How It Actually Happened – The Loanyantra’s Story

An experienced banker, Harsha, was performing his duty with respect to the banks and also to the end customers. He was aware of the customers problems and knew the banks’ tips regarding home loan. It was his passion to help the customers, in his best means, to get through the loan process as fast as possible.

On his way towards life, came a tech savvy customer, Vijayananda Reddy, who knew a little about home loan. His thirst was to come out of home loan as early as possible. He observed that his 2 year old home loan interest rate was higher than the market interest rate, loan tenure was increasing as the interest rate increases and no change in the loan EMI. So, the intelligent techie Vijayananda Reddy  quoted two issues to Harsha, the intellectual banker,

  1. I want to reduce my ROI to the present market ROI which is comparatively lesser than my ROI.
  2. I want to keep myself updated about the changing ROIs by different lenders.

Harsha, as his responsibility, is very positive and responsive in solving Vijayananda Reddy’s issues with utmost care and with a hassle-free process. The bright engineer thought he could be helpful to many home loan borrowers by automating this process and by bringing awareness to them.

There rose an initial seed for LOANYANTRA.COM. The two bright worlds banking and IT came together to create a customer friendly home loan process which includes automated, technology oriented home loan management.

Loanyantra.com took its shape in January 2016 and started operating from T-hub, Hyderabad. Proud to be a chosen start-up for t-hub. Also victoriously winning the hearts of the investors.

Now loanyantra.com, with its motto, pay less, pay fast, going ahead successfully with a team of 8. The well planned business strategy not only helps the home loan customers but also guides them to save to the maximum on their home loans.

The LoYans, as they call themselves, have processed 70 cr. loans majorly from Bengaluru and Hyderabad. They want the online home loan management to reach to all those 80% online users in India.

How does the standard deduction benefit the tax payers?

Union Budget 2018-19, introduced standard deduction of 40,000. Which is a pure deduction from tax, as the tax payer need not show any bills or documents to claim.

So, is the standard deduction really beneficial and how?

For example, a tax payer is getting a salary of Rs. 10,00,000. According to the taxation rules. There is a tax slab till Rs.5,00,000 wherein he need not pay the tax for the Rs.5,00,000. So, the next Rs.5,00,000 is considered as taxable income. The tax payer can claim for tax deduction if he has some investments or expenses. Say, before Budget 2018-19, the tax payer can claim for medical reimbursement of Rs. 15,000 by submitting proper medical bills. Also, there was transportation allowance 19,200.

However, the tax payer can claim those benefits only by showcasing the proper bills. With the budget 2018-19, the medical reimbursement and transportation allowance is removed. But a standard deduction of Rs. 40,000 is added. Which means, the tax payer, without proving or without any reason or without submitting any bills can just need not pay tax for that Rs.40,000. 

Aditya Modani, Tax Director, EY India, said, “Re-introduction of standard deduction meets the long-time wish of salaried class taxpayer. Standard deduction will be provided without any requirement to furnish any evidence for claiming such a deduction.”

It is a bundled exemption, in which the individual tax payer might benefit upto INR 5,800.

Budget and standard deduction
Budget and standard deduction

Plan Now and Save More

You can also get tax exemption if you have investments. Your investments can be in mutual funds, insurance, home loan.  You can claim tax benefits upto INR 3,00,000.

It is perfectly fine to invest. Invest now and claim tax benefit and save more. It is also best time to invest in home as the interest rates are lower. So add both the advantages and flow with the market. Loanyantra helps you to plan well and save more on your loans.

Get to know all the tax exemptions associated with home loans. Claim tax exemption on principal and interest. Loanyantra plans it all for you. Loanyantra is just a missed call away –  040-71011991. Get a call back to let us know more about your requirements. Get a customized service from dedicated relationship manager. Know about all the lenders and choose from the favourite banks with reduced interest rates. Also avail discount on interest rates for an year. Loanyantra will still follow your loan till you close the disbursal loan. Yes, loan. Know more to save more.

 

 

Budget 2018 and Your Loan – Repo Rate Unchanged

Budget 2018-19, the 5th budget and the last budget in P.M Narendra Modi’s tenure, presented by Finance Minister Arun Jaitley, left no hopes for reduction of home loan or personal loan interest rates.

Though the budget sounds rural and weaker section friendly, it is worth mentioning that it is a much foresighted budget which if really implemented and taken as it is to the poor, will surely make India Proud.

After a two day meet, the Monetary Policy Committee (MPC) of the Reserve Bank of India, announced a no repo rate change. Repo Rate, the rate at which the RBI lends money to the banks, doesn’t change and remains at 6%.Five members of the monetary policy committee voted to keep rates unchanged, with one member, Michael Patra, voting for a 25 basis points hike.

The inflation which is at a high pace is expected to increase further, as the analysts see. Commenting on the RBI policy statement, Anjali Verma, economist, Phillipcapital India, said: “The policy decision is in line with our expectation along with the hawkishness that is built into the statement. While we retain status quo from RBI for FY19, a risk to our call may come from higher inflation.”

Here are some other key projections from the central bank’s sixth bi-monthly monetary policy statement of 2017-18:

– GVA growth (value of goods and services) for 2017-18 projected at 6.6%
Reverse repo rate (rate at which it borrows from commercial banks) kept unchanged at 5.75%
– Inflation forecast at 5.1% in fourth quarter of fiscal year 2018
– RBI estimates retail inflation in 5.1-5.6% range in first half of 2018-19, 4.5-4.6% in second half.

Know about repo rate and its influence on loan interest rates

Repo Rate 6%
Reverse Repo Rate 5.75%
Interest Rate – Home Loan 8.3%
Interest Rate – Personal Loan 10.35%

Tax Advantage from Union Budget : 

There is no more medical reimbursement and transport allowance by the government to the salaried and the pensioners. There is a standard deduction of Rs. 40,000, no need of submitting bills and documents. There is an increase of 1% cess from 3% to 4%. The net income on which benefit would be available is INR 5,800 and consequential income-tax saving will depend on the income-tax bracket an individual falls in. In case of taxpayer who are differently abled persons, the transport allowance exemption would continue.

Tax Details Before Budget 2018-19 After Budget 2018-19
Medical Expenses 15,000 Nil
Transport Allowance 19,200 Nil
Standard Deduction 40,000

Loans Cheaper than Usual :

Repo rate vs interest rate
Repo rate vs interest rate

Before 2016, the home loan interest rates used to be 14%. Slowly RBI reduced the repo rate and in turn, there is a reduction in interest rates to 8.3%.

If you are one of the luckiest persons to shortlist your dream home, then why delay, the interest rates are much lower than ever before. Book your home and start paying your home loan EMI and close it as fast as you can.

Loanyantra looks at all your financial needs. Why worry for anything else. We look at the trends of the interest rates and guide you the best lender according to your requirements. Whether a home loan or personal loan, we are just a missed call away. Once you are our customer, your loan is our loan. Follow our updates and start saving on your loans and close it early.

Budget Highlights 2018-19 On Tax: Direct Taxes & Indirect Taxes

High anticipation on budget on Feb-1st

We have complied budget Highlights of 2018-2019.

Personal Taxation : Budget Highlights – DIRECT TAXES

Heading

Comments

Tax Rates

No Change in income tax slab or tax rates or surcharge

Education cess substituted with Health and Education cess of 4%

Standard Deduction

Standard deduction of INR 40,000 or amount of salary received whichever is less.

However transport allowance for INR 19200 and medical reimbursement for INR 15,000 was previously available and post this proposal , a bundled exemption of INR 40,000 is available i.e. only an increase of INR 5800.

Transport allowance exemption is available only for differently abled person.

Capital Gains

Provisions of section 54EC – The lock-in period for investment of specified bonds under 54EC is increased to 5 years from 3 years. This is pertaining to capital gains arising from long term capital assets, being land or building or both. This amendment is effective April 1, 2018

Senior Citizen Deductions – health insurance premium and medical treatment

Section 80D provides a deduction in respect of payments towards annual premium on health insurance policy or preventive health check-up of a senior citizen or medical expenditure in respect of very senior citizen. This has been proposed to increase from INR 30,000 to INR 50,000.

Section 80DDB provides deduction to individuals or HUF‟s in respect of amount paid for medical treatment of specified diseases. The deduction value is proposed to be increased to INR 100,000 from INR 60,000

Withdrawal from NPS S c h e me

An employee contributing to NPS is allowed an exemption in respect of 40% of the total amount payable to him on closure of his account or his opting out. This was previously not allowed to non-employee subscribers. However, it is proposed to extend the said benefit to all subscribers

Deduction in respect of interest income to senior citizen

Deduction of INR 10,000 is allowed under 80TTA with respect to interest income from savings account. It is proposed to allow a deduction of INR 50,000 in respect of interest income from deposits held by senior citizens.

Also it is proposed to amend section 194A to raise the threshold for deduction of TDS on interest income from 10,000 to 50,000

PF / Pension

As a measure to incentivise employment of women in formal sector and to enable higher take home wages, women employees contribution for first three years of employment is proposed to be reduced to 8%. However, employer contribution to continue at current rates.

Non-Corporate Assesses – Tax
Assesses (less than <) 60 Years

 

FY 2018-19

Tax rate

0- 2,50,000

Nil

2,50,001- 5,00,000*

5%

5,00,001- 10,00,000

20%

10,00,000 Plus

30%

Surcharge Applicable to Individual Income

FY 2018-19

Tax rate

0- 5,00,000

Nil

50,00,001- 1,00,00,000

10%

1,00,00,000 plus

15%

Assesses (more than >) 60 years and (less than <) 80 years  / Senior Citizens

FY 2018-19

Tax rate

0- 3,00,000

Nil

300001- 500000*

5%

5,00,001- 10,00,000

20%

10,00,000 Plus

30%

Assesses (more than>) 80 years 

FY 2018-19

Tax rate

0- 5,00,000

Nil

5,00,001- 10,00,000

20%

10,00,000 Plus

30%

Corporate Assesses – Tax 

Sub Category

Comments

Tax Rates

Corporate tax rate reduced to 25% (plus applicable surcharge and cess) for domestic companies with total turnover or gross receipts not exceeding INR250 Crores for assessment year 2017-18

Health and Education Cess at 4% instead of Education Cess of 3%

MAT relief for Companies undergoing Corporate Insolvency Resolution Process

It is proposed to amend section 115JB to provide that the aggregate amount of unabsorbed deprec iation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company‟s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority.

Benefit of carry forward and set off of losses pertaining to companies undergoing corporate insolvency resolution process

Section 79 of the act provides for carry forward and set off of losses in a closely held company only if there is a continuity in the beneficial owner of the shares carrying not less than 51% of the voting power on the last day of the year or years in which the loss is incurred.

In case of company seeking insolvency resolution involves change in the beneficial owners of shares is beyond the persmissible limit under section 79. Therefore, it is proposed to relax the rigors of section 79 in insolvency cases.

Measures to promote Start ups

Deduction under 80 IAC shall be available to eligible start-ups for consecutive three out of seven assessment years if it

> is incorporated on or after 1 April 2018 but before 1 April 2020,

> turnover doesn‟t exceed INR 25crores for seven previous years

> if it is engaged in innovation, development or improvement of products or processes or services, or a scalable business model with a high potential of employment generation or wealth creation.

International financial services centre (IFSC)

It is proposed to amend section 47 of the act to provide that transactions pertaining to transfer of a capital asset being bond or global depository receipt under 115AC, through recognised stock exchange located in international financial services centre be exempt where consideration is paid in foreign currency.

Alternate Minimum Tax for a unit located in International Financial Services Center to be 9% (plus applicable surcharge and cess)

Application of dividend distribution tax to deemed dividend

Deemed Dividend under section 2(22)(e) is taxed in the hands of the recipient at the applicable marginal rate.

Now it is proposed to bring deemed dividend under section 115 O and proposed to be taxed at 30%, without grossing up.

Royalty and FTS payment by NTRO

Section 195 requires a person to deduct to deduct tax at the time of payment or credit to a non resident.

The national technical research organization (NTRO), it is proposed to amend section 10 so as to provide that the income arising to the non resident , not being a company or foreign company, by way of royalty from or fees for technical services rendered in or outside india to the NTRO will be exempt from income tax.

Aligning the scope of business connection with modified PE Rule as per Multilateral instrument

Business connection amended in section 9 to include any business activities carried through a person who, acting on behalf of the non-resident, habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by the non-resident. It is further proposed that the contracts should be-

o in the name of the non-resident; or

o for the transfer of the ownership of, or for the granting of the righttouse, property owned by that non-resident or that the non-resident has the right to use; or

o for the provision of services by that non-resident.

Business Connection to include significant economic presence

Explanation 2 to the section 9 which defines „business connection‟ is also narrow in its scope since it limits the taxability of certain activities or transactions of non- resident to those carried out through a dependent agent. Therefore, emerging business models such as digitized businesses, which do not require physical presence of itself or any agent in India, is not covered within the scope of clause (i) of sub-section (1) of section 9 of the Act.

In view of the above, it is proposed to amend clause (i) of sub-section (1) of section 9 of the Act to provide that ‘significant economic presence’ in India shall also constitute ‘business connection’. Further, “significant economic presence” for this purpose ,shall mean-

o any transaction in respect of any goods, services or property carried out by a non-resident in India including provision of download of data or software in India if the aggregate of payments arising from such transaction or transactions during the previous year exceeds the amount as may be prescribed; or

a systematic and continuous soliciting of its business activities or engaging in interaction with such number of users as may be prescribed, in India through digital means.

The existing tax treaties would not be impacted by the concept of significant economic presence, however, attempts will be made to include the concept in the future Indian tax treaties.

Amendments in relation to notified Income Computation and Disclosure Standards.

Several provisions of the Act, as regards applicability of Income Computation and Disclosure Standards, stand amended. This is expected to ensure a higher level of certainty in relation to ICDS

Long term capital gain tax on sale of equity shares etc.

Long term capital gains on sale of an equity share of a listed company or a unit of an equity oriented fund or unit of a business trust by all assessees (including FII) in excess of INR 100,000 shall be taxable at 10% subject to satisfaction of certain conditions.

Equity Oriented Mutual funds to be liable to pay tax at the rate of 10% on income distributed to unit holders

Tax on transfer of immovable property

No adjustments to sale consideration, in respect of transfer of immovable property, will be required if the difference between the stamp duty value and sale consideration on transfer of immovable property is not more than 5%.

Rationalisation of provisions relating to country by country

Section 286 of the Act, contains provisions relating to specific reporting regime in the form of country by country report (CbCR) in respect of international group. The following amendments are propsed to be made so as to improve the effectiveness and reduce the compliance burden of such reporting :

The time allowed for furnishing the CbCR, in the case of parent entity or Alternative Reporting Entity (ARE), resident in India, is proposed to be extended to twelve months from the end of reporting accounting year;

> constituent entity resident in India, having a non-resident parent, shall also furnish CbCR in case its parent entity outside India has no obligation to file the report of the nature referred to in sub-section (2) in the latter‟s country or territory

> the time allowed for furnishing the CbCR, in the case of constituent entity resident in India, having a non-resident parent, shall be twelve months from the end of reporting accounting year;

> the due date for furnishing of CbCR by the the ARE of an international group, the parent entity of which is outside India, with the tax authority of the country or territory of which it is resident, will be the due date specified by that country or territory;

> Agreement would mean an agreement referred to in sub-section (1) of section 90 or sub-section (1) of section 90A, and also an agreement for exchange of the report referred to in sub-section (2) and sub-section (4) as may be notified by the Central Government;

> “reporting accounting year” has been defined to mean the accounting year in respect of which the financial and operational results are required to be reflected in the report referred to in sub-section (2) and sub-section (4).

Deduction in respect of income of Farm producer companies

100% deduction in respect of income of farm producer companies for period of 5 years introduced (having turnover upto INR 100 crores)

Tax treatment of transactions in respect of trading in agricultural commodity derivatives

Trading of agricultural commodity derivatives which is even not charged to commodity transaction tax shall be treated as non-speculative

Others

* Disallowance for certain cash payments would be applicable to certain entities claiming benefit of section 10(23C)

* New scheme for scrutiny assessments (e-assessments) to be introduced by way of notification

* Compensation (capital or revenue) for termination or modification of a contract relating to business to be taxable as business income and relating to employment to be taxable as income from other sources

* Conversion of stock-in-trade to capital asset to be taxable as business income at the fair market value („FMV‟) as on date of conversion

Excise Duties :

Category

Comments

Excise duty on Petrol and Diesel

Changes in Basic Excise Duty on motor spirit (petrol) and high speed diesel oil (effective from February 2, 2018)

Categories

Existing Rate / litre

Revised Rate / litre

Unbranded Petrol

6.48

4.48

Branded Petrol

7.66

5.66

Unbranded Diesel

8.33

6.33

Branded Diesel

10.69

8.69

> Additional Duty of Excise (Road Cess) of INR 6 per litre on motor spirit (petrol) and high speed diesel oil will be abolished upon enactment of the Finance Bill, 2018.

> Road and Infrastructure Cess levied on petrol and high-speed diesel at INR 8 per litre.

> Upto the enactment of Bill, levy of road cess has been exempted on domestically manufactured and produced petrol and high speed diesel.

Other exemptions

The following products are exempt from Road and Infrastructure cess subject to payment of appropriate excise duties on petrol and diesel and GST on ethanol or bio- diesel used for making such blends.

(i) 5% ethanol blended petrol. (ii) 10% ethanol blended petrol. (iii) Bio-diesel, up to 20% volume.

Service Tax : 

Category

Comments

Retrospective exemptions granted

>> Life Insurance services provided to Coast Guard personnel by the Naval Group Insurance Fund (for the period 10 September 2004 to 30 June 2017)

>> Services by Goods and Services Tax Network to Central Government, State Government or Union Territories (for the period 28 March 2013 to 30 June 2017) are proposed to be exempted from service tax.

>> Government‟s share of profit petroleum on services by Government by way of grant of license or lease to explore / mine petroleum crude or natural gas or both (for the period 1 April 2016 to 30 June 2017).

>> Refund can be claimed within 6 months from enactment of the Finance Bill, 2018.

Customs Duty :

Category

Comments

CBIT C

> Central Board of Excise and Customs to be renamed as the Central Board of Indirect Taxes and Customs (effective from date of enactment of Finance Bill)

Assessment

> “Assessment” will include specific aspects such as classification, duty, valuation, exemption or concession of duty etc.

Rate of customs duty

> Rate of basic customs duty is 10%

Change in Customs Tariff Act, 1975

> IGST Valuation methodology and compensation cess for Warehoused goods sold prior to clearance for home consumption or export has been prescribed.

Social Welfare Surcharge

> A new levy in form of Social welfare surcharge at the standard rate of 10% on aggregate of customs duties has been introduced effective immediately. This e x c l u d e s S a f e g u a r d d u t i e s , C V D , A n t i – d u mp i n g d u t y a n d S o c i a l W e l f a r e Surcharge. Certain goods exempt from SWS and certain items such as Petrol, HSD, Gold and Silver are at 3% ( Notification 11/12/13 of 2018 ).

Road and Infrastructure Cess

> The existing Road Cess (levied at INR 6 per litre) on Petrol and High Speed Diesel has been replaced with the new Road and Infrastructure Cess (to be levied at INR 8 per litre). However, the total duty incidence on import of both the products remains the same due to change in CVD

Jurisdiction

> The scope of Customs Act has been expanded to apply to any offence or contravention committed outside India by any person unless specified otherwise.

Indian Customs Waters

> Definition of „Indian Customs Waters‟ has been amended to extend its limit to „Exclusive Economic Zone‟ of India upto 200 nautical miles from 12 nautical miles.

Redemption Penalty

> Requirement to pay redemption fine dispensed with in cases of voluntary payment of all dues. Further, the option to pay redemption fine to be void, if not paid within 120 days from the date such option was extended.

Risk based Selection

> Provisions introduced in Customs Act, 1962 to provide legal backing for verification of risk based selection of self-assessment through customs automated system. The methodology of Risk based Selection has been codified in the law

Show Cause notice

· Process of pre-notice consultation by the authorities before issuance of demand notice for recovery of duty or refund in cases other than collusion, suppression, etc. This is intended to enable ease of the process and to minimise litigation.

> Provision introduced for issuance of supplementary SCN in specified circumstances.

Revised guidelines for Advance Ruling

> Applicant to include any importer or exporter or any other person with justiciable cause to the satisfaction of the authority.

> Application for advance ruling is to be made to Custom Authority for Advance Rulings (CAAR) (Principal Commissioner or Commissioner of Customs)

> The time limit for pronouncement of ruling is reduced from 6 months to 3 months.

> Appeal against the order of CAAR can be made before Authority for Advance Ruling under the Income Tax Act.

Education and SHE Cess

> Education cess and secondary and higher education cess abolished

Time Limits

> Time limits set for adjudication proceedings except in certain cases. In the event that proceedings are not completed within the time frame, it shall be deemed as if no notice is issued.

Repairs

> Government is now empowered to exempt goods which are imported for repair, further processing or manufacture, Re-imported for repair, further processing or manufacture after exports.

E Payments

> A Facility of electronic cash ledger has been introduced and the payment of duty, interest and penalty is possible through such cash ledger

Basic Customs Duty Rates on – some products

Decreased

Raw Cashew
Bricks, blocks , tiles, ceramic goods
Solar tempered glass for manufacture of panels etc

Basic Customs Duty Rates on – some products

Increased

Crude Edible Vegetable Oil

Refined edible vegetable Oil

Food Preparations ( certain exclusions )

Perfumes, beauty, make up preparations etc

Specified parts of mobile phones

Truck and Bus radial tyres

Woven fabrics of Silk

LCD and LED panels

Footwear and parts of footwear

Refractory bricks and ceramic goods

Cut and polished coloured gem stones

Diamonds including lab grown, semi processed , half cut, broken etc , Non industrial diamonds

Imitation jewellery
Spark ignition engines of certain motor vehicles Compression ignition engines of certain motor vehicles Mattresses
Scent and toilet sprays
Cigarette lighters

Compile by NMR & Associates Chartered Accounts
For any information/assistance Contact: CA. NAGARAJ MUTT RACHAIAH

e-Mail ca.rajmrn@gmail.com | nmrandassociates@gmail.com

Cell: +91 9980 662 817 | Phone +91 8023 464 517

 

 

Home Loan For Women Borrowers

Loan for women borrowers– new focus area of banks/ financial institutes.

Home loan for women borrowers
Women Borrowers – Lower Interest Rates

Home loans have become a popular way for the buyers to buy a new house; however, it has been observed that lately there has been a rising inclination of banks/financial institutes to motivate home loan for women. Successive measures by government and banks to encourage women empowerment and including women in all spheres of financial decision is a step in the direction of making women financially secure.

Some basic documents and criteria of loan for women borrowers:  
  • Loan application form
  • Passport size photographs
  • ID proof like voter ID, PAN Card, Adhar Card Driving Licence
  • Residence Proof like utility bills (electricity, telephone, water etc.)
  • Those women who are not salaried employees, they need to submit business address proof
  • Bank statement of last six months
  • Completed loan application
  • Passport size photographs
  • Proof of identify (photo copies of Voters ID card/ Passport/ Driving licence/ IT PAN card)
  • Residence proof (photo copies of recent Telephone Bills/ Electricity Bill/
  • Property tax receipt
  • Personal assets and financial liabilities statement
  • Details of other loans if any
  • A woman must be either the sole applicant or a co-applicant.
  • The property for which then loan has to be sanctioned should in the name of the woman applicant or she should be the first owner.

Special bank accounts for women, concessional rates and special loans for women borrowers, all directed in the direction to motivate women home buyers.

Let’s have an understanding about the special privileges that a woman home loan borrower gets from the bank / financial institutes :
  • Lower interest rate – The rate of interest levied on a home loan by banks or financial institutes is lower for women. It is lower by atleast 0.05%. For example : SBI has the scheme of HER GHAR, HDFC has scheme of WOMAN POWER
  • Better probability of home loan application being accepted – Under the guidelines of Pradhan Mantri Awas Yojana, preference is to be given to women. Widows, single working-women, persons belonging to scheduled castes and scheduled tribes, backward classes, differently abled and transgender people will be given preference. Women borrowers are perceived as less risky by banks and HFCs and hence they hold a better chance of getting their loans approved. Banks do consider other factors like credit score and documents before approving the home loan.
  • Lower stamp duty charges – In some states, if a property is bought in the name of a woman, the stamp duty levied is lower compared with what’s applicable for a man. For instance, in New Delhi, a woman has to pay 4% stamp duty compared with 6% for a man. This is also true in case of conversion of a property from leasehold to freehold, and in case of gifts.

One of the conditions as eligibility criteria for many banks for loan approval is presence of home loan co-applicant. Co-applicant is basically a person who acts as a guarantor and shares equal responsibility of repaying loan as the main applicant. Banks nowadays are insisting on having a co-applicant without educating the customer about its repercussion and legal liabilities. In case of women borrowers having a co-applicant increases your eligibility to avail high amount of loan but at the same time this can pose a few risks like:

    • Dispute between husband and wife – In cases where you have your spouse as a co-applicant but not the co-owner, you can face the problem of repayment of EMI. This is applicable vice-versa. Any kind of dispute in the future leaves the co-applicant male or female in a mess.
    • Asset risk of the co-applicant – In case the primary applicant fails to repay the EMIs, the burden falls on the co-applicant. Whether you are the co-owner or not you have to repay the loan.
    • Reduced credit eligibility- Being a co-applicant reduces your credit eligibility up to 50% which may impact your future loan applications.

Although, being a co-applicant poses some disadvantages it has some benefits too like:

  • Eligibility for higher amount – Having a co-applicant makes you eligible to apply for home loan of a bigger amount.
  • Tax Benefits –As per Income tax Act, 1961, you reap the tax benefits. Joint ownership can be beneficial if both the spouses take home loans as each can claim tax deduction for the interest paid on loan.

Note : It depends on the mutual understanding of the applicant and co-applicant; however, there is a legal way out for it. You can sign a document which clearly shows the liability of both and this can be executed on a stamp paper and should be notarized.

Loanyantra special cutter pack of home loan for women borrowers:

There are many companies offering loan for women borrowers but it is important that you are through with the legal aspects of the home loan. Loanyantra is a one stop shop solutions for your entire home loan requirement. You can easily connect with us and we suggest you how you can reap the maximum benefit out of the special home loan schemes for women. Moreover, Loanyantra also offers a discount of 0.01% on the home loan interest rate which is a discount on the bank / financial institutes interest rate.

Plan your home loan well and close it early. Get in touch with us today.

Expectations from Union Budget 2018-19

With the demonetisation effect the tax collected this year has been increased drastically. This leaves many in good terms of expectations from Union Budget 2018-19.

Demonetisation, RERA and GST were really major changes for Indian economical growth in the year 2017. Also, being this an election year, the expectations from Union Budget 2018-19 are no less.

The major expectation is it should be a common man as well as business class friendly one. India has jumped 30 places and 53 places in Ease of Doing Business rankings and Ease of Paying Taxes category respectively as per the rankings released by World Bank. Government would like to improve these rankings in the years to come and further policies and measures are expected to be formulated in this direction.

Major expectations from Union Budget 2018-19,  are  change of slab rate by increasing the exemption limits for the employed and senior citizens. This expectation is based on the previous year changes in the tax slabs. To please the masses and to reduce the gap amongst the poor and rich, limit for deduction under Section 80C and Section 80D might be increased say from 2.5 lakh to 3 lakh rupees per annum as the minimum taxable income.

Tax on Investments have a higher expectation from Union Budget 2018-19.

The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses. Tax payers can expect the exemption limit under Section 80C to be hiked by Rs. 1,00,000 to Rs. 2.5 lakh. Right now exemption under Section 80C of the Income Tax Act is Rs. 1.5 lakh.

Expectations are very high as this will be the First Budget after the implementation of Goods and Services Tax (GST). Amendment is also expected in the GST laws to allow input tax credit to the customer provided he has made the payment of invoice along with tax to the supplier. At present, input tax credit is available only if the tax charged in respect of the supply has been actually paid to the Government by the supplier of goods and services.

Expectations are also high from the Finance Minister to change the periodicity of filling of GST returns from monthly to quarterly for all the taxpayers though the payment of tax can be made monthly for taxpayers having a specified aggregate annual turnover. This will lead to simplified compliance mechanism and will boost the confidence of tax payers by reducing the much added compliance burden on the taxpayers.

epectations from the Union Budget 2018-19
Expectations from the Union Budget 2018-19
Expectations from Union Budget 2018-19 w.r.t Affordable Housing :

‘Housing for all by 2022’ is one of the pet projects for the government and it wants to deliver 10 million houses under this program. Out of 10 million, 95% of the houses are to be constructed for Economically Weaker Sections (EWS) and Low Income Groups (LIG). As the affordability of this segment and the house value is low, the impact of slightest upward cost pressure is magnified and becomes a deal breaker. The current GST rate of 18% coupled with 1/3rd abatement for land is adding huge upwards pressure on the overall cost of house. There are expectations for lowering of the GST rates only for affordable housing projects to 12% with 50% abatement for land taking the effective GST rate to 6%. This shall provide a boost to the cause of housing for all by 2022.

Expectations from Union Budget 2018-19 – Tax Saving w.r.t Home Loans
Current Amount Expectation from Union Budget 2018-19
Deduction under 80c 1,50,000 /- 2,50,000/-
Deduction under 80c(Principal Amount) 1,50,000/- 2,50,000/-
Deduction under 24B (Interest Amount) 2,00,000/- 3,00,000/-
Stamp Duty Varies from 3-6% Constant 3% across all the states.
GST rate 12% 6%
Total interest rate (GST + Stamp Duty) 18% 8%

Also reduction of stamp duty which presently ranges from 3 to 6 per cent, varying across different states, as a result of which the consumer pays an additional amount of approximately 18 per cent only in taxes to the government (including GST and stamp duty). The government should look at reducing this cost, rationalising and unifying stamp duty rates across the country.

What are the tax benefits of your home loan?

Under Section 24, you are empowered to claim up to Rs 200000 or the actual amount of repaid interest. However, you can only make the claim when you are in possession of the house.
Under Section 80C, you can claim the principal up to the maximum limit of Rs 150000 across all the investments made under the section 80C. However, you might be needed to show the lender’s statement showing the not only the interest and principal components but also the repayment for the year.

Expectations from Union Budget 2018-19 w.r.t. Direct Taxes
Income Slab Tax Rate
Income up to Rs 5,00,000 No tax
Income from Rs 5,00,000 – Rs 10,00,000 5%
Income from Rs 10,00,000 – 20,00,000 20%
Income more than Rs 20,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.
*Income tax exemption limit for FY 2018-2019 is up to Rs.5,00,000 for individual & HUF other than those covered in Part(II) or (III)
Expectations from Union Budget 2018-19 w.r.t  Direct Taxes.
PART II: Income Tax Slab for Senior Citizens (60 Years Old Or More but Less than 80 Years Old)(Both Men & Women)
Income Slab Tax Rate
Income up to Rs 8,00,000 No tax
Income from Rs 8,00,000 – Rs 10,00,000 5%
Income from Rs 10,00,000 – 20,00,000 20%
Income more than Rs 20,00,000 30%
Surcharge: 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.

Surcharge: 15% of income tax, where the total income exceeds Rs.1 crore.

Cess: 3% on total of income tax + surcharge.
*Income tax exemption limit for FY 2018-2019 is up to Rs.5,00,000 for individual & HUF other than those covered in Part(II) or (III)
Expectations from the Union Budget 2018-19 w.r.t Rural Economy / Farm Loans:

In Finance Minister, Arun Jaitley’s budget speech on 1st February 2017 the finance minister stated that he proposes to present the budget under ten distinct themes and rural population was one of the said themes. Experts believe that budget 2018 will be no different in fact the FM is expected to focus more on rural India and its economy with renewed vigor. Consecutive years of drought and then demonetization have had its impact on the rural economy too, but recent surge in tractor sales may indicate that the worse may be behind us. Tractor manufacturers sold a whopping 363,071 unit in the April – September 2017 period, a 21% increase compared to the same period last year. Over the last couple of years policies such as farm loan waiver and subsidies have become a norm but these sops do not reach the small farmers, may be fiscally unviable and even counterproductive. Experts believe that the FM in his budget 2018 should focus on providing relief to small farmers with very small or negligible land holdings. This can be done by taking steps to ensure agri-GDP growth and rural wage growth.

The budget is a great opportunity to create a level playing field amongst individuals.

The top agenda of the government would be to create a positive feeling for the future among the masses considering this year’s Lok Sabha elections as well as to boost the investor confidence.

Lets hope for an investor friendly budget 2018-19.

Real Estate in 2017 – Major Trends and Expectations for 2018

Real Estate in 2017 – Major Trends and Expectations for 2018

By Niranjan Hiranandan, President, National Real Estate Development Council (NAREDCO), which works under the aegis of Ministry of Housing & Urban Poverty Alleviation, Government of India.

As Santa Claus time comes closer, I look at the ‘gifts’ that we received in 2017. In the Affordable Housing segment, we expect the PPP model to take off and make a major difference. As we come to the end of 2017, I am reminded of the scene last year: nearing Christmas in 2016, Demonetization had happened recently. This was arguably, the single-most important factor which positively impacted real estate, in terms of encouraging digital payments in real estate transactions. This was just the beginning of a ‘new regulatory regime’ which continued to introduce us to newer regulatory norms through 2017, a year that will be remembered as the year of paradigm change in terms of Indian real estate.

While the year started with demonetization having recently been implemented, the impact continued almost till April 2017. Then we had the Benami Properties Act, followed by RERA and GST – and then, the amendment made to the Bankruptcy and Insolvency Code. This is a list of new regulatory aspects which impacted stakeholders. The paradigm change that these brought about changed how real estate transactions happen. For one, right since Jan 2017 till the festive season started towards the second half, 2017 was largely a year of slow market; slower sales and a ‘wait and watch’ attitude on part of home seekers.

Commercial real estate did well across 2017. To give an example, a start of Hiranandani Signature, a 16 storey commercial tower with 4 lakh sq. ft. of office space in Gujarat’s GIFT City, in early December gives complete confidence on positive trend. For commercial realty, in 2017 it has done good, should do better in 2018. REITS are still at the ‘take-off’ stage, we hope to see REITS ‘take flight’ in 2018.

 

Affordable Housing emerged as the driver of real estate growth through 2017, given the initiatives and support from the government. Home Finance also being at record low interest levels provided the extra ‘boost’ needed to ensure that a home seeker finds a ‘dream home’ becoming a reality, with a home loan. With Affordable Housing emerging as the rising star of Indian real estate in 2017, the Government also made efforts to boost the mission of “Housing for All” by 2022. The policy reforms under PMAY, hiked the earlier MIG-1 carpet area of 90 sq m to 120 sq m and the earlier MIG -2 carpet area of 110sqm to 150 sq m. So, in these few aspects, 2017 was positive.

Would one define 2017 as a year favorable for realty buyers, or a year for realty developers? I would not make this an “either – or” scenario. This was truly a year that was favorable – as also challenging – for both, buyers and developers. To begin with, demonetization gave a push to digital payments. Then, the first half of the year saw transactions being put on hold, as stakeholders wanted to see the impact of RERA. Once RERA was implemented, it was GST which was next in line for implementation – effectively, the ‘fence sitters’ moved on to becoming ‘actual buyers’ from the festive season. It followed almost half a year of very slow sales, and the off-take has been slow in moving upwards. At the end of 2017, real estate is moving back towards normalcy, albeit under the new regulatory regime. Talking of which, it has also been a year when safeguards for investors are getting due attention and a more transparent and accountable industry has turned more attractive for FDI.

In the new regulatory regime, construction, like other aspects of real estate and the Indian economy, requires proper working methodology, one that is transparent and includes accountability – which will ensure adhering to the new regulatory regime. In this regard, 2017 was by large a year that brought sustainability to Indian construction industry.

Looking into 2018 and the future, rationalization of tax as a result of the move to cover real estate fully under GST, and providing a boost for rental housing are the two key drivers to look forward to. In a nutshell, 2017 for the real estate sector has definitely been good – in the long run. In the short run, it can actually be termed ‘challenging’ – sales and new launches were slow through most of the year, with the ‘revival’ happening from the festive season. Through 2017 and into the future, consumer confidence will grow as a result of RERA, the developers will work in a more transparent manner and be accountable for their projects. Affordable Housing will be the driver of real estate growth, given the initiatives and support from the government. Home Finance is also at record low interest levels, this will ensure that a home seeker will find it to his/ her advantage of buy a home with a home loan. So, 2017 can be summed up as ‘positive’, looking at the long term perspective.

 

What you don’t know about BITCOINS

Is Bitcoins legal in India?

At present, there are no regulations governing virtual currencies like bitcoins in India. RBI, on December 24, 2013, issued a press release on virtual currencies like bitcoins, litecoins, bbqcoins, dogecoins stating that creation, trade and usage of virtual currencies as a medium for payment is not authorized by any central bank or monetary authority. Further, RBI has cautioned virtual currency traders and users to various security related risks such as hacking, malware attack etc.

While RBI has not legalized bitcoins, it has declared them unauthorized as of now. RBI is currently examining the risks associated with the usage, holding and trading of virtual currencies under the extant legal and regulatory framework of India, including foreign exchange and payment systems laws and regulations.

There is enough scope for legalizing bitcoins. One has to wait and watch as to which approach the Indian government takes. Keeping pace with the changing times, Indian government will have to come out with appropriate amendments in the foreign exchange and information technology laws to specifically include bitcons.

What are the popular bitcoin websites that do transactions?

HighKart.com became the first e-commerce site in India to exclusively accept bitcoins as a payment method. WERWIRED, a Bangalore-based geospatial, security and entertainment consulting company offered bitcoins as a mode of payment for its customers. Castle Bloom, a salon in Chandigarh, became the first physical outlet to start accepting the digital currency. Buysellbitco.in, an online portal dealt in buying and selling of bitcoins in India. But it was raided by the Enforcement Directorate.

Some of the Indian Exchanges to Buy Bitcoins are PocketBits, Unocoin, Zebpay, Coinsecure.

PocketBits is one of the Best Cryptocurrency Exchange to Buy & Sell Bitcoins or Altcoins in India.

Unocoin is one of the India’s Trusted Bitcoin Company having more than 150,000 users. Buy and Sell Bitcoins in India from Unocoin. Apart from Buying and Selling Bitcoins, you can Send & Receive Bitcoins. It can also be used to do Prepaid/Postpaid Recharges. Unocoin can be accessed from the Website and Unocoin also has an Android & iOS App

What is the value of the bitcoin?

The value of the bitcoin varies in each website. Please do check with different traders and in different websites before buying it.

Who are those trading in bitcoins in India?

Tech-savvy young investors, real estate players and jewellers are among those invested in bitcoin and other virtual currencies.

How do I invest in Bitcoins?

You can get bitcoin by:
– Mining them (the process by which new Bitcoins are generated by solving the math problems quoted in the website).
– Purchasing them from bitcoin exchange for real money
– Receiving them in return for sale of goods or services

persoanl loans for bitcoins
Personal loans for bitcoins

Is it worth investing in bitcoins?

Today’s world is running towards digitalisation. So, it is not quite far for India to reach the so called Digital currency stage. Just that the Government has to make it regularised.

Ofcourse, it is worth investing once the government regularises it.

Is it safe investing in Bitcoins?

The network is peer-to-peer and transactions take place between users directly through the use of cryptography, without an intermediary. These transactions are verified by network nodes and recorded in an immutable public distributed ledger called a blockchain.

The Sharp rise in bitcoin exchange rate in recent years (from $1000 to $1300 for January-April 2017 and from $1300 to $1700 in the last two weeks) raises concerns that the rate may “collapse” and even to return to their former positions; however, bitcoin had and still have serious preconditions for growth, so it is not necessary to consider this growth as a “bubble”.

What is the minimum amount needed to buy Bitcoins in India?

You need not buy one Bitcoin to begin investing with. You can start with buying a part of the Bitcoin. The minimum amount needed to begin investing in Bitcoins is around Rs.500.

How is investing in Bitcoins advantageous for me?

Bitcoin shows stable annual scale, growth rates, and there is reason to believe that this trend will continue. The graph below shows that the exchange rate of bitcoin over the last 12 months has increased about 4 times from 450 to $ 1,700.

Bitcoins have a number of benefits. It significantly reduces transaction costs, enables the growth, ease and security of e-commerce and physical transactions, etc.

What are the disadvantages of bitcoins?

– When goods are bought using Bitcoins, and the seller doesn’t send the promised goods, nothing can be done to reverse the transaction. This problem can be solved using a third party escrow service like ClearCoin, but then, escrow services would assume the role of banks, which would cause Bitcoins to be similar to a more traditional currency.
– Risk of Unknown Technical Flaws : The Bitcoin system could contain unexploited flaws. As this is a fairly new system, if Bitcoins were adopted widely, and a flaw was found, it could give tremendous wealth to the exploiter at the expense of destroying the Bitcoin economy.

Do be aware that most of them are out there to scam you. If you do decide to invest, make sure it’s going to a legit company that pays you back.

What are the legal procedures to buy Bitcoins in India?

Submit your PAN card and a valid address proof and a bank account. Make sure that the PAN and bank account belongs to the same person. The verification process takes about 2-3 working days. After this, you are good to go.

Do we get loans to invest in Bitcoins?

It depends on the risk potential. Say if you can afford some EMI for loans then you should go for it .

Investment is always Good.. And as you can see the bitcoins is going popular as compared to share market or any other investment plans in INDIA.
so, it is important for the money to be invested to increase your returns.

Find out some interest bearing funds when you invest in bitcoins. For example, BitBays is an exchange website which pays a small promotional interest rate on all balances held on their site.

So, calculate your interest to be paid on your loan and the interest gained in bitcoin investments and the final returns expected once you sell the bitcoins. Only if you are sure of gains, you can go for the loan.

What is the procedure to get loan for bitcoins?

The loan can be taken as personal loan as the reason for the personal loan need not be mentioned. The procedure can be followed just as you follow for the personal loan.

What  you should know before investing in bitcoins?

Since use of bitcoin involves high level of risks, unless ambiguity surrounding bitcoins is resolved its use cannot be foolproof.

Research before investing in Bitcoins. There are many websites and it is recommended to find the correct and trustworthy one.

How is the tax calculated when you trade in bitcoins?

The tax aspect of bitcoins is also a grey area, in order to comply with the income tax regulations, a person accepting bitcoins against services should pay income tax after converting bitcoins into rupees and the bitcoin sellers who earn profit can pay capital gains tax (if selling after a long duration). Such steps will legitimize the unregulated bitcoins transactions.

There are actually 3 ways in which you earn bitcoin & the taxation differs from one to another.

The income tax authorities may choose to tax the gains from bitcoins under the head “Income from other sources”. Further, if the income gets taxed under “Income from other sources”, the taxpayer would have to pay taxes at a rate as applicable to the tax slab he falls under. For eg, if his taxable income exceeds Rs 10 lakh, he would be liable to a tax @ 30% as against the flat rate of tax of 20% he would be liable to pay, if charged to tax under long-term capital gains. The benefit of indexation as would be available if taxed under capital gains , would also not be available if taxed under Income from other sources.

India has sent tax notices to tens of thousands of people dealing in cryptocurrency after a nationwide survey showed more than $3.5 billion worth of transactions have been conducted over a 17-month period.

So, it is also important to know the taxation rules and also to pay the tax when needed.

In summation, bitcoins are digital cash and decentralized, peer-to-peer payment system. Being volatile in nature, care has to be taken that a mechanism is devised to tackle risks associated with fraud and money laundering. Regulators will have to take steps to provide individuals and businesses with rules to integrate this new technology with the formal regulated financial systems.

 

 

Home Loan Prepayment

I am a 26-year-old man, working in an MNC in Chennai. Last year I decided to buy a home for myself. Buying a home was my biggest dream and thanks to the lofty home loan policies that banks and HFCs are offering these days. I managed to buy a 2 BHK. Well, I succeeded in managing to bag loan from one of the government banks and got it at a reasonable interest rate.

Now, I am a satisfied person and secured that few years down the line, I will own my house. But one thing that always boggled my mind was if I wish to prepay my loan then what is the nitty-gritty associated with it. Since I work in private sector, I don’t have much time to run around the bank to fulfill the formalities and the paperwork.

Then, one of my friends suggested to go through LoanYantra, an online loan management company. Well, my association with LoanYantra proved to be a successful one and they gave great tips which definitely cleared the air that surrounded the idea of home loan prepayment. For many to avoid the hassle of running behind the banks, here I am sharing my knowledge of Home Loan Prepayment.

What is Home Loan Prepayment?

Home Loan Prepayment is paying an additional amount to the outstanding principal of the loan amount while you are in the Home Loan tenure. This additional amount is over and above the regular EMIs. This helps in reducing the principal outstanding which in return helps in reducing your EMIs and/or your home loan tenure.

It might sound easy but there is a slight catch. Banks typically levy a prepayment charge of about 2 – 3% of the outstanding loan amount. This amount is charged if you are repaying above a certain amount or you are switching your bank. Although most of the banks don’t charge extra. Thus, it’s advisable that you enquire while you apply for your home loan about the prepayment charges as well.

What You Should Know About Home Loan Prepayment 

Home Loan Prepayment can be a bit tricky as some lenders include extra fees.  In case of home loan, banks borrow funds based on the commitment for long period, these funds have to be re-assigned through credit channels for which bank has to pay additional cost. Thus, banks discourage the process of prepayment by leving an extra charge on the outstanding loan amount.

To Prepay the Home Loan, it is advisable for the concerned person to attend. If not possible,the authorized person needs to carry a letter which says that the respective person is authorized by the lender to repay the loan.

Note : RBI and the NHB have abolished penalty on home loan prepayment (home loans with flexible interest rate). So banks usually do not levy extra fess. But conditions apply.

Home Loan Prepayment Vs Tenure and EMI.

Home Loan Prepayment reduces the outstanding principal amount. So, this inturn reduces your EMI or tenure. It is always wise to calculate and choose.

Loanyantra’s Tip : It is better to reduce the tenure and keep the EMI constant. When you have an increment in the salary, you can increase the EMI which will reduce the tenure even further.

Do’s ad Don’t’s of Home Loan Prepayment:

  • Carry your ID proof (Aadhar is the most preferred one).
  • Carry your chequebook in case you need extra.
  • Also remember to mention your name, account number, home loan account number behind the cheque when you issue.
  • Collect all your previous cheques if you wish to change your EMI.
  • A proof of source of funds for your Home Loan Prepayment.
  • Make sure that you update your CIBIL database after home loan prepayment as it helps in reducing the outstanding balance and also helps in improving your credit score.
Home Loan Prepayment charges of some of the popular banks and HFCs
Banks and HFCs associated with Loan Yantra Home Loan Prepayment Charges
SBI ZERO
ICICI ZERO
IDBI Not more than one prepayment in a month
DHFL 3% + Service Tax
Indiabulls ZERO
Axis Floating Rate Loan: Nil

Fixed Rate Loan: 2% of outstanding principal/amount prepaid

CITI ZERO

Words of Wisdom –

LoanYantra is committed to making a difference in the approach towards availing home loan and paying it back. We are known fro absolute customer satisfaction and we work on it continuously. Stay connected with us on www.loanyantra.com and get a planned calender, timely alerts and valuable suggestions on Prepayment of your Home Loan.

Understand hybrid home loans in detail!

Hybrid loan, according to RBI, is a two step mortgage. It is an ARM (Adjustable Rate Mortgage) that has one rate for part of the mortgage and a different rate for the remaining part of the mortgage. The interest rate changes in accordance with the market rates. The borrower, on the other hand, may have the option of making a choice between a variable rate or a fixed rate on the adjustment or agreement date. 


Hybrid loan products are popular options that package the advantages of both floating and fixed rate products.


Hybrid loans are popularly referred to as ‘partly fixed partly floating lHybrid home loansoans’ . This mixed option lends flexibility and greater choice to the home buyer. A part of the home loan is anchored under fixed rate and the rest is exposed to the prevailing floating rate of interest. This enables the borrowers to minimize the impact of adverse rate movements and benefit in times of favorable changes.

There are two options you can opt for after the fixed rate period of your loan is over. One is either you opt for a lower percent of your loan amount as floating and higher percent of the loan amount as fixed and vice versa, or the other option is you take a 50:50 for both the rates. Example for both the types is given below.

A homebuyer decides to take a loan for Rs 80 lakhs. If he feels that the rates are likely to move upwards in the coming months, he can lock 60 percent at a fixed rate. The remaining 40 percent is exposed to floating rate fluctuations. In case the interest rate goes upwards, the part of the loan locked under fixed rate remains unchanged. However, in the event the rate drops, the borrower will benefit only on the 40 percent of the loan that is under the floating component.

Some borrowers may decide to lock their loan at 50:50 under fixed and floating . This is the safest bet for homebuyers who cannot predict the future direction of rate movements. So the Rs 80 lakh loan is actually treated as two loans of Rs 40 lakhs – one at a fixed rate and another at the prevailing floating rate of interest.

So, your bank might ask you to sign two separate loan agreements-one for fixed rate of interest and the other for floating rate of interest. However, many banks may combine the same and use a single agreement for both the components. You must read the terms and conditions of your agreements with utmost care and your relationship manager is bound to explain to you, if you do not understand them.

When should you foreclose or convert from one component to other?

Under Hybrid loans, many banks offer you the option of foreclosing the floating component if the interest rates move up, with or without any pre-payment fees. And if the interest rates move down, may foreclose the fixed part, with or without pre-payment penalty, as per banks policies. Other banks offer you facilities such as converting your fixed portion to floating if the interest rates move down and converting the floating rates into fixed, if interest rates move up. Of course you will be charged a certain amount of fees for doing so, which can more often than not, be negotiated.

Some examples of hybrid loans include State Bank of India’s offer of SBI-Flexi Home Loans, HDFC’s 2-in-1 Home, Part Fixed,-Part Floating loan by ICICI and Bank of Baroda’s Flexi-home loans.

Though RBI discouraged the hybrid home loans for a period of time, now they are back again after a break of two years. Hybrid loan is recommended to those who are not ready to accept the frequent fluctuations in the EMI or for those who have to get used to the home loan for a period of time.A hybrid loan bails a borrower out of the dilemma of choosing between a pure fixed and a floating product.