Tag: real estate

Reduction in Stamp Duty rates

Prasad AjinkyaLeave a comment
Stamp duty in Maharashtra

In a move to bolster real estate sales, the Maharashtra government has announced a reduction in stamp duty rates of up to 2-3%.

As a new home buyer, this is an opinionated piece and somewhat of a warped perspective. However, I will try to be as objective as possible and hope to give enough citations to qualify my stance.

What is stamp duty?

Stamp duty is the additional charge that you will have to pay if you are buying a home anywhere in India. Depending on the state you are in, this stamp duty is payable at different stages in the home buying journey.

In Maharashtra, the stamp duty is to be paid upfront when you are doing the home down payment. In other states, such as Karnataka or Telangana (I am mentioning these because these are the two fastest growing states in terms of real estate) this stamp duty is to be paid on possession.

Why is this so important?

Well, most people end up saving for buying their first homes. Unless if you have access to super awesome payment plans and offers such as the home down payment assistance of HomeCapital, the majority of their savings end up being spent for buying that first home.

A stamp duty is usually levied on top of the agreement value. So in Maharashtra whenever you buy a home, not only will you be paying the usual 5% GST, you will also have to pay a 5% stamp duty as well. This pretty much puts the cost of the home at 110% of the agreement value. This is not even factoring in the cost of the broker, the registration fees, the home loan processing fees. If you add that up, the cost of the home is often 115% of the agreement value.

Stamp duty is 30% of this chunk. This chunk of expense is usually not visible to the average home buyer, until the point of purchase. That means you realize that you have incur additional expenses when you commit to buying a home.

Reducing this stamp duty from it’s 5% to 2-3%, the Maharashtra government has reduced the overheads of home buying.

So … what is the actual impact?

This is the question that a lot of us are asking. The actual impact if you are purchasing a home anywhere in Maharashtra, is a 60% reduction in stamp duty (that’s 2-3% of the agreement value). So, if you were to purchase a home worth 1Cr INR (roughly USD 140,000), then the net benefit you are getting is 2-3 Lakhs INR (roughly USD 3000-4000).

Would this impact real estate sales in the long term? No. In the larger scheme of things, this is but a drop in the ocean that’s not the painful part. In the smaller scheme of things, there might be some speculator transactions hoping to cash in on the “opportunity”.

Having just finished the worst quarter in the last 20 years, the sales are bound to rise. As the industry slowly recovers to its pre-COVID numbers, this small respite is a precisely that. It’s a small reprieve and pretty much nothing else. After 10 years, no one will remember this move, however, if this move were to solidify into the norm … then this would be interesting to see.

Conclusion

I think the government needs to look at the larger issues of access to affordable capital. Granting a small reprieve is not really an incentive to the industry.

The short term transaction upheavals would be an issue, and this hurts the same industry more than actually helping. However, most state governments have historically shown to be myopic and short sighted .. due to the nature of their terms and I cannot really fault them for this. So, like all things in the past 4 years, this shall also pass.

Why Working Class Indians Still Struggle to Buy a Home & What Can One Do?

Prasad Ajinkya1 Comment
Working class

There’s room at the top they’re telling you still

But first, you must learn how to smile as you kill

If you want to be like the folks on the hill

A working-class hero is something to be

John Lennon

When you think about it, a working-class hero with a dream to build a home is something to be, especially in the dubious world of rising property rates. You are either of the two – the one who had booked a flat years ago and have lost the hope of waiting for the builder to deliver, and have decided to say goodbye to the dream home that never came to be. Or the one struggling with finances to actually buy a home.

Imagine if you may, a middle-class worker plagued with the thoughts of home loan EMI, house rent till he gets the possession, kids’ school fees, and household expenses – all to be managed in his meagre salary; a seemingly endless loop of payables even before the salary gets credited. Not to mention the big question – how to secure finance to pay off the chunk of the home down payment. Sounds familiar? Perhaps a struggle you yourself might be facing!

With RERA (Real Estate Regulatory Authority) in place, there is some relief to the home buyers when it comes to putting their trust in developers. That resolves the first issue of untrustworthy developers. However, the problem of securing finance still remains the biggest concern.

Today, with subvention plans or no-EMI-till-possession plans buyers are more hopeful. Under such schemes, home buyers are asked to pay some percent (in between 10 to 30 percent) of the amount as the down payment. The rest is paid by a bank to the developer as a loan. While the project is under development, the developer pays the interest on the loan to the bank. The buyer’s EMIs begin only after he gets possession. A great deal, isn’t it? But like all good things, this too comes with a catch. Home buyers need to understand the nitty-gritty of the schemes before venturing into a deal. After all, knowledge is power!

Coming back to the current situation, while no-EMI-till-possession plans resolve 70 to 80% of the problem, the massive 20-30% upfront down payment remains a hurdle equivalent to a massive chunk of an iceberg submerged underwater. Here is where HomeCapital comes to the rescue with it’s Home Down Payment Assistance Program. What this program does is it facilitates interest-free loan equal to the contribution towards down payment which will be provided by the partner-lending institutions in participating projects. The interest is borne by HomeCapital and the principal amount is divided by the number of months to arrive at monthly payments. The program increases your home loan eligibility and makes your home buying faster and simpler. Sounds too good to be true? But it is true. Tried and tested, the program addresses the challenge of the down payment for home buyers, particularly first time buyers from working-class with dreams to have a home sweet home.

To sum up, in the ever-changing real estate market, one thing that never changes is the challenges faced by the home buyers. However, with more strict regulations in place and evolving home finance sector addressing a few of the big problems, owning your dream home doesn’t seem like a far fetched idea anymore. All you need to do is make a smart move to move into your dream home today, rather than five to ten years down the line.

Helping GenZ find their place

Prasad AjinkyaLeave a comment
When do backpackers settle?

A few decades back, the only time a fresh out of college fledgling would consider buying their own house was when they contemplated marrying and even then within a joint family system they saw buying property as investment.

Over time, with escalating rents and increased self independence, the robust Gen Z is showing an inclination to own homes by the time they turn 27. The Homebuyer Insight Report shows a majority of prospective home buyers between 18 and 23 who want to buy a house in the next 5 years (this is in the developed countries). About 52% of the above numbers have already started saving for their own property.

But what about the developing nations?

The story in developing nations is completely different. With a majority of individuals going through lengthier schooling periods, and taking more time to find their way through their careers and eventual independence, the average Indian Gen Z has all the aspirations of the Gen Z, but also has all the legacies to manage.

I say aspiration because the typical Gen Z in India first rushes headlong into a job to ensure financial independence. Over time as the bare necessities are funded, then the Gen Z aspires to travel … the generation is also called as backpackers because of the affinity of unstructured experiences which are valued by this generation. For example instead of a Kesari tour (meh!), this person would want to backpack their way on a beaten down path.

So when do Gen Z finally settle?

The research done points to a couple of reasons.

When starting a Family

Starting a family is the largest motivator for settling down and buying a home. Even if that means taking a loan or financial aid for buying the home.

One of the major challenges that Indian Gen Zs face is that the down payment required for real estate is so high that it’s difficult to buy this house early. What that means, that an entire generation starts becoming more career focused so that they can finally afford their homes.

To solve this problem, HomeCapital has launched India’s First Home Down Payment Assistance Program. Wait … what?

Yes, it is a mouthful, but it’s worth it. What this program addresses, is the challenge that most first time home buyers in India face. The down payment.

Started by a team of professionals from varied fields, the program will provide up to half of your down payment requirements. The program lets you to double your down payment capability and widens your reach in terms of home affordability. It increases your home loan eligibility and makes your home buying faster and simpler.

The cool part

The best part is that this program is engineered in such a manner that the user is not charged interest for the unsecured personal loan that the user gets on this form of assistance. That’s as good as a 0% interest for the user!

Yes, you got that right. If you want a home and you are buying a home on any of HomeCapital’s listed properties, then the HomeCapital team will help you with an unsecured personal loan to pay the down payment, the stamp duty and the registration fees. At zero interest.

So, if you haven’t been thinking of buying a home because of the insanely high prices, now think again.

Financing Retirement for Seniors

Prasad AjinkyaLeave a comment

Some time back I had written about equity release, and I wanted to talk about several things at once in that post (possibly the reason why I ended up sounding a bit cautious and a bit enthusiastic at different points in that post). In order to avoid this confusion, here is a simpler post … equity release is the perfect retirement financial vessel for senior citizens.

This article is aimed for senior citizens who might have been aware of this instrument but are scared of taking any kind of action to ease their livelihood. The idea is to help you make informed decisions instead of blindly signing on the dotted line.

A lot of seniors face the same question – who will support me in the later part of my life? Well … now that question is answered … its to use your house as a vessel to fuel your future income.

In case if you have not thought of any source of passive income, then this question might put people in a quandry.

Once the value is arrived at, then the next step should be finding the right firm whom you can come to terms with. Here you need to ensure that the people you end up transacting with are open, friendly and willing to put your concerns to rest. A smart idea would be to see if the financial organization is not putting any undue pressure on you to use up your release amount faster.

Once the terms of agreement are mutually agreed upon, then you simply have to enjoy the benefits of your home and the income generated from your house’ sale.

It’s like having your cake, and eating it too!