Bangalore IT pros finding it difficult to service home loans

BANGALORE: Economic slowdown has cast a shadow on Bangalore's housing market, with the rising cost of living and poor salary increments forcing an increasing number of IT professionals in the city to put their upscale homes on sale. 

Gen Y techies, who had invested in apartments, row houses and bungalows in Bangalore — India's IT capital, some 15 years ago, are now finding it difficult to service their expensive home loans or even maintain these houses amid falling rental yields. Resale inventory in this housing segment has grown 30-35% over the last six months, according to property portal CommonFloor.com.

Six of every 10 such properties are owned by IT executives, up from around four about two years ago, it said. "The booming real estate market was a major incentive for techies, but now that salaries are not going any higher, inflation is getting the better of these people, they are feeling the heat and the burden of hefty EMIs," said Mohandas Pai, the former CFO and head of HR at Infosys, who has seen the IT industry grow in Bangalore over the last 20 years from close quarters.

Resale inventory in this housing segment has grown 30-35% over the last six months, according to property portal CommonFloor.com. "Now they are eager to get rid of any excess property they possess while they can still getting a good deal," added Pai, who is chairman of Manipal Global Education. Since 2001, the city has seen an addition of 350,000 apartments, about 8% of which are now up for sale. During this period, about 45,000 villas and penthouses were added to the city and 8% of these are now in the resale market.

"These properties would fetch a huge premium now, running into a crore or more. Why not sell them off," said Kalpana Murthy, associate director — residential services at Cushman & Wakefield, a property consultant.

Bangalore's realty sector had witnessed steady investment by salaried IT professionals till a few years ago, with well-paying jobs making even a second or third home affordable for some. Around this time, real estate prices were low and the return expectation high, which helped push up rentals. That demand, however, began to peter off as recession set in, hitting company bottom lines and employees' salaries. Salary increments in the IT sector this year have been in the 6-8% range, compared with a minimum of 15% between 2007 and 2010. Adding to the gloom is IT industry body Nasscom's forecast that the domestic IT sector could generate 50,000 less jobs this year, down 17% compared with last year.

"Looking at the appraisals for the year, I stalled my shifting plans, which would only increase my expenses," said 35-year-old Ankit Jain. The Accenture employee recently sold his 1,500 sq ft, three-bedroom apartment on Sarjapur Road, which he had bought in 2009, for twice the purchase price. But not everyone is as lucky. With several such professionals in the market to sell, and builders launching new projects every month, Bangalore is facing an oversupply of sorts while demand has been dropping steadily. "The market is certainly slow and sellers are finding it difficult to find buyers.

The slowing economy and rising inflation is making matters worse," said Srinivas Reddy NS, senior manger — research at Jones Lang LaSalle, another property consultant. Home sales across the country have been slipping over the last few quarters. According to property research firm Liases Foras, new home sales in Bangalore in the June quarter were down 23% from a year ago. Another techie, Shameer VK, 35, who works with Cisco and lives in a 2,000 sq ft apartment in Marathalli, said his home is "too lavish", given the current economic scenario.

"I bought my apartment for close to Rs 50 lakh in 2008, and I pay an EMI of Rs 39,500. A similar house in the same project now goes for Rs1.3 crore," Shameer said, adding that if he is able to find a buyer for his flat, the money will help him pay off his debt and also buy a smaller property in the neighbourhood. The housing resale market in Bangalore is dominated by peripheral localities in the east and south of the city, which are close to major IT hubs.

According to Sumit Jain, chief executive of CommonFloor.com on Sarjapur Road, which is equidistant from Whitefield and Electronic City, more than 11% of all properties are available for resale. At Whitefield and Bannerghatta, it is 10.9% and 6.9%, respectively. Marathalli has 4.9% while JP Nagar has 4.6%. With the rupee having fallen sharply against the dollar, experts say it could be an opportunity for non-resident Indians who are repatriating dollars.

[Source : http://timesofindia.indiatimes.com/tech/tech-news/software-services/Bangalore-IT-pros-finding-it-difficult-to-service-home-loans/articleshow/22322735.cms ]

Ways to check delays in a construction project

There are about 70% projects which were delayed from the actual date of completion in the year 2011

A construction project when started is set with an original schedule and a completion date, but most of the time it ends up being delayed.

There are various reasons because of which a construction project is delayed. Perhaps most of the construction delays can be prevented and planned properly for the set date.

There are various other factors which are inevitable and lead to a construction delay. One of the important aspects before a construction starts is to maintain the construction schedule in order to stay on budget and complete it on time.

However the project delays in real estate have become very common. There are about 70% projects which were delayed from the actual date of completion in the year 2011. Most of the projects are running behind the schedule by many months. In such instances it becomes very complicated for the home buyers to check any potential delay in his/her project.

Project delays have become a nightmare to most of the home buyers as they will have to wait for years. Most of the builders have an array of clauses for the delay. Also most of them pay their home loan EMI even without getting their home possession and other issues like building plans being changed midway through the construction, or common facilities falling short of expectations arise.

Major causes:  No proper planning

In most of the cases, the construction projects are delayed due to the improper planning of the project. It is very important that a builder should plan beforehand about the project he is going to launch.

Both the customer and the contractor will be responsible for a proper planning. It is very important that the contractor should schedule a sub-contractor for a project on time and if delayed, the schedule will be delayed too. Also in most of the cases items of the contract are inaccurate and are omitted unintentionally.

This will apparently lead to the delay of the supplies on time and the contractor will have to wait until he gets hold of all the supplies. Another reason for the delay is due to the customer’s unstable decision making. Since there will be various options, the customers will be confused between the choices which will again lead to a delay. Also the back-orders and failure to place orders on time will cause a delay in the project and schedule.

Shortage of workers

Shortage of workers is a major problem. The contractor or the subcontractor is short of workers which eventually lead to a delay. There are various problems which a worker and a contractor face while working on a project. Also due to the lack of workers, there will be very few workers who will be employed on the same project which also leads to a delay.

Most workers also do not show up to their work in case they find another preferable job. Also the subcontractor might not be regular to his job causing a delay in the job.

Waiting approvals

There are various approvals before the start of any construction which should be approved by the concerned people. In most cases, the approvals are ignored and delayed. Most of the contractors fail to obtain these necessary documents.

Also in most cases the contractors have to wait for the city inspectors to perform routine inspections before starting the work on the project. In case there are minor errors through the inspection, the contractor will have to wait till they are set right.

External factors

As mentioned earlier, there are various external factors responsible for the project delay. This involves poor weather conditions like rains, tremors, landslides and so on. Also scarcity of water, sewer problem and other factors also lead to a project delay.

How to avoid delays

The authentication: It is very important that a property buyer should check the relevant documents and the authentication of the project from the builder. The buyer can visit the developer’s office to check the authenticity.

Documents like the land ownership detail, land being approved for residential development, project clearance and layout approval, environmental clearance and others should be checked thoroughly.

The most important documents are the sanctioned plans. If the sanction plan is tested while signing the deal, the buyer can confidently go ahead with the builder. All of these documents should be scrutinized well before choosing a developer and signing a deal. Also the property buyer can file an application to the PRO of the authority in order to verify the land title, approved building plan and the completion certificate of the property. All of these procedures should be carried out in the earlier stages.

Online group

It is always better that the home buyers should be a part of an online group. In case if the regulator is absent being a part of the online group will safeguard the interest of the home buyers. There are various online groups like Yahoo, Google and many more wherein one can either state a group or join an existing one. Doing this will help the home buyer to share his/her concern among members and get the right deals.

One of the most important steps to minimize the risks attached with a delayed project is to go in for a construction linked payment plan. It is advisable for the home buyer that he/she should opt for a CLP at the time of signing a document.

Monsoon is good season for investment in real estate

Developers offer discounts during monsoon due to slump in demand. Bankers too offer attractive loans to meet their target on the housing front. Problems like leakage, waterlogging will be known only during monsoon.

In an agriculture-dominated economy like India, the realty sector is generally witness less transactions on account of several factors. After spending money during summer, the middle class and upper class look down for investing heavy amount during the monsoon. Moreover Ashada – inauspicious days – discourage families from buying properties and new goods.

The monsoon is normally a dull period for the real estate industry and house hunting during the rains could bag you a good deal. In Monsoon, Sale or booking of flat falls and real estate builders in India could be facing a liquidity crunch too, so the developers readily gives out discounts. The real estate builders or developers have no option but to give discounts to sell. Banks and financial institutes come up with monsoon special offers on home loans.

During the rainy season, developers usually find it difficult to push sales and many people postpone buying a house during these months. Developers finally start offering discounts on properties. The quantum of discount varies for different cities, depending on how badly it is affected by the monsoon.  Most buyers prefer to keep away from investments during monsoon because of religious belief in ‘Ashada’. There is lesser number of site visits by prospective buyers and demand for property buying also goes down. The developers have no option but to give discounts.

Get Best Deal

But buyers can turn this monsoon season as an opportunity to get flats or sites at lesser prices. To get a best deal for your real estate investment in Monsoon, bargain for lower rates with your builder or developer.

Locality

 Buying property in monsoon can help you to find right property and good location. It will give you an idea about problems regarding water logging and traffic or time consuming to commute in that locality during monsoon. Such a search becomes especially important if you have moved to a new city and are not familiar with the locality and the geographical problems.

Monsoon discount: The builder wants to get rid of existing project so he can start a new project in the upcoming festival season. They are willing to offer lower rates to serious buyers. The quantum of discount in Mumbai and Kolkata is likely to be higher than other cities.

 Due to hike in Home Loan, banks and financial institutes are strict in lending developers and the onset of monsoon, Real estate business in the city has taken a dip. Builders and developers are willing to offer special rate for serious buyers.

Monsoon Home Loan: Though not many banks are likely to offer formal discount offers this year because of the recent rate hikes by the RBI, Banks and Financial institutes are willing to negotiate the rates and charges depending on your credit profile.

Good for Building Inspection: Most property buyers opt for buying a property in festival season or in summer. You can check for building structure and signs of dampness or leakage before signing on the dotted line.

So, if you looking for a property,  see it during the monsoon and it is good time to buy. The monsoon is normally a dull period for the real estate industry. More realty companies will offer discounts as sales are not taking place and banks are willing to negotiate the rates and charges with property buyers. The developers will not publish the discounts that they are offering but you can bargain for lower rates and get best deal. During monsoon, you can check for signs of dampness or leakage before signing on the dotted line.

Single Window System for Clearance for Real Estate Projects Soon

“Housing Start-up Index” to be formulated by Housing Ministry in collaboration With RBI

Ajay Maken, Union Minister for Housing and Urban Poverty Alleviation informed that the Government had sanctioned projects worth Rs 41723 crores for building of 15,69,000 houses/dwelling units for Economically Weaker/Lower Income Group sections under the Ministry’s flagship JnNURM (BSUP and ISHDP) programmes.

Mr Maken said approximately 10 lakh houses were either ready or under various stages of completion. Similarly under the Pilot phase of Rajiv Awas Yojana (RAY), in the 195 identified beneficiaries cities Rs 100 crores had been released for undertaking the finalisation of slum free city plans. 40 Projects worth Rs 1769 crores for construction of 32517 dwelling units in 33 cities had been sanctioned till the 10th March 2013, Mr Maken informed.

Informing about the Swarna Jayanti Shahari Rozgar Yojana (SJSRY) of the Ministry, Maken apprised that during the XI Five Year Plan, a total expenditure of 2691 crores was made, 27.37 lakhs of beneficiaries had been provided Skill Training and 12.76 lakh of individuals were assisted for self-employment and also 6.29 lakh women beneficiaries were assisted for setting up of Group Enterprises. For the year 2012-13, as on 22nd March 2013, Rs 685.62 crores have been released to States and so far 3.23 lakhs of beneficiaries have been provided Skill Training and 53329 individuals were assisted for self-employment and also 29107 women beneficiaries were assisted for setting up of Group Enterprises.

Elaborating further the Minister said that in order to have a mission mode approach to Urban Livelihood, the Ministry will launch a National Urban Livelihood Mission (NULM) during 2013-14, which will replace the existing SJSRY. Two new Schemes namely, Support to Urban Street Vendors and Shelter for Urban Homeless has incorporated in NULM. The targets for Skill Training under NULM will be 4.0 million during the XII Plan period. It is also proposed to construct 1600 shelters for urban homeless during the XII Plan period. As far as 2013-14 is concerned, it is proposed to provide skill training to 4 lakh urban poor beneficiaries and to construct 200 shelters for urban homeless.

Maken informed that Ministry had set up a Committee under the Chairmanship of Shri Dhanendra Kumar for ‘’Streamlining Approval Procedures for Real Estate Projects’’ (SAPREP). The Committee had since submitted its Report and the Ministry was in the process of formulating a single window system for clearance of Real Estate Projects throughout the country, which was expected to bring down average approval time from 196 days to 45-60 days. Apart from other things, the process involved developing of Single Composite Application Form (CAF) which entailed seeking and getting permissions from the Municipal/State Governments/Central Government agencies simultaneously. The Ministry will incorporate the recommendation of the SAPREP Committee as one of the mandatory reforms to be carried out by the States, if they were to avail the funds under Rajiv Awas Yojana.

The Ministry had recently set a Credit Risk Guarantee Fund Trust (CRGFT), alongwith the National Housing Bank, HUDCO, Financial Institutions and Banks. It was expected to mobilise Credit worth about Rs 60000 crores to fund housing in the EWS and LIG sector. All these coupled with ECB and 3% priority sector lending is expected to significantly bridge the gap in the area of shelter and housing.

On the new initiatives of the Ministry, Mr Maken said that the Ministry had decided to frame and formulate a Slum Upgradation Index for monitoring periodically the upgradation of slums in the country. This index will reflect the trend in the growth of slums and their characteristics for a period of time. In this direction, the Ministry has decided to set up a High Power Committee to suggest methodology for developing the slum Index in India and report will be submitted within 3 months. He further stated that Rajiv Awaas Yojana benefits will also be extended to unidentified as well as non notified slums.

Speaking about the Urban Housing Fund, recently declared by the Finance Minister in his Budget Speech. Mr Maken informed that a separate fund of Rs 2000 crores, to be administered by the National Housing Bank had been envisaged to support financing and credit to affordable housing sector. With an aim of benefitting the Economically Weaker and Lower Income Group segments which were not benefitting under the current priority sector lending limit of Rs 25 lakhs, the Ministry had decided to limit the loan amount to Rs 8 lakhs and the cost of dwelling units to Rs 12/15 lakhs.

Maken also announced the formulation of ‘Housing Start Up Index’ (HSUI) by his ministry shortly in collaboration with Reserve Bank of India. He said that internationally, only 6 countries namely Canada, United States, Japan, France, Australia and New Zealand are compiling data related to building permits/housing starts on a regular basis.

The Index will serve as a tool/measure to reflect the change in housing sector and related industries vis a vis the entire economy. The number of housing starts during a given period reflects the institutional response to the existing number of building permits, besides the current demand for houses. Accordingly, Housing starts is considered to be a lead economic indicator because of its Forward-Backward linkages with more than 270 industries.

Considering the importance of HSUI, Shri Maken said that it was felt necessary to develop the Index which can be used as a tool to monitor the movements in housing and related sectors of the Indian economy on a regular basis. Giving the progress made so far in this direction, Shri Maken stated that the Pilot HSUI is likely to be released jointly by ministry of HUPA and RBI shortly.

With a view to protect the rights of urban street vendors and to regulate street vending activities, Maken said that the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill, 2012 has been introduced in Lok Sabha on 6th September 2012. The Standing Committee has since submitted its Report and the Ministry was in the process of taking a much more vendor friendly Bill to the Cabinet at the earliest.

The Minister further stated that in order to provide a uniform regulatory environment to enforce disclosure, fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions, the Ministry of Housing and Urban Poverty Alleviation had drafted a Bill titled ‘Real Estate (Regulation & Development) Bill 2012 in consultation with all stakeholders.

Provisions for dispute resolution mechanism have been brought out in the said Bill. It was expected to be brought up for the consideration of Cabinet soon before being introduced in the Parliament.

KHB to Develop New Layout Jigani at a Cost of Rs 3,000 crore

The Karnataka Housing Board (KHB) will develop a new layout called Swami Vivekananda Nagar near Jigani at a cost of Rs 3,000 crore to allot 50,000 sites and houses.


The Cabinet has approved the proposal and we will acquire around 2,500 acres of land for the
project.

Minister for Housing V Somanna said “We are spending Rs 450 crore to provide drinking water for the proposed layout. We are also planning to acquire 400 acres of land near Devanahalli for allotting houses to the applicants. We are planning to complete both the projects at the earliest.”

When asked about the land acquisition problems that have been plaguing the five layouts that were supposed to be developed around the city, Somanna said, “The KHB is planning to purchase the land directly from the land owners at the market price. It will be fixed by the local DCs.”

The KHB has 23 ongoing projects at different places in the State and has invited applications for allotment of 296 houses at Sir M V Layout, 808 houses both near Kengeri, 384 houses in Suryanagar and 832 houses at KHB Green Park in Gulbarga. It has constructed 1, 2 and 3 BHK houses in these areas.

Availability of BDA, KHB units will reduce demand for private developers’ flats

BDA allot 3-bedroom houses at Rs 27 lakh while private developers charge more than Rs50 lakh

Bangalore Development Authority’s (BDA) proposal for allotment of 6,190 low-cost housing
units and Karnataka Housing Board’s (KHB) initiative to construct 3,000 flats in and around
the city are likely to affect the realty sector in Bangalore.

Infrastructure experts pointed out that the BDA and the KHB acquire land at a lower price and construct houses at lower cost. The lower cost of housing units will naturally be lower and private developers cannot sell flats at the cost at which the BDA and the KHB sell their
units.

Private developers’ business is likely to be affected. It is said that the BDA’s allotments have
benefited the middlemen and speculators at the cost of farmers and private developers, and it is not likely to change this time as well. Many plots allotted by the BDA continue to remain
vacant.

Housing consultants argued that BDA’s plan to allot three-bedroom houses at Rs 23 lakh and
Rs 27 lakh, whereas private developers charge more than Rs 50 lakh for a three-bedroom
house in the city would naturally reduce the demand for private housing complexes.

Moreover, people who buy flats from government agencies can be secure as they will not
face any title disputes. Therefore, most of the people would prefer to buy flats from the BDA
even if the quality of construction would not be as good as that of private developers, they
said.

Bangalore Residential Report, published by a private realty agency, showed 20,600 housing
units were consumed in the city in 2011 and around 55,000 housing units were still available.

On an average, Bangalore consumed around 25,000 housing units annually and a majority
of them were low-cost units. If more than 9,000 units were made available in the market by
government agencies, private builders would be greatly affected.

Houses to benefit people, says BDA

Bangalore Development Authority (BDA) Commissioner T Sham Bhatt said the BDA’s low
cost houses will benefit the people of lower income in the City of Bangalore.

The BDA has invited applications for allotting 4,388 single-bedroom flats, 1,170 two-
bedroom flats and 632 three-bedroom flats at different places in the city and will issue
applications from March 25.

The BDA has reserved 2,194 single-bedroom flats from the total 4,388 units under different
categories. The KHB has proposed to construct over 3,000 low-cost housing units in
Suryanagar II Phase, Yelahanka, Devenahalli and Kengeri.

No Penalty on Pre-Closure

The Reserve Bank of India (RBI) has directed all nationalised banks not to impose penalty  for pre-closure of housing loans. The notification issued by the RBI has brought some smile of middle class families who now have the opportunity to shift their costly and high interest loans to other banks, particularly HUCO, a public sector entity.

RBI strictly disallowed banks from charging foreclosure charges / pre-payment penalties on
home loans on floating interest rate basis. “The removal of foreclosure charges/prepayment
penalty on home loans will lead to reduction in the discrimination between existing and new
borrowers and competition among banks will result in finer pricing of the floating rate home
loans,” RBI said in a notification to banks. Though many banks have, in the recent past,
voluntarily abolished pre-payment penalties on floating rate home loans, “there is a need to
ensure uniformity across the banking system,” an official said.

We also advise you to apply for housing loans in the public sector banks. Banks like HUDCO
offers loans at 10 per cent rate of interest up to Rs 26 lakh. Moreover, public sector banks
charge less consultancy fee than private banks in the country. But seek suggestions from
financial experts before obtaining loans either housing or any other loan.

One has to think ten times while fixing the size of the house loan. Larger the size of the loan,
more interest rate burden as well more monthly repayment. Like size of a house required
differs from one family to other, the amount of loan is also differs from one to other family.
Therefore, before buying property, it is advisable to appoint a solicitor to inspect the original
title documents of the property being purchased and later apply for housing loan.