REAL ESTATE: LOCATION, LOCATION, LOCATION!
What drives real estate prices is location. If you are buying property for the purposes of making your home alone, there are personal factors that should determine your purchase decision. But if you are buying property as an investment, you have to consider returns from the investment realistically. Are you buying the place and intend to give it out on rent every month? Then a marketable prime property might make sense. But if you are going to hold on to your property then think twice before investing in high-priced metropolitan areas, in the hope that prices will shoot up higher here. In fact, appreciation in these places will be low. A thumb rule to follow is that your investment per square foot should double in five years. And that’s unlikely to happen in an already high-priced area. If you are not certain of your money doubling in five years, you’d be better of putting investing in a small savings scheme or in a mutual fund.
THREE GOOD REASONS TO BUY YOUR DREAM HOME NOW
Here is why this might just be the right time for you to take the plunge: • Property prices have dropped by 30-40 per cent for what they were about a decade ago when it was boom-time for real estate. Going by industry trends, prices are unlikely to drop further.
• If you do not have money to buy a home, there are scores of housing finance companies queuing up just to find a customer like you. With intense competition, it is a buyer’s market, and you can be selective and to an extent demanding in getting your loan sanctioned quickly.
• If you do not own a home, there is a high likelihood that you are renting one. All the more reason to convert the pay-out into an asset. Strain your finances a little more and you will be paying the EMI’s for your own home!
What The Home Financer's Have In Store For You: • Lowest interest rates due to high asset quality • A choice of fixed and variable interest rate loans • Competitive processing fees and repayment fees
The Players
The Interest Rates
BANK OF BARODA
8.75-10.5
CITIBANK
8.75-10.00
HDFC
9.00-10.00
HSBC
8.25-9.25
ICICI BANK
8.75-9.75
IDBI BANK
8.50-9.50
LIC HOUSING
8.75-11.50
STANDARD CHARTERED
9.00-10.00
STATE BANK OF INDIA
9.00-9.75
REAL ESTATE: LOCATION IS THE KEY
What drives real estate prices is location. If you are buying property for thepurposes of making your home alone, there are personal factors that shoulddetermine your purchase decision. But if you are buying property as aninvestment you have to consider returns from the investment realistically. Areyou buying the place and intend to give it out on rent every month? Then amarketable prime property might make sense. But if you are going to hold on toyour property, then think twice before investing in high-priced metropolitanareas, in the hope that prices will shoot up higher here. In fact appreciationin these places will be low. A thumb rule to follow is that your investment persquare foot should double in five years. And that’s unlikely to happen in analready high-priced area. If you are not certain of your money doubling in fiveyears, you’d be better of putting investing in a small savings scheme or in amutual fund.
CHECKLIST FOR PROPERTY INVESTMENT
When investing in real estate, there a host of things you should look out for, if you want to avoid long-drawn litigation. Here are some of them:
• First, do not pay the token money in cash or even as a cheque unless you are sure that all the papers are in order as it will be very difficult to recover this money later.
• Do some homework on the builder. Check out the other projects he’s completed, and his financial muscle. Will he be able to complete the project even if he fails to sell the entire project?
• If it’s land you are buying, get hold of a copy of the plan, which has to be approved by the town or district planning board.
• Check if the layout is authorised if you are buying a plot in the suburbs. Ensure that all the necessary approvals for the construction like that from the Municipal Corporation, Water Works etc. are available.
• Make sure you are buying land that is for residential use. For all you know, it may be agricultural or industrial land. If the land has been converted for residential use, make sure you see the approval papers.
• Ensure that the land has a clear title. You will have to check with the sub-registrar’s office for this. Take care that the title deeds are in order. Otherwise these investments may result in losses for you. Take the advice of competent lawyers about the legality of the title deeds. If you take loan from a bank, the process of legal verification will ensure that the title deeds are valid.
• Verify whether the location is good or not, both for present occupation and future appreciation.
• If you are buying property in a cooperative housing society, it would help to meet the neighbours and/or the chairman/secretary/treasurer of the society.
• There is a host of paper work that you need to complete. In case of a re-sale property, make sure the re-seller has all the papers you will require to duly register your property.
Note: this is not a comprehensive list of things to watch out for when buying real estate. Make sure you consult a lawyer or a consultant when doing so.
OPTING FOR A HOME LOAN
What is good about buying homes today is that it has become possible. What with so many finance corporations just wanting to give you loans. So if you have a stable monthly income you might want to opt for a loan yourself. Here are some of the basics you should bear in mind while opting for a home loan:
• Make sure you have surveyed the market and get details from all the major finance corporations, especially look for the best interest rates available.
• When opting for a scheme, consider the long-term saving plans as well as your monthly spending plans.
• Ensure that the EMI or the equated monthly installments you are about to opt for is what you can afford to pay without much financial strain.
• It would also be prudent to work into your payback plan your expectation of an increase in salary.
ONLINE HELP FOR HOME LOANS
You need not necessarily make a myriad of phone calls and trudge down busyoffices asking for information. As a net user, remember that most of thefinancial transactions—banking, applying for a credit card, a loan, trading instocks---you want to do can be done on the net. Help and advice, therefore, isalso just a click away. Ideally, you should just do a search for the sitesthrough your most favoured search engine. Most also have user-friendly onlinetools that will calculate the EMI for you, based on your requirements.
HOW MUCH CAN YOU BORROW
• Get an estimate of the amount you can borrow. You generally need to make arrangements for 15-20% of the total amount yourself.
• The financing is usually to the tune of 2-3 times the annual household income.
• Your repayment capacity is also considered. The Equated Monthly Installments (EMI) should ideally not exceed 50 % of monthly household income.
• Other than interest rates, one must also be vigilant about hidden or `loaded’ costs like administrative and processing charges, address, legal verifications, etc. One must make provision for these as it could substantially increase repayment costs.
• Freebies like waiver of last two installments, free accident cover, etc are also offered by some companies. Keep a look-out for these.
• Factors like age of property could matter, so confirm if your finance company has any predetermined norms.
• Documents such as employment certificate, salary slip, copy of I-T returns are required for loan processing.
• When in doubt of signing legal and financial documents of any kind opt for legal counseling.
REFINANCING YOUR HOUSING LOAN
Should you refinance yourpresent housing loan? If you are lucky enough to borrow when home rates werelow, definitely much lower than what is being offered in the current market,refinancing is obviously not worthy of consideration.
But if you financed your homewhen mortgage rates were higher, or if you have an adjustable rate loan andwould like to opt for better terms, then you might want to consider refinancingyour housing loan. The following tips might just help you decide:
• Refinancingcan be worthwhile if the current interest rate on your mortgage is at least twopercentage points higher than the prevailing market rate. This figure isgenerally accepted as the safety margin when balancing the costs of refinancinga mortgage against the savings.
• Do not lookfor quick-fix solutions though. Remember, it takes up to three years to fullyrealize the savings from a lower interest rate given the costs of therefinancing, but it could still be worth it in the long run.
• If you are in requirement ofliquid funds, say for investing in a new business, or for your children'seducation, then you can opt for refinancing and draw on the equity built up inyour house to get cash.You might want to consult ahousing loan company for further details
