Every body has a dream to have their own house and to fulfill this dream we take a loan from the bank. But there is a need to take care of the property papers after taking home loan from the bank.
Recently there has been a case where the lender bank misplaced the property papers of one of their customer.
Sudhir Bawa had taken a home loan from a multinational bank and repaid it, but when he wanted the original sale deed papers back from the bank he was told that his property papers were lost.
Bawa, consultant with an international pharmaceutical company, told IANS, "I had taken Rs 9,00,000 as home loan from HSBC Bank in Connaught Place in 2000. By 2002 I had repaid the loan. But the bank apprised me that the original sale deed papers were lost ".
The bank shrugs off the matter from their shoulders by lodging an FIR at the Connaught Place police station.
Bawa added, "They informed me by a letter and then merely registered an FIR. However, they refused to compensate me for the loss caused by the bank's carelessness. If the documents get into the wrong hands they can easily be misused.”
Ultimately Bawa sell off his property at a lower price, bearing a loss of over Rs 10 lakh as he did not have the original papers of his property.
"This is sheer negligence on the part of the bank and they are liable to compensate the loan applicant," said lawyer Manjeet Singh Ahluwalia.
Lawyers handling consumer matters also agree that though such cases are not the average cases, banks are unwilling to pay compensation to the aggrieved.
"Banks are generally not inclined to compensate the loan applicant, leaving him with no recourse but to move court. This unnecessarily adds to the backlog of cases," said Sugriv Dubey, a lawyer.
Though last year, the State Consumer Commission had slapped a fine of Rs 500,000 on Citibank for misplacing the original documents of the property of Prem Narain Gupta.
Gupta, a resident of east Delhi, had taken a loan of about Rs 7,00,000 for renovation of his property valued about Rs 1.5 crore in 2001.
"Once a service provider resorts to such a procedure that a loan applicant has to deposit the original deed and not the certified copies of the title deed, he has to exercise utmost care and caution in the safe preservation of documents," the commission had said in its order.
Thursday, February 28, 2008
Monday, February 25, 2008
Cut in PLR by banks unlikely to encourage house seekers
Recently both state-owned and private sector banks reduced their PLR by Rs 0.50 per cent from 0.25 per cent. This resulted in a reduction in interest rates of lending, including home loans.
But the jubilation over banks cutting prime lending rates (PLR) may not spread out to the realty market as bankers and realty firms say they are unlikely to encourage house seekers.
According to Axis Bank's (formerly known as UTI Bank) Senior Vice-President Sujan Sinha the cut in PLR is not going to affect the property prices in India.
"Axis and most other banks cover borrowers with minimum net income of Rs 7,500. But then, comparing the sky-high property prices, especially in metros, it is like a drop in the ocean, which hardly makes any ripple or difference to middle-class consumers," Sinha said.
Expressing similar views, major Mumbai realty firm Nahar Group's senior vice-chairperson Manju Yagnik said: "In order to bring a visible and ostensible change in the real estate prices, the banks will have to slash interest rates further."
She added, "With home loans dipping, we are adopting a wait-and-watch policy especially with the budget just round the corner. There will be no immediate effect on the property prices".
"No doubt there will be a small correction in the real estate prices but then this will be more due to the falling market and economic slow down," Yagnik pointed out.
According to the Managing Director of real estate firm Marathon Group, Mayur Shah, the downward revision of PLR was "in no way going to affect the real estate prices".
He said, "It all depends on the cost of land and cost of construction”.
Shah specified that the positive impact of the rate cut can be seen on the consumers who were earlier shying away from taking loans, fearing the hike in interest rates of home loans to continue.
Union Bank of India slashed interest rates across the board last week, the chairman of the bank M V Nair, said, "We have acted on the general feeling that interest rate should come down."
"We are convinced that this was the appropriate time as the depository and lending rates needed some correction," he said, adding that he was hopeful that the rate cuts "would certainly benefit and attract the middle class".
Meanwhile it seems some other leading private banks do not appear to be in any mood to bring down their PLRs, at least not till the budget.
But the jubilation over banks cutting prime lending rates (PLR) may not spread out to the realty market as bankers and realty firms say they are unlikely to encourage house seekers.
According to Axis Bank's (formerly known as UTI Bank) Senior Vice-President Sujan Sinha the cut in PLR is not going to affect the property prices in India.
"Axis and most other banks cover borrowers with minimum net income of Rs 7,500. But then, comparing the sky-high property prices, especially in metros, it is like a drop in the ocean, which hardly makes any ripple or difference to middle-class consumers," Sinha said.
Expressing similar views, major Mumbai realty firm Nahar Group's senior vice-chairperson Manju Yagnik said: "In order to bring a visible and ostensible change in the real estate prices, the banks will have to slash interest rates further."
She added, "With home loans dipping, we are adopting a wait-and-watch policy especially with the budget just round the corner. There will be no immediate effect on the property prices".
"No doubt there will be a small correction in the real estate prices but then this will be more due to the falling market and economic slow down," Yagnik pointed out.
According to the Managing Director of real estate firm Marathon Group, Mayur Shah, the downward revision of PLR was "in no way going to affect the real estate prices".
He said, "It all depends on the cost of land and cost of construction”.
Shah specified that the positive impact of the rate cut can be seen on the consumers who were earlier shying away from taking loans, fearing the hike in interest rates of home loans to continue.
Union Bank of India slashed interest rates across the board last week, the chairman of the bank M V Nair, said, "We have acted on the general feeling that interest rate should come down."
"We are convinced that this was the appropriate time as the depository and lending rates needed some correction," he said, adding that he was hopeful that the rate cuts "would certainly benefit and attract the middle class".
Meanwhile it seems some other leading private banks do not appear to be in any mood to bring down their PLRs, at least not till the budget.
Wednesday, February 13, 2008
FM asks banks to focus on home owners, consumers
After the Reserve Bank of India's (RBI) moral suasion to public sector banks on cutting interest rates, the Finance Minister P. Chidambaram insisted the public sector banks to cater to the requirement of credit to home owners and buyers of consumer goods.
In his meeting with the chiefs of the public sector banks finance minister asked state-run banks to ensure that productive sectors of the economy are not starved of credit.
After a meeting with the Chief Executives of Public Sector Banks in Delhi the Finance minister told the reporters that productive sectors have not been starved of credit and banks have fulfilled their mandate in this area. He said, over the next few days, banks will pay attention to the credit growth and delivery. He also asked the banks to implement sugar package in the next 10 days and submit reports.
Meanwhile, amidst ongoing rate cuts, bankers on Tuesday said they expect a further fall in interest rates due to ample liquidity in the banking system.
Some banks have already reduced interest rates. State Bank of India (SBI), India's biggest commercial bank by assets, reduced its benchmark prime lending rate by 25 basis points to 12.5%.
Private sector housing finance major HDFC and public sector banks such as Canara Bank and Allahabad Bank have also cut rates on retail and consumer loans. Last month Chidambaram had asked banks to lower rates to revive slowing loan growth.
"With ample liquidity in the banking system, pressure on rates has eased," said M. B. N. Rao, Chairman of Canara Bank. With the revision in prime lending rate (PLR), the interest rates on home and car loans, in addition to loans for small and medium enterprises and consumer goods, will also fall.
Speaking to reporters in New Delhi today Rao said that the banking industry is facing a peculiar situation - high growth in deposit rates and decline in credit growth. On a Year on Year basis, deposits grew by 29.5% till Jan. 25 as against 23.5% last year. At the same, advances grew by 22.6% compared to 29.8%.
In his meeting with the chiefs of the public sector banks finance minister asked state-run banks to ensure that productive sectors of the economy are not starved of credit.
After a meeting with the Chief Executives of Public Sector Banks in Delhi the Finance minister told the reporters that productive sectors have not been starved of credit and banks have fulfilled their mandate in this area. He said, over the next few days, banks will pay attention to the credit growth and delivery. He also asked the banks to implement sugar package in the next 10 days and submit reports.
Meanwhile, amidst ongoing rate cuts, bankers on Tuesday said they expect a further fall in interest rates due to ample liquidity in the banking system.
Some banks have already reduced interest rates. State Bank of India (SBI), India's biggest commercial bank by assets, reduced its benchmark prime lending rate by 25 basis points to 12.5%.
Private sector housing finance major HDFC and public sector banks such as Canara Bank and Allahabad Bank have also cut rates on retail and consumer loans. Last month Chidambaram had asked banks to lower rates to revive slowing loan growth.
"With ample liquidity in the banking system, pressure on rates has eased," said M. B. N. Rao, Chairman of Canara Bank. With the revision in prime lending rate (PLR), the interest rates on home and car loans, in addition to loans for small and medium enterprises and consumer goods, will also fall.
Speaking to reporters in New Delhi today Rao said that the banking industry is facing a peculiar situation - high growth in deposit rates and decline in credit growth. On a Year on Year basis, deposits grew by 29.5% till Jan. 25 as against 23.5% last year. At the same, advances grew by 22.6% compared to 29.8%.
Tuesday, February 12, 2008
Liberalize the real estate, make houses affordable
The government’s principle is to provide roti, kapda aur makaan for all, then housing has to be made affordable everyone, especially in urban dwelling.
After liberalization in the aviation and telecom sectors, the common man of India has been able to use these facilities. In the same manner it has become necessary that real estate should also be liberalized.
Right from local government and up to the central government, real estate sector is taxed at every level so it has become the highest taxed sectors in the country. Taxes can build up to 45 per cent of the project cost. Therefore there is a need that government should rationalization of the taxes for the sector.
To start with, the finance minister should make the entire interest and EMI (equated monthly installment) payment of the first house completely non-taxable. This would bring down the burden of the buyers.
Moreover we appear to be moving towards an interest rate regime which is different from the international one. Over the last two years, as the interest rates have gone up there has been increase in the borrowing costs, by over 70 per cent. Therefore, there is a need to bring the interest rates down as is the global trend and this will make possible houses more affordable and also ease our borrowing costs.
Tax exemption on IT (information technology) parks should continue. If SEZs (special economic zones) are getting special tax exemptions, then same should be extended to IT parks as well.
Not all IT companies are capable of setting up of shops in SEZs, and, hence, should get the same exemptions by operating out of IT parks.
It’s important for the government to focus on mass affordable housing. Thus this segment must get some tax exemptions. If the finance minister plans out a special tax incentive for mass affordable housing projects, then the rates can be easily brought down by 15-20 per cent which will make houses more affordable for the common man.
In his last budget, the finance minister had brought leasing of commercial properties under the service tax umbrella. We have been opposing this move as leasing activities cannot be a service.
Over the last few years there has been increase in the input prices, so we are not demanding any special schemes or incentives to reign in input prices. We believe in free market economy and are willing to pay market prices of commodities we buy.
In fact what the government can do is to ensure that products are available when needed, like it brought down the import duty for cement; it can bring down the import duty for steel, which will make it cheaper.
On FDI (foreign direct investment), we need the government to consider, at least for the listed real estate companies, that such investments be treated as portfolio investment.
After liberalization in the aviation and telecom sectors, the common man of India has been able to use these facilities. In the same manner it has become necessary that real estate should also be liberalized.
Right from local government and up to the central government, real estate sector is taxed at every level so it has become the highest taxed sectors in the country. Taxes can build up to 45 per cent of the project cost. Therefore there is a need that government should rationalization of the taxes for the sector.
To start with, the finance minister should make the entire interest and EMI (equated monthly installment) payment of the first house completely non-taxable. This would bring down the burden of the buyers.
Moreover we appear to be moving towards an interest rate regime which is different from the international one. Over the last two years, as the interest rates have gone up there has been increase in the borrowing costs, by over 70 per cent. Therefore, there is a need to bring the interest rates down as is the global trend and this will make possible houses more affordable and also ease our borrowing costs.
Tax exemption on IT (information technology) parks should continue. If SEZs (special economic zones) are getting special tax exemptions, then same should be extended to IT parks as well.
Not all IT companies are capable of setting up of shops in SEZs, and, hence, should get the same exemptions by operating out of IT parks.
It’s important for the government to focus on mass affordable housing. Thus this segment must get some tax exemptions. If the finance minister plans out a special tax incentive for mass affordable housing projects, then the rates can be easily brought down by 15-20 per cent which will make houses more affordable for the common man.
In his last budget, the finance minister had brought leasing of commercial properties under the service tax umbrella. We have been opposing this move as leasing activities cannot be a service.
Over the last few years there has been increase in the input prices, so we are not demanding any special schemes or incentives to reign in input prices. We believe in free market economy and are willing to pay market prices of commodities we buy.
In fact what the government can do is to ensure that products are available when needed, like it brought down the import duty for cement; it can bring down the import duty for steel, which will make it cheaper.
On FDI (foreign direct investment), we need the government to consider, at least for the listed real estate companies, that such investments be treated as portfolio investment.
Friday, February 8, 2008
Banks issued notice for seeking details of interest rates increases on home loans
Last month a notice have been sent to about half a dozen banks by the Monopolies and Restrictive Trade Practices Commission (MRTPC) seeking details on how they had determined the interest rate increases on their housing loans.
This reflects the concern expressed by the Reserve Bank of India (RBI) in its mid-term policy review in October 2007 on transparency and fairness in the pricing of housing loans.
In 2007-08, most banks had lowered the lending rates but only for the new housing loan borrowers, because revising the interest rates for existing customers require banks to first revise their benchmark prime lending rates (PLRs) to which the housing loan interest rates are linked.
However, some public sector banks have now lowered the interest rates for both existing and new borrowers. But they have still kept the benchmark PLR unchanged, reflecting the increasing irrelevance of the PLR as a benchmark rate.
Whereas the PLR was supposed to be the rate at which a bank would lend to its best borrowers; banks’ prime borrowers are now availing loans at interest rates that are 25% lower than the PLR.
In spite of fall in the deposit rates and lowering cost of funds since April 2007, banks did not change their PLRs.
In its report on the trend and progress of banking in India for 2006-07, the RBI, had observed that the share of lending at rates below the PLR (sub-PLR lending) had gone up by 79% at the end of March 2007 from 69% a year earlier.
In 2001, the RBI allowed lending at rates below PLRs so it is no longer essential to revise the PLR to reduce effective loan rates. In April 2003, the RBI proposed a single benchmark PLR to address the downward stickiness in lending rates.
While the general practice of having multiple prime lending rates for working capital and term loans had made the pricing of loans complex.
Banks are supposed to take the approval of their boards in fixing their BPLR, based on cost of funds, operating expenses and a minimum margin to meet the regulatory and provisioning norms and a profit margin.
While the lending rates did come down initially, reflecting the overall decline in interest rates over the last three years, the BPLRs, quick to rise, have shown reluctance in climbing down.
In case of floating rate loans, banks had the option to either link the interest rates to BPLRs or market the benchmark rate.
In its mid-term review for 2005, RBI had called for a review of the BPLR system noting that competition had forced the pricing of a significant proportion of bank loans far out of alignment with BPLRs and in a non-transparent manner.
It was supposed that loans to companies were being under-priced, while small-scale industries and agriculture were being over-charged. So RBI asked banks to analyze the costs incurred for lending to various segments.
Since then, the RBI had repeatedly expressed its concerns, accompanied with threats of regulatory action if banks did not ensure transparency and fairness in the pricing of loans.
In their pre-monetary policy meeting with the RBI in January 2008, banks did convey the absence of a market-determined benchmark rate to price floating rate loans.
“We told the RBI about our need for a true market indicator for the benchmark rates to develop floating rate products,” said a banker present at the meeting.
Bankers have marked the need for a market-determined benchmark rate. Banks are only asking for flexibility in determining the interest rates on the lending side, as well as on the deposits.
Banks have not been able to find the takers for the floating rate deposits since fixed deposits are a preferred option. Banks are assessing the feasibility of having different interest rate deposit products.
A customer who wants the option of withdrawing the deposit before maturity should be offered a particular interest rate and; a borrower who forgoes the option might be given a higher interest rate.
The retail committee of banks under the guidance of the Indian Banks’ Association is studying the issue. Meeting is likely to be held this month to discuss the establishment of benchmarks for floating interest rates.
Banks cannot argue that they are exposed to a similar interest rate risk on the deposit and lending side. While banks provide housing loans with an average maturity of 10-15 years, the deposits are of 1-3 year maturity and are automatically re-priced when they come up for maturity.
A working group has been formed by RBI to study the development of an inter-bank term money market in India. The inter-bank term money market, where banks can borrow funds from each other for 15 days to one year, is very low as the daily volumes are currently just a few hundred crore rupees.
This reflects the concern expressed by the Reserve Bank of India (RBI) in its mid-term policy review in October 2007 on transparency and fairness in the pricing of housing loans.
In 2007-08, most banks had lowered the lending rates but only for the new housing loan borrowers, because revising the interest rates for existing customers require banks to first revise their benchmark prime lending rates (PLRs) to which the housing loan interest rates are linked.
However, some public sector banks have now lowered the interest rates for both existing and new borrowers. But they have still kept the benchmark PLR unchanged, reflecting the increasing irrelevance of the PLR as a benchmark rate.
Whereas the PLR was supposed to be the rate at which a bank would lend to its best borrowers; banks’ prime borrowers are now availing loans at interest rates that are 25% lower than the PLR.
In spite of fall in the deposit rates and lowering cost of funds since April 2007, banks did not change their PLRs.
In its report on the trend and progress of banking in India for 2006-07, the RBI, had observed that the share of lending at rates below the PLR (sub-PLR lending) had gone up by 79% at the end of March 2007 from 69% a year earlier.
In 2001, the RBI allowed lending at rates below PLRs so it is no longer essential to revise the PLR to reduce effective loan rates. In April 2003, the RBI proposed a single benchmark PLR to address the downward stickiness in lending rates.
While the general practice of having multiple prime lending rates for working capital and term loans had made the pricing of loans complex.
Banks are supposed to take the approval of their boards in fixing their BPLR, based on cost of funds, operating expenses and a minimum margin to meet the regulatory and provisioning norms and a profit margin.
While the lending rates did come down initially, reflecting the overall decline in interest rates over the last three years, the BPLRs, quick to rise, have shown reluctance in climbing down.
In case of floating rate loans, banks had the option to either link the interest rates to BPLRs or market the benchmark rate.
In its mid-term review for 2005, RBI had called for a review of the BPLR system noting that competition had forced the pricing of a significant proportion of bank loans far out of alignment with BPLRs and in a non-transparent manner.
It was supposed that loans to companies were being under-priced, while small-scale industries and agriculture were being over-charged. So RBI asked banks to analyze the costs incurred for lending to various segments.
Since then, the RBI had repeatedly expressed its concerns, accompanied with threats of regulatory action if banks did not ensure transparency and fairness in the pricing of loans.
In their pre-monetary policy meeting with the RBI in January 2008, banks did convey the absence of a market-determined benchmark rate to price floating rate loans.
“We told the RBI about our need for a true market indicator for the benchmark rates to develop floating rate products,” said a banker present at the meeting.
Bankers have marked the need for a market-determined benchmark rate. Banks are only asking for flexibility in determining the interest rates on the lending side, as well as on the deposits.
Banks have not been able to find the takers for the floating rate deposits since fixed deposits are a preferred option. Banks are assessing the feasibility of having different interest rate deposit products.
A customer who wants the option of withdrawing the deposit before maturity should be offered a particular interest rate and; a borrower who forgoes the option might be given a higher interest rate.
The retail committee of banks under the guidance of the Indian Banks’ Association is studying the issue. Meeting is likely to be held this month to discuss the establishment of benchmarks for floating interest rates.
Banks cannot argue that they are exposed to a similar interest rate risk on the deposit and lending side. While banks provide housing loans with an average maturity of 10-15 years, the deposits are of 1-3 year maturity and are automatically re-priced when they come up for maturity.
A working group has been formed by RBI to study the development of an inter-bank term money market in India. The inter-bank term money market, where banks can borrow funds from each other for 15 days to one year, is very low as the daily volumes are currently just a few hundred crore rupees.
Monday, February 4, 2008
Home loan rates expected to fall before budget
There can be fall in the Home loan interest rates in the weeks leading to the budget.
Last week HDFC reduced its interest rate by 25 basis points, following on the same lines ICICI Bank and other public sector banks are also planning of reducing their interest rates by 25 to 50 basis points. According to ICICI bank sources cut in the interest rate is expected in a couple of weeks.
“We are evaluating the interest rate scenario and likely to take a final decision shortly,” a source in the bank said. “Given the global trend, there is case of softening of the interest rate. However, much depends upon the inflation, which is still at around 4 per cent with upward bias.”
Though, bankers have doubts about that the reduction in the interest rate may increase the home loan demand.
Since January 2006, there has been an increase by 4 percent in the interest rate and the equated monthly installment (EMI) has increased by Rs 250 per lakh for 20-year loan. A reduction of 50 basis points will definitely have an effect on EMI and would reduce by around Rs 34 for a 20-year loan.
Bankers said the current decline in the home loan disbursement is primarily because of the sharp rise in real estate prices, as many borrowers are finding it difficult to divide out such huge EMIs.
Union Bank of India Chairman MV Nair said there has been reduction on deposit rates and lending rates.
The Bank of Maharashtra is thinking of reducing lending rates in some segments next week. “We might effect an interest rate cut in the range of 0.25-0.50 per cent,” said bank chairman MD Mallya.
Last week HDFC reduced its interest rate by 25 basis points, following on the same lines ICICI Bank and other public sector banks are also planning of reducing their interest rates by 25 to 50 basis points. According to ICICI bank sources cut in the interest rate is expected in a couple of weeks.
“We are evaluating the interest rate scenario and likely to take a final decision shortly,” a source in the bank said. “Given the global trend, there is case of softening of the interest rate. However, much depends upon the inflation, which is still at around 4 per cent with upward bias.”
Though, bankers have doubts about that the reduction in the interest rate may increase the home loan demand.
Since January 2006, there has been an increase by 4 percent in the interest rate and the equated monthly installment (EMI) has increased by Rs 250 per lakh for 20-year loan. A reduction of 50 basis points will definitely have an effect on EMI and would reduce by around Rs 34 for a 20-year loan.
Bankers said the current decline in the home loan disbursement is primarily because of the sharp rise in real estate prices, as many borrowers are finding it difficult to divide out such huge EMIs.
Union Bank of India Chairman MV Nair said there has been reduction on deposit rates and lending rates.
The Bank of Maharashtra is thinking of reducing lending rates in some segments next week. “We might effect an interest rate cut in the range of 0.25-0.50 per cent,” said bank chairman MD Mallya.
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