Budget: One of the factors affecting home loans

Smriti asked, respected Sir, Wanted to know how the expected budget will affect the Home loan or loan trends which are currently prevailing in the market.

Harsh Roongta answers, Budget is only one of the factors affecting the home loan market. This year though a lot of action is expected on the real estate front which in turn will have an impact on the home loan market. However i do not see a very immediate big impact as the influence of the central government on this sector is now reaching its limits and the next set of reforms have to be done at the state level. Tax reforms affecting this sector are very unlikely. What might perhaps happen is some announcement on credit infratsructure in the country in the form of regulations such as Credit Bureau, Consumer interest protect etc. So lets wait and see.

raga asked, which is the best bank for home loans ?

Harsh Roongta answers, This question is asked often and the answer remains the same. There is no such thing as the best bank. If that were true than all the other banks would have to close down. As far as an individual is concerned the best bank is the one which is able to meet his requirements fully at the best possible rates. This is exactly what we assist consumers in discovering by making interested banks compete for your loan. This is the only possible way to find out which bank is the best for your need.

vasrsha asked, hi,if i wish to buy second house wether i can avail tax benefit as per new budget,which interest will be wise dicision floating or fixed?

Harsh Roongta answers, Well the new budget has still not come. bUt as per existing provisions there are no restriction on the numebr of homes in respect of which you can claim this deduction.

urbplan asked, can i take tax exemption against repayment of loan on property under contsn

Harsh Roongta answers, If the property is not ready by March 31, 2007 you cannot get any tax benefits on loan repayment (interest or principle) for the year ending March 31, 2007.

vasuki asked, Hi harsh My husband and I have bought a flat and registred it jointly.House loan too was sanctioned in both our names.For tax benefit can we both claim Rs 1.5 lakh each on interest? Say our interset will be Rs 4 lakh per annum and similarly principal.

Harsh Roongta answers, The tax benefit will be avilable to both of you in the proportion of your share in the loan. The maximum limit ( i am assuming the house is self occupied otherwise there is no maximum limit anyways) will be separately available to both of you i.e. you will be able to claim a maximum of Rs 150,000 each.

It would be advisable to enter into a sharing arragemnnet between yourselves to make the matter clear. You can get a draft of the sharing arrangement on the apnaloan.com website.

brajesh asked, I have a one year old loan for a period of 20 years with ABN-AMRO (amt Rs 27 Lakh) and the floating rate has now touched to 11%. I just spoke to ICICI guy and he is claiming that he can transfer my loan to ICICI with 9.5% Floating. Does it make sense to switch to ICICI

Harsh Roongta answers, With that kind of a rate differential it aboviously does. But why don't you ask around before settling on a new lender to ensure that you get absolutely the best deal.

bdalai asked, Hi Harsh,I have purchased my flat in Bangalore,last 5 yrs i was staying there,now i have been transfered to Mumbai,here i am staying in a rented house,My parents are staying in Bangalore,Can i claim both HRA and Home loan intrest exemption?Pls clarify me. Thanks, Bibek

Harsh Roongta answers, Contrary to popular opinion, there is no restriction under the I-T Act to get both. Many salaried consumers take a home loan to acquire a residential property, but do not stay in that property for various reasons. They stay in rented premises for which they pay rent.

If they are receiving a house rent allowance from their employer, a question frequently arises is -- whether they can claim exemption of their HRA based on the rent actually paid by them as well as the interest payable on the loan taken to acquire the owned property. This is such a widespread question that it rightly justifies an elaborate reply of this kind.

If some portions of the reply are difficult to understand don't worry. The technical portion of the reply really needs to be understood by your HR Department so that they can give you the benefit while calculating the amount of tax deductible at source from your salary.

You can also get this benefit while paying the advance tax on your business income. The exemption of HRA is covered under section 10 (13A). Let us now turn to the deduction of interest payable on a home loan. The interest is not a straight deduction allowed from the salary income. The deduction is actually allowed while calculating the "Income from House Property". The effect, in the case of self occupied property is the same as allowing it as direct deduction from salary income. The relevant sections are section 22 to section 27.

ravi asked, seeing the price hike in properties, banks are giving less valuation for home. is it so because they are thinking this is only a temporary boom in property rates?

Harsh Roongta answers, This is a normal process during a booming property market where banks try and protect themselves from a severe downtrend in the future.

nkd asked, Sir, i had taken housing 1oan in 2004 at 7.25% floating rate. Past 3 years the interest rate has increased by 3% and now my current interest rate is 10.25%. I am planning to convert the same into fixed one but friends are insisting me not to do so. Sir What do you think will it increse again after budget? Should i convert the same from floating to fixed one?

Harsh Roongta answers, Apnaloan.com is advising all its consumers to opt for (or remain in) a transparent floating rate loan rather than a fixed rate loan. In any case this is not a one time desicion and needs to be reveiwed periodically.

rajmohansv asked, hello, recently i went to sbi bank to check about the interest rate, mgr said that there is no fixed as such, even fixed is subject to change for every two years in proportion to floating. is it so?

Harsh Roongta answers, Yes this is correct. Though some banks like ICICI and HDFC have genuine fixed rate home loans where the rate does not change during the entire duration of the loan irrespective of what happens. But these genuine fixed rate loans are expensive around 13% currently.

sunaina asked, I understand from your writings that home loan interest payments made in the period prior to the date of posession can be written off only in five installments over five consecutive years after the date of repayment. Is this true? Also can I claim stamp duty and registration as an expense if it is made before the date of posession for commercial premises?

Harsh Roongta answers, Just to clarify. In the year in which the property is ready the entire interest payable (whether pertaining to the period in that year when the property was not ready or later) is available for deduction.

For example if the interest meter starts in January 2006 and the property is ready for possession in October 2006 then for the year ended on March 31, 2007 the entire interest (from April 2006 till March 2007) is eligible for deduction. The 1/5th rule will apply only to the interest payable till March 31, 2006.

AJAY AGARWAL asked, Dear Harsh, I had taken a home loan from abn amro. It had fixed rate of 6.5 % for 2 years. Now that 2 years are over, they are asking for 11.5 % for the next 3 months and then it will be revised as per market rates. I have the option of making it a fixed loan for another 2 years - the rate being offered is 12.5 and conversion charges are Rs 5500. is this ok or should i try another bank, or should i continue in floating rate? Please advise.

Harsh Roongta answers, The rate looks too high. You should defintely try another bank. Please atke into account the pre-payment charges while taking the desicioon though the differential being offered is much higher than the market and hence a shift is likely to make sense. 

killerraj asked, My flat loan has been cancelled thrice because of there was some problem with the construction of the building, what's the solutions for this? its almost 3 months now tht i applied to various banks....

Harsh Roongta answers, If the building has some construction or legal defect maybe you should change the property which you want to buy as this has an adverse impact on you.

Part II: Take personal loan to buy that dream house