Month: January 2013

AIG private equity buys out Bangalore-based RMZ’s stake in Hyderabad project

30 Jan 2013, ET Bureau.

BANGALORE: New York-based private equity fund AIG Global Real Estate has bought out Bangalore-based developer RMZ Corp’s 50% stake in their stalled joint venture mall project in Hyderabad, a person with knowledge of the development said.

“RMZ has exited its Rs 53-crore investment in the mall-cum-office project,” the person said. “AIG now plans to set up a residential property on the 11-acre plot and is willing to put in additional capital for developing it.”

The project will be launched by the first quarter of the next fiscal, subject to internal approvals, the person added. Bamasish Paul, managing director of AIG Global Real Estate’s India operations, did not confirm the development, but RMZ’s managing director Raj Menda said, “The dispute was settled amicably.”

The deal closes a chapter of wrangling between the partners over whether the project should be residential or for mixed-use. The project, which was to be completed by early 2012, never came up, blocking AIG Global Real Estate India Advisors’ Rs 350-crore investment.

About four months ago, the AIG firm had served a legal notice to RMZ for failure to let it exit its investment in the project.

ET had reported in October last year that RMZ had sought $20 million from AIG as payment towards notional loss of profit for allowing it to exit the project. The person quoted earlier said AIG will build over 1,500 apartments, priced between Rs 50 lakh and Rs 60 lakh each, with a total out lay of Rs 1,000 crore.

According to property consultants, the residential sector in Hyderabad has bounced back after the slowdown and price correction of 2008.

“Total absorption in the Hyderabad property market went up 14% to 4.06 million sq ft in the third quarter of current fiscal,” according to a recent report by property research firm Liases Foras.

LIC Housing launches home loan scheme for self-employed

29 Jan 2013, PTI.

CHANDIGARH: LIC Housing today said it is planning to roll out a new housing loan scheme for self- employed people wherein monthly loan repayment schedule might be tweaked to daily or quarterly.

“Other than the Equated Monthly Installments (EMIs) system (meant for service class), we are planning to have an arrangement for self employed category in such a manner that where money (housing loan installment) can be deposited (by borrower) on daily basis or quarterly basis,” LIC Housing Finance Director and Chief Executive V K Sharma told reporters here today.

The LIC promoted Housing Finance company will target wide variety of sectors including small businessmen traders, farmers, shopkeepers etc for this new housing loan facility, he said.

“We plan to launch this loan scheme next fiscal,” he said.

Stating that EMI repaying system was more skewed towards service class, he hoped that the new loan scheme would benefit self-employed people who faced innumerable problems in availing housing loan from financial institutions.

“The credit appraisal of self employed which is another issue is currently being looked into (by LIC Housing),” he said.

Currently, the LIC Housing Finance has just 15 per cent of total loan portfolio as self-employed customers.

In an effort to lend more to women, LIC Housing Finance launched woman-oriented home loan scheme ‘Bhagya Lakshmi’ on January 7 this year wherein interest rate will be 0.25 per cent lesser on home loans if property is in the name of a woman.

Sharma said that loan repayment record of women had been excellent which prompted it to extend loan facility at low rate to them.

“Based on our past data, you will be surprised to know if the house is in the name of lady then delinquency or default (in home loan) is virtually zero. Then we decided why not this (low interest rate) benefit be passed on to ladies,” he said, adding that women had been better in credit appraisal.

He said the company received a tremendous response to this scheme and in less than 20 days of scheme launch, it processed 3,084 cases across the country.

LIC Housing Finance has over 8 lakh customers comprising 2 lakh women customers.

RBI cuts repo rate, CRR by 25 basis points in its Q3 review of monetary policy

29 Jan 2013

NEW DELHI: The Reserve Bank of India (RBI) in its third quarter monetary policy review obliged with a 25 basis point repo rate cut, first repo rate cut in nine months. The repo rate now stands at 7.75%.

The bank also cut the cash reserve ratio by 25 basis points to 4%. The move is meant to infuse Rs 18,000 crore into the banking system.

While repo rate cut will reduce the cost of borrowing for individuals and corporates, the reduction in CRR, which is the portion of deposits that banks have to park with RBI, would improve the availability of funds.

“The stance of monetary policy in this review is intended to provide an appropriate interest rate environment to support growth as inflation risks moderate,” Subbarao said while unveiling the policy review.

The RBI, however, has reduced the growth projections for the current financial year to 5.5 per cent from its earlier estimate of 5.8 per cent. While it is also flagged of the risk of twin deficit on account of widening current account deficit and fiscal deficit amidst a slowdown in the economy.

On inflation, it moderated the rate to 6.8 per cent for March-end from earlier projection of 7.5 per cent.

The central bank’s policy decision is against the backdrop of slowing economy and easing of inflation pressures. However at the same time, with deposit growth in the banking system lagging the credit growth, there could be some obstacle in passing on rate cuts as banks’ face a risk of a squeeze in deposits if they reduce rates further. So far, credit has grown 16.3% year-on-year, which is with the central bank’s comfort zone of 16% for the year. But deposits have grown by 13.3%, way below the central bank’s comfort zone of 15% for the year.

C V R Rajendran, executive director of Bank of Maharashtra said that a cut in lending rates will happen only after deposits rates are lowered.” However at present, lowering deposit is a challenge given that deposit growth is slower than the advances growth. The action taken by large players wills the deciding factor for the industry.”

Though a rate cut should help lower cost of borrowing on the assumption that banks will cut lending rates, there could challenges. For one, borrowing decision for investments depend on a host of other policy factors and the overall investment climate.

For the bond market, which have been plagued with liquidity constraints, the central bank might have done with CRR cuts. Going ahead, dealers expect that the central bank to handle liquidity issues through open market operations or OMOs.

“From hereon we do not expect any more CRR cuts over the next six months the central bank would rely on open market operations.” said A Prasanna, economist at ICCI Securities Primary Dealership.

On the eve of the keenly expected review, the central bank, struck a hawkish tone on the state of fiscal and current account deficits, appearing to throw into question even the much-expected 25-basis-point reduction in rates.

“Given the preponderance of non-monetary factors behind the current slowdown in an environment where risks from high inflation, current account and fiscal deficits still remain, the scope for supportive monetary policy action is constrained,” said RBI’s Macroeconomic and Monetary Developments Third Quarter Review. “As reform actions get executed, monetary policy could increasingly focus on growth revival.”

The central bank’s cautious tone came as Finance Minister P Chidambaram sought to woo investors in Frankfurt with prospects of lower interest rates reviving economic growth as price acceleration is slowing.

The government has made no secret of its desire to see lower rates in the past, and RBI’s reluctance to oblige has been a major point of discord between the two. Last October saw an unprecedented display of irritation by the Finance minister at RBI, which did not cut rates against the government’s wishes.

Source: The Economic Times

Charge prepayment penalty only on fixed rate loan dues: RBI

23 JAN 2013, ET Bureau.

MUMBAI: Home loan borrowers who have opted for fixed rates may have easier terms on their mortgages as the Reserve Bank of India has advised banks to revise the penalty structure on prepayments and charge it only on the outstanding amount. It has also recommended that banks should focus on raising long-term deposits to fund more long-term loans to help reduce the EMI burden on home loan borrowers.

A report on the ‘Feasibility of Introducing more Long-Term Fixed Rate Loan Products by Banks’ from the banking regulator has said banks should charge pre-payment penalty only on the outstanding loan amount and not on the value of loans as is normally done. The guideline will help borrowers save substantial amounts if they were to prepay a fixedrate loan. This comes after the RBI’s recent mandate to banks to do away with pre-payment penalty on floating rate home loans.

The RBI committee that prepared the report has also advised banks to popularise longterm deposits to develop a longterm fixed rate product. The committee notes that the Indian financial system has government bonds for up to 30 years. This creates a benchmark to issue and price 30-year bonds by banks. Banks could, therefore, make efforts to offer longer-tenor fixed rate loans, say up to 30 years, which would help reduce the EMIs of borrowers. Fixed-rate long-term loan products with periodic interest reset provision (say every 7-10 years) may be offered by banks in addition to plain vanilla fixed-rate loan products.

However, banks should take care that the resetting of interest rate does not violate regulatory guidelines on the base rate, the report said. Banks may explore the option of take-out financing.

In addition , banks may explore promoting securitisation market for better asset-liability management. The committee has also suggested that banks and Indian Banks Association should play a prominent role in educating customers regarding possible impact of rate changes on their equated monthly instalments.

Builders oppose real estate regulatory bill

15 Jan 2013, PTI.

NEW DELHI: Realty industry bodies CREDAI and NAREDCO today opposed the government’s proposed real estate regulatory law saying that the bill in the current form is not practical and only favours property buyers.

Minister of Urban Development Kamal Nath and Minister for Housing and Urban Poverty Alleviation (HUPA) Ajay Maken today called a meeting of six industry chambers — CREDAI, NAREDCO, CII, Ficci, Assocham and PHDCCI — to discuss the draft bill.

HUPA is planning to bring this bill in the forthcoming Budget session of the Parliament to regulate the sector. At present, inter-ministerial consultations are on after which Cabinet clearance will be sought.

“We opposed the bill in the current form. Bill is not practical and it is one sided, in favour of consumers,” NAREDCO President Naveen Raheja told PTI.

“We have demanded that all stakeholders in the development of real estate should be brought under the ambit of this bill including government agencies which give clearance to this project,” he added.

The association sought that all consumer complaints should be addressed to the proposed real estate regulator and no other authorities should attend their complains, Raheja said.

The Real Estate Regulation Bill aims to establish a regulatory authority for enforcing fair practice and accountability norms and fast track dispute resolution mechanism in real estate transactions.

According to sources, the six associations were asked to give their representation in writing.

They said CREDAI and other organisations also opposed the bill. A CREDAI official said the draft is detrimental to the interest of the industry and is one-sided.

Source: Economic Times

SARE Homes inks pact with ICICI Bank to offer special finance schemes

10 Jan 2013, PTI.

CHENNAI: SARE Homes has inked a Memorandum of Understanding with ICICI Bank to offer special finance schemes for the real estate developer’s two upcoming projects.

For launching the two projects, SARE Homes has offered customers an option to pay 20 per cent of the booking amount for an apartment, an offer which would be available for a limited period in association with ICICI Bank, a company statement said.

“The present scheme is in association with one of the country’s banking institutions, ICICI Bank, which will further facilitate home buying for a large number of customers”, SARE Homes, Executive Director, David Walker said.

SARE Crescent ParC is part of a 112-acre residential township coming up at Old Mahabalipuram Road, with prices beginning from Rs 38.5 lakh onwards.

SARE MeadowVille is another project offering expandable villas coming up at GST Road, with prices beginning from Rs 32.5 lakh onwards. The project, in the second phase of development, offers different type of expandable villas, the statement added.

Why invest in properties?

People often looking for investment options to double their money and try to invest in Commodities, shares, NSC Bonds, Mutual funds, Gold and in many other ways, but most of these investments have risk factor included in them which can increase your amount and decrease your invested amount.

To increase the investment amount over the years with the possibility of getting tax deductions and the possibility of taking advantage is only possible with the investments in properties. It is accepted that investing in properties is not a simple task to do it and is not affordable to everyone. People that have the affordability, income and who pay higher taxes can plan for a investment in property.

With the booming real estate sector and with the rising demand of luxury properties one can easily gets benefited if they plan to invest at early stages. For Ex. A builder will sell a flat at lesser price at the initial stages of construction and raises the cost at the completion stage. It is advisable to invest in property at this point of time where the property can be obtained at lesser price and there is no need to pay complete amount of money towards the purchase.

If one invests in property at the starting stage of construction the benefits are high for any customer. A customer need to pay margin amount of 20% of property cost on his own and can avail home loan for remaining 80% of the property cost. The home loan interest rate charged on fresh purchase of property starts at 10.50% and it varies depending on loan amount. Most of the projects will have a pre approval from banks and it will not take much time for any customer to complete the process. At this stage banks will not charge any EMI and only charge PRE-EMI which will not come under repayment tenure but which surely give tax benefit. The Pre-EMI gets increased depending on the loan amount disbursed and the construction stage. The maximum tax benefit one can avail on home loan under section 80© of Income Tax Act is Rs. 1, 50,000 /- on interest paid on home loan and Rs. 1,00,00 on principal amount repaid on home loan.

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