RERA has revived home sector demand

SBI is seen to be among the major gainers from the government’s move to inject equity into state-run banks to enable them to lend more and spur economic activity. In an interview with TOI, Rajnish Kumar, the newly-appointed chairman of the country’s largest bank, talks about signs of change in the economic situation and expects a pick-up in demand after Tuesday’s Rs 7-lakh-crore package for the road sector. At the same time, he says, the bank may reduce interest rates in some basket, given the low credit demand. Excerpts:The government announced a major recapitalisation plan on Tuesday. What is your fund requirement?

We will work out our numbers and estimate the capital requirement. But we are better than the Basel III estimate. Given that we account for one-fourth of the banking system, I am sure the government will prioritise our requirement.

The government has also talked about monetisation of non-core assets. What is your plan, including on the real estate assets?

That programme will continue. It’s a separate exercise.Our properties will be handled by SBI Infrastructure Management but hiving it off is not a very tax-efficient option and there are complications.

How do you see the overall economic situation?

The India story remains intact, which is a view that is shared by everyone. There is no real slowdown in con sumption. In manufacturing sector, things can be better.But the government’s announcements for the infrastructure sector will give a major boost to employment and given the linkages with other sectors, higher government spending will help a lot of industries. I see major gains for cement and steel. Higher manufacturing activity may not see as much increase in jobs as in the past due to automation, which has reduced the employment potential. But more construction will mean more employment and the sector will have a cascading effect on other sectors.

Given the slowdown in growth and inflation remaining below 4%, do you expect RBI to cut rates?

We don’t see an immediate reduction in rates, especially in the December review.

Is there scope for banks such as yours to reduce deposit rates and also lending rates, especially for housing and other retail loans?

It will depend on individual banks. But given that credit growth is muted, there is scope for some further reduction in interest rates in certain baskets. While the overall decision will be taken by the assetliability committee, but some changes may happen.

One of the problems for low demand for loans is over-capacity in the system. Have you seen an improvement in the situation?

There is a problem in sectors such as power, where a lot of capacity is idle or under-utilised. The demand for loans from generation projects is not there. In other sectors such as steel, there is a balance between production and consumption. There will be more demand from the engineering sector in the coming months and I also expect demand from defence production and railways. With the latest thrust on infrastructure, the investment cycle will pick up. Automobiles are doing well with car sales being strong and light commercial vehicles also doing well. There was some disruption due to RERA but now all developers are marketing RERA-approved projects, which has reduced the trust gap between the buyer and the builder. Now buyers feel assured and the residential sector demand has revived. The thrust on affordable housing is also positive for the sector. These are pointers to things turning around (in the economy).

The finance minister spoke about indiscriminate lending between 2008 and 2014, creating problems for banks. Going forward, how do you prevent that?

When we do business, the risk management department has to be very strong, something that is a focus for us. We need to strike a balance between business growth and the risk appetite. Pricing of risk is a very crucial element. In the past, the problem was excess liquidity, which meant that pricing of the risk was not proper. If the risk is higher, then the reward has to be adequate. Due to higher liquidity , everyone was chasing few assets and the risk was underpriced. We need to get the riskreward framework right and the anxiety for growth should not upset that.

GST is seen to have created pressure on SMEs. What is your feedback?

The steps announced by the government should help clear some of the problems as most of them have concerns related to timely realisation of receivables. The move for electronic registration of public sector companies will help clear the dues of MSMEs on time. I hope the private sector also responds in a similar fashion.

Source – TOI

5 things NRI buyers must know about home loan

An NRI or a non-resident Indian can easily take a loan from any of the lenders in India for buying a property in the country.

1) A resident Indian as a co-applicant or a co-borrower or a co-owner of the property should be a part of the application that is to be submitted

2) The minimum age of the borrower should be 24 years

3) The borrower needs to submit last three months’ salary slips and bank statement of the salaried account to the lender

Procedure

1)There are a lot of online platforms available wherein you submit an online application with all the details

2) Such platforms help shortlist the right lender. They also give an option of uploading all the requisite documents online and then manage the entire process on your behalf

3) You will have to issue a power of attorney in the name of your co-applicant, maybe your family member or whoever is going to be the joint owner of your property or co-applicant to the loan in India

4) Additionally, you’ll have to go to the Indian embassy in your country and take the power of attorney format from the lender to whom you’re applying. There is a definitive format which has to be signed in favor of your Indian co-applicant in the application, after which the Indian Embassy will put a seal of approval on it

Switching banks: If you wish to transfer your home loan from one bank to another in the wake of lower interest rates, first check if there is a switching cost with the lender from whom he has taken the loan. If there is no cost of switching then there could be other costs involved such as fee which the new lender will charge. Stamp duty may also be applicable if you are creating a mortgage deed in favour of the new lender.

Be flexible: Taking a loan on fluctuating rate of interest is recommended because fixed rate of interest is generally 50 – 100 basis points more than the flexible rate of interest. They also attract a foreclosure charge whenever you want to switch. Thirdly, the Indian market rates may go down. If you are going to take 9.4 per cent floating rate right now, it is quite likely that in the next 12 months you might be at 8.75 per cent. Instead, if you go for a 10 per cent fixed rate of interest, you will be stuck at 10 per cent even if the market comes down to 8.5 or 8.75 per cent

Pre-payment: If you wish to make a pre-payment then you should tot up the numbers diligently. How much interest cost is getting saved by reduction in tenure? If you feel that is more as compared to the tax benefit which you would have availed by investing this money somewhere else, then you should go for it

What you must know

1) For a salaried customer, the maximum tenure possible is 30 years. For a self-employed person, it is 20 years

2) First get a loan approval for yourself and then decide on the value of the property you want to buy. Your savings should give you enough financial buffer

3) The age of the property does not matter much. If the property is well-maintained and the residual age of the property is at least 12 years, then the bank will definitely fund it

5) As in the case of Indian residents, if a female is the joint owner of a property, a five basis points reduction in the rate of interest is available under home loan
6) Two NRIs can also opt for a joint home loan in India but only if they are blood relatives and they stay in the same house
Source – Magic Bricks