aware and will have multiple banking or financial service relationships.

To cater to this new profile, banks and HFCs will have to value-add and provide high levels of personalised and dedicated service, both at the time of sale as well as through the duration of the loan.

— The author is MD, Tata Capital Housing Finance

Source: The Indian Express

Before you switch your home loan

Home buyers had been facing a scenario of high interest rates which was in existence for a very long period of time. However, during the current year the scenario looks different with the Reserve Bank of India lowering key policy rates. It is widely expected that the central bank would continue to lower rates in its forthcoming announcement. Many banks, in response to the rate cuts, went ahead and announced lower interest rates on home loans, with State Bank of India taking the lead. Moreover prepayment charges on loans have also been abolished in line with RBI guidelines. With these changes happening, how can anyone not be tempted to switch to a bank with lower rate of interest?

Before you decide to take the plunge, halt, and evaluate. One should take into account key considerations before switching loans.

Interest rate variation

Check the existing rate of interest and the interest that you have been offered now. If the new lender’s rate is at least 1-1.5 per cent cheaper then it makes sense to switch.

For example, on an existing loan of Rs 75 lakh charged at 12 per cent for 20 years, your current EMI is Rs 82,582. If there is a reduction by 0.5 per cent, your EMI will change to Rs 79,982, a difference of Rs 2,600. However, if the interest rate comes down to 10.5 per cent, the savings would be substantial with your new EMI at Rs 74,879, which means savings of Rs 7,703.

Remaining tenure

It is a known fact that during the initial years of a home loan, major component of the EMI outgo is towards repayment of the interest component and a small part goes towards repayment of the principal amount, however this changes as the years increase.

For the loan of Rs 75 lakh at 12 per cent cited in the previous example, out of the EMI of Rs 82,582, the interest portion stands at Rs 75,000 and only Rs 7,581 goes towards principal reduction for the first month. So to get a better deal, it pays to switch during the initial years of the loan.

If you are servicing your loan at a very high rate of interest like 14-15 per cent (with interest rates continually being hiked), a switch towards the latter half of the tenure may still be beneficial, but you need to figure out how much interest remains to be paid to arrive at an accurate picture.

A good online loan calculator would show that the savings from switching is lowest when the remainder of the tenure is five years or less. If a switch is carried out towards the later part of the tenure, a significant proportion of the interest component would already have been repaid and the benefit from switching the loan is lost.

Processing fees for new loans

A new lender would typically charge a processing fee ranging from 0.25-1 per cent of the outstanding amount. The country’s largest lender, SBI, has currently capped the processing fee to maximum of Rs 10,000. Depending on the amount of loan outstanding, the processing fee will be a determining factor for deciding whether to switch loans or not. The processing fee should be lower than the cost saving that you would make on the interest differential.

However, here you have a catch-22 situation, as the amount of loan will be higher during the initial years of the loan and that is when the switch is more beneficial. But on a higher amount, the processing fee would also be higher. Further, some banks also charge a legal fee for property verification and such added extra costs. This also needs to be figured in the net savings available.

It is not possible to decide whether to switch or not based on a single cost. We will have to work a combination of all costs and decide prudently.

One can also try renegotiating the loan with the existing lender at lower rates to avoid processing fee. No lender would like to lose a borrower with good credit history. Hence this option could be explored before actually opting for loan switch from a different lender with its accompanying hassles.

— The author is CEO, BankBazaar.com

Source: The Indian Express

Lower interest rates, lower costs

Navin Raheja, President, Naredco

What is the reaction of the real estate industry to the Budget? Of the key demands, post Budget, what needs to be done on a priority basis?

The National Real Estate Development Council (Naredco) is extremely disappointed with the Budget proposals. The Council in its memorandum to the finance and housing ministries had suggested conferring infrastructure status to integrated township and group housing and giving income tax relief to developers and buyers to stimulate demand and supply. Besides, there is a need for monetary interventions to lower interest rates, to bring down costs both for developers and home buyers. We hope that the RBI will address them to give the much needed boost to the sector.

The Budget offered an additional deduction of Rs 1 lakh for a first home loan up to Rs 25 lakh for FY14. How do you evaluate this proposal?

Naredco is happy that the proposal would benefit first time home buyers. The net deduction now available will be up to Rs 2.5 lakh and would definitely boost demand and supply in tier II and III cities. In metros, where average cost of house is above Rs 50 lakh, it would be of no help.

What are your views on the proposal to set up an urban housing fund?

It is a welcome step. Naredco had been advocating the ‘shelter fund’ to mitigate the problems of low income groups and economically weaker sections who are deprived of decent living conditions and are forced to live in unauthorised colonies and slums or be a squatter. This will help in eradicating slums, where nearly 25 per cent of urban population live. Housing finance institutions will get encouragement and their risk will be appropriately covered.

Are the Budget proposals to boost affordable housing different from the earlier pronouncements on ECBs for low cost housing?

External commercial borrowings (ECBs) permitted in Budget 2012-2013 for affordable housing has been operationalised. This will help in creating capital, at low cost, for the development of affordable housing projects. The urban housing fund will primarily help low income buyers in accessing home loans. This, and the interest subsidy scheme will help the poor in buying a house.

Corporate governance is a major issue in the sector, as the RBI pointed out. Does Naredco have a time-bound agenda in this regard?

Naredco is continuously working on it. Enacting the real estate regulation Bill, simplified project approvals and the new accounting procedure will help a lot in achieving this objective.

Source: The Indian Express

Buying house in a bank auction? Take care of additional costs

With the zooming real estate prices showing no sign of hitting a speed bump, many prospective buyers have begun to tap another avenue to buy cheap houses—auction properties. Though it’s not a common practice, banks auction the houses that they foreclose. What makes them attractive is that their selling price is usually advertised as being 15-20% less than the prevailing market price in that particular locality. However, before you jump at the prospect of buying one, consider the ramifications.

A bank auctions the properties for which the owner is unable to repay the home loan taken from the bank. This means that there could be various incidental expenses that you too could have to pay. When a borrower misses a couple of EMIs on his home loan, the lender sends him notices. If he continues to default for a few months, the bank takes over the house under the SARFAESI Act. The property is then put up for auction and this is advertised in the local dailies.

As the bank is only interested in getting its outstanding principal and some interest component, this amount is listed as the reserve price for the auction. This is usually much lower than the price that the property would fetch in the market. If the final auction price is higher than the reserve price, the extra amount is handed over to the original owner.

What to check

The low reserve price may seem tempting, but you need to ascertain whether the amount mentioned by the bank is the gross price or if there will be additional costs that you may have to pay later. Here are some questions you need to ask before you bid.

Are there unpaid dues?

When a bank auctions a property, it is sold on an ‘as is where is’ basis, so you should read the bid document carefully to find out if there are any unpaid dues. “The bid document is like the prospectus of an IPO, where all the facts covering the legal title and responsibility for pending dues are stated,” says Om Ahuja, chief executive officer, residential services, Jones Lang LaSalle India.

In most cases, the owner is not in a position to pay the dues to the bank and knows that the property will be seized. So he doesn’t bother to pay the associated fees, such as the society maintenance charge or property tax. From the time he receives the first notice till the property is taken over, there is a minimum period of six months. This means that if you buy the house, you will probably have to pay at least six months’ worth of outstanding dues.

Obviously, the utility bills are also unlikely to have been paid. It’s possible that some utilities have been disconnected or discontinued, such as the removal of the electricity meter. So, you will have to pay for renewing the connections, along with the late fee, if any.

How much repair work is needed?

Most banks do little to keep the property in good condition after taking possession. So, you may have to undertake some renovation or maintenance work to make it more habitable. It would be a good idea to visit the property and calculate how extensive the repair work is likely to be and how much it will cost.

Also, as the property is being sold on an ‘as is basis’, you will be responsible for any damages that may have been caused directly or indirectly to other properties around it. For instance, if there is water seepage while the house is in the bank’s possession and this damages an adjoining property or the one below it, you, as the new owner, will have to pay for it.

It’s also possible that the previous owner has left some stuff in the house. You will have to check with the bank about the person who will assume responsibility for it. Will you have to pay extra for any furnishings, furniture or appliances that have been installed by the previous owner? Will the previous owner collect these or will you need to dispose of these? Who will be entitled to the money received on the sale of these items?

Source: The Economic Times