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 ]

First, define your requirements!

Size of a house required differs from one family to other.

 Requirements differ from one buyer to another depending on their lifestyle, family size, preference, usage etc. Buying a good apartment or flats from reputed dealer or developer offers you or its residents the convenience of lifestyle facilities like a club-house, swimming pool and gymnasium. 

Defining your preference or requirement helps to save time on unyielding and time consuming deals for inappropriate properties. It will also help your real estate agent to come up with the right property faster. You will have to focus on factors like financing, real estate service providers, paperwork involved and other legal and regulatory issues. 

Once your requirement is defined and you found right property, check the legal aspect of the property. Be sure that the developer has acquired approvals and No-Objection-Certificate (NOC) from the Municipal Corporation, Area Development Authorities, Electricity Boards, Water Supply & Sewage Boards and concerned authorities. Ensure that the developer has entered into proper development agreements and property has clear titles. 

A home buyer books the property when builder or developer launches new project or property under construction. For a project under construction, you should ask for the allotment letter and development agreement. The development agreement is linked between the builder and the landowner and contains details regarding the terms and conditions on which the landowner has permitted development of his property. In case of constructed properties, you should ensure that the seller has the title and possession of the property as well as the right to transfer the property.  

Understanding Government policy and other legalities such as Stamp duty and Service tax will be extremely handy in making an informed choice of property. The stamp duty is usually a percentage of the transaction value levied by the state government, on every registered sale. The final sale deed should be stamped and registered at the appropriate local area office. The service tax will be charged on those payments made on residential projects which are still under construction. Before buying property, it is advisable to appoint a solicitor to inspect the original title documents of the property being purchased.

Cell to monitor property prices on the cards

It will help assessment of property values more realistically.

The Karnataka government has decided to set up a separate cell to monitor property prices across the State.

It will also suggest revision of guidance value on a scientific basis is on cards with the Department of Stamps and Registration seeking the Government nod.

The cell with property valuers, town planners, engineers and statistical officers will be created shortly, and it will monitor price variations in the market.

Currently,  the guidance value was being fixed unscientifically and always remained on the lower side of the market value. “It is the clinching factor for the Government to raise revenue and should not be based on whims and fancies” an official said.

Currently, the guidance value is revised after seeking reports from sub-registrars. A central valuation committee (CVC) headed by the IGR and comprising members from the public, studies the reports, announces the values and calls for objections before the final notification is issued.

The proposed cell will assist the sub-registrar and will give its suggestions to the CVC, following which the guidance value will be revised. Members of the cell will also scout realty and property exhibition to understand the market, the official said.

The cell will enable the department to revise the guidance value annually as mandated by the Karnataka Stamps Act.

Incidentally, guidance value of the properties in Bangalore was revised after more than four years.

The proposal will be submitted to the Finance Department for approval as it involves creation of new posts.

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.

Financial Bridges

Bridge loans are designed to meet needs for the interim period, between sale of an existing house and purchase of a new one.

Apart from offering regular new housing loans, financial institutions offer the facility of bridge loans too.

The interest rates for bridge loans are higher than the normal long-term loans since the duration of bridge loans are shorter.

Home bridge loans are specially designed to meet such requirements for the interim period between sale of the existing house and purchase of a new one. The HFI will lend approximately 80 per cent of the value of the new property.

The compulsion of arranging the immediate substantial payment to the builder was the deciding factor for the choice of loan. And the couple opted for a bridge loan from a housing finance institution.

This is useful when you do not want to take a long-term home loan. It gives you enough time to sell your existing property and make payment for the new house and also pay off the loan quickly.

How to go about it

The loan will be sanctioned only upon entering into a formal sale agreement with the builder of the new house. The documentation process will be similar to that of taking a loan on a new house/flat but the duration of the loan will have to be defined, which usually will be for a period of two years. The interest rates for these types of loans are higher than the normal long-term loans since the duration of bridge loans are shorter.

Guide to Buying a Property in Bangalore from a Legal Perspective

“BE DELIGENT BEFORE BECOMING A LITIGANT”

Once you decide to buy your dream house or any commercial property, there are many documents you need to look into thoroughly before closing the deal. If you ignore this, you may be in for an enduring trouble.

People in the real estate business narrate many such stories from their vast experience. However, they also add that after the technological improvements brought about by successive governments in the registration process (the encumbrance certificate will have the photographs and thumb impressions of the sellers and the buyers each time the property changes hands), such experiences are on the ebb. Yet, some gullible persons could fall prey to the machinations of others, they point out.

If you are the kind of person who hates to encounter unsavoury incidents and loves to lead a peaceful life, the advice from experts is to verify or scrutinise documents in the initial stages itself.

It is always advisable that property buyers must insist on seeing the original documents of the house before making the advance payment. It is prudent on your part to make a huge advance payment only when you are satisfied with the authenticity of the documents. Once you make a hefty payment while signing the sale agreement and later encounter problems, you and your family may feel insecure till you get back the amount.

Eventually, he will return your money. Suppose, if he returns that money in instalments, then your plans of buying another property will go awry. Hence, ensure that all the documents are in order.

• Verify/scrutinise documents in the initial stages itself
• Pay advance only after seeing the original documents.
• Have them scrutinised by an advocate.
• Always ensure that you are dealing with the right owner.
• Have all the members of family of the owner present during registration.
• Have a peace of mind to enjoy your property.

The improving infrastructure, the leading IT hub and the commercial advancements in Bangalore have made it witness a real boost in the real estate sector. The strategic location and the developing road map have seen a clear rise in the demand of purchase, selling and reselling of properties time and again. This adds to the complexity of the matter as you have to doubly ensure that you are not investing your lifetime savings into a fraudulent property.

To prevent yourself from getting duped you can always take the help of a professionally qualified solicitor to get all your legal paperwork verified. For this reason, if you are planning to buy a property in Bangalore then refer to the below mentioned checklist, which should definitely come handy so that you can acquire a clear title. The paperwork required for authentication of the title varies from property to property and the region it falls in. The checklist needs to be verified before purchasing any property. Do not forget that the original documents of title like sale deed, partition deed, gift deed and will etc., are to be verified on a mandatory basis.

Purchasing a Flat/an Apartment in Bangalore

As the real estate market in Bangalore has become all the more dynamic due to the purchase, sale and resale of flats/apartments, it becomes all the more crucial for the buyer to handle the entire procedure very carefully. If you aspire to own a flat or an apartment in Bangalore and wondering where to start from then have a look at the following checklist and the information you must possess from the developer/promoter before you seal the purchase.

I. Purchasing a Residential Flat/Apartments:

Mother deed/ Sale deed: This is the most important document for tracing the ownership of the land. It gives details of the property as to how it was acquired at the initial stage and the subsequent series of transactions it has undergone. You should also check for the original sale agreement showing the builder/developer duly registered.

Khata certificate & up-to-date tax paid receipts: In case of a joint venture, the Khata should be in the landowner’s name. If you purchase the property directly from the developer the Khata should be in the name of the developer/promoter.

Joint Development Agreement: The agreement should be examined thoroughly if it’s a joint development. You must clearly understand the ratio at which the build-up area is divided between the promoter and the landowner.

Encumbrance Certificate: A latest Encumbrance certificate having the details of last 30 years should be checked. It can be obtained from the sub registrar.

Approved Plan: Check for a copy of the approved building plan by the respective government authority and also for the portion of the apartment being purchased.

Sanction Plan: Verify whether the building plan of the apartment is sanctioned and also check the validity of the sanction plan. You must also check the commencement certificate and take a confirmation from the Municipal authorities if the building adheres to the norms of the laws.

NOCs: You should obtain NOCs under the provisions of Income-Tax Act and Urban Land Ceiling and Regulation Act if required.

Occupancy certificate: This is issued to the developer by the apartment corporation/BDA/CMC. A buyer should insist for this.

Besides the above steps to be followed you should also ensure that the developer has obtained approvals from the Municipal Corporation, Electricity Boards, Area Development Authorities and Water Supply and Sewage Boards. It is advisable for the apartment owners to file a joint declaration under Karnataka Apartment Ownership Act, 1972, get duly registered and attain the rights and legal safeguards.

II. Purchasing a Commercial Flat:

Purchasing a flat in Bangalore for commercial purpose also includes more or less the same steps as in the case of a residential flat like deeds for absolute sale and conveyance. These offer a record for absolute and exclusive property rights of the commercial flat, confirms the usage rights, amenities and infrastructure.

Karnataka Ownership Flats (Regulations of the Promotion of Construction, Sale, Management and Transfer) Act, 1962 governs all the matters related to both residential and commercial flats.

Purchase of agricultural land in Bangalore

If you intend to purchase any agricultural land in Bangalore for non agricultural purpose then you must have the approval as per the provisions and rules under Karnataka Land Reforms Act (1961) and the Karnataka Land Revenue Act of 1964. The regulating authority for approving any layouts on the outskirts on Bangalore rests with the Bangalore Metropolitan Regional development Authority or BMRDA.

Before investing in any agricultural land you must adhere to the checklist which follows:

Mother deed/ Sale deed: This is the most important document for tracing the ownership of the land. It gives details of the property as to how it was acquired at the initial stage and the subsequent series of transactions it has undergone.

Search Report: It provides details of the original property holder, property history, charges on the property, current property status (all dues paid or still pending) and the number of times the property has changed hands before being owned by the present seller. Your advocate will fetch you all these details and confirm whether it is a legitimate property for sale or not.

Agreement: Once the property is decided, make an advance payment and get a written agreement on a stamp paper duly signed by both the owner and the buyer in the presence of two witnesses. An agreement must state: the advance paid, actual price, duration of actual sale, and legal actions to be taken in case of a default from either party.

Stamp Duty: This should be paid in full and on a timely basis. To get an agreement stamped it should be without any signature or date and the agreement can be implemented only when the Stamp Office fixes stamps on it.

Registration: Get the deed registration done in a sub registrar office within the timeframe mentioned in the agreement. For registering a property you need: house tax/property receipts, original title deed, and previous deeds etc., two witnesses are also required at the time of registration.

Apart from the above measures to be followed you should also get hold of an Akarbandi, an Encumberance certificate, Saguvali chit, Conversion order, Payment Challan, Up-to-date Tax-paid receipts, Land Acquisition Status, Mutation Extracts, NIL Tenancy\ Certificate/ Form No. 7 Endorsement, Podi Extracts, RTC (Record of Rights)/ Phani, Section 79A & B endorsement U/KLR Act, 1961, Patta Book, and Tippani. You should also have the family tree of the vendor, the comprehensive development plan or CDP and a Zonal recognition map to aid you. Another important thing to be remembered is that the property should not be located in the Green Belt Area.

Purchasing Revenue Land in Bangalore

Purchase of Converted Revenue Lands requires the following documents- Conversion Order from the Deputy Commissioner, receipt for the paid conversion amount, RTCs for last 30 years issued by the village accountant, documents of ownership, Mutation Register Extracts, Akarbandi/Tippani/Podi Extracts, Tax paid receipts, boundary map, village map, Nil tenancy certificate, approved layout plan, Khata certificate issued by Revenue authority, Encumbrance certificate, Zonal regulation map, power of attorney (if any) and an evidence from the respective authority that no acquisition proceedings exist.

Purchasing BDA (Bangalore Development Authority) Sites

The various documents necessary for purchasing a BDA property are- allotment letter, receipts of payment for the site, possession certificate, absolute sale deed, khata certificate from BDA, khata certificate (to be obtained from Bangalore Mahanagar Palika if the property falls under the corporation revenue jurisdiction), up-to-date income tax paid receipts, tax paid receipts from Bangalore Mahanagar Palika, Encumbrance certificate (from allotment till possession date) and a re-allotment letter or re-conveyance deed in case the property is re-conveyed by the BDA.

It is highly suggested that acquiring a property through Power of Attorney should be avoided to prevent any litigation in the future. Documentation is the major step in the acquisition of an immovable property of any kind so utmost care should be taken while carrying out all the paperwork. All the agreements should be stamped according to Karnataka Stamp Act, 1957 following all the rules therein.
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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.

Registering Khata in Bangalore

Khata is important when you apply for any license of building or for trade, applying for loan from any banks or financial institution. Khata is an account which consist all the details of property like name of owner, size of buildings, location of property and all other details that helps to file property tax. 

 Application for Khata: 

Get a Khata application form (costs Rs.10/-), plus copies of five documents - Betterment charges receipt, Receipt of latest Property Tax paid, Building sanction letters, Title certificate, Sketch of layout. It is available either online or at any BBMP office.

 Application for Encumbrance Certificate (EC): 

Get an EC application (Form-22), available free of cost at sub-registrar office. It should be for a period of at least a year. The cost of applying for EC is Rs. 35 for one year. You will need to go back after a day or two to collect the EC. While applying for EC, one has to carry copy of sales deed.

Obtain Notarized copy of documents:

Get Notarized of the following - Sale deed, Form II (if you have), Possession Certificate (if you have), GPA (if used), and fill up the form – green and pink.

Submit the Application: 

Tag the application to the notarized documents, EC, latest property tax receipt, plan of the flat along with the common documents and submit to the local ARO Office. Get the pink acknowledgement with submission number, stamped and signed by respective officer.

Follow up: 

Go back after 15 days to check the status. Keep doing this till you get the demand note.  Demand note indicates the amount you need to pay as Khata registration fee.

Assessment of Property: 

Once you submit the Khata application, the BBMP Revenue In-charge and Assistant Revenue Officer personally visits the property to assess the property. After the property is assessed BBMP formally communicates this mentioning the property dimensions (in sq feet), its value as per BBMP assessment and the tax liability thereon.

Pay Registration Fee: 

Submit the DDs as per the demand note to ARO Office and get a stamped acknowledgement. Once you get acknowledgement, it means the process has begun. The administration fee or demand note amount is two per cent on the stamp paper value. Most people confuse this to be two per cent of the property value mentioned in the sale deed. The demand note is issued in batches. So do co-ordinate with others in your building whose names are in the demand note to get all the DDs.

Follow up:

Go back after 15 days to check the status.

Khata notification: 

Check the notification to see that your name is spelt correctly and other information like area of flat, car park, and so on, are correct. Take the Khata notification to the ARO office with an application requesting issue of Khata certificate (pay Rs. 25) and Khata extract (pay Rs. 100).

Khata Registration: 

Once you pay the Khata Registration fee, in about 1-2 weeks, one receives the notice for paying the pending property tax. Without this the Khata Extract will not be issued in your name. But if you have reached this point it means Khata has been technically registered on your name.