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Where will you get the funds?

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Where will you get the funds?

Last updated: February 25 2012
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  • Where will you get the funds?

    Banks could be giving smaller loans after RBI's notification on property valuation, says Vandana Ramnani

    T he Reserve Bank of India's recent notification to banks to stop taking stamp duty and registration costs into consideration for property valuation could make life difficult for you if you're planning to buy a home.
    Apart from just giving a loan of 80% on the property price, banks will now release smaller loan amounts. Arranging for 30% of the property price can definitely be tough. It will result in what Divya Baweja, senior director, Deloitte in India, calls “detrimental cash flow issue for individuals“.

    Though the move will curb speculation, realty experts say will lead to a decline of 5-10% in home sales, especially in the midsegment. The thought of paying more money could force potential buyers to “postpone their purchase.

    This will have an impact on the demand and loan disbursements but not on property valuations,“ says Sachin Sandhir, managing direcmanaging dire tor, RICS South Asia. GET READY TO PAY UP The Reserve Bank of India (RBI) has issued a notification to banks to exclude stamp duty, registration and other similar charges while calculating the value of a property a bank intends to finance Following the new notification, prospective buyers will have to shell out 10% more from their own funds for registration and stamp duty

    The optimistic, however, think impact will be minimal, affecting ready-to-move-in units instead of new launches.

    Om Ahuja, CEO residential services, JLLS says the notification is expected to have only a short-term impact. The RBI is only trying to be cautious and ensure that there is no overleveraging by investors or actual users. Land costs have shot up and form 70 to 80% of the total cost of property in large cities and pose a big challenge in India. The mortgage aspect is very small. In the short term, this may lead to reduction in home sales but in the medium to long-term, people will get reconciled to it, he adds.

    For under-construction properties, the impact will be felt at a later stage when the stamp duty is required to be paid. The notification might result in short term deferment of plans for a few consumers. Further, the buyers might have to resort to personal loans to meet the higher down payment requirements for the ready-to-move-in property, adds Neeraj Bansal, director advisory, risk consulting, KPMG.

    -HT
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