Loan Approved

13/09/2015

What happens with your Home Loan when a Project gets Delayed?

Story 1: Nitin Gupta, a 50 year-old executive director in a prominent financial services firm in Bangalore liked the idea of buying a villa in an under-construction project from a developer who is an expert in such type of construction. He wanted to retire after 5 years and stay in a spacious villa with a private garden and a swimming pool !

He met the builder's sales executive in their site office one Saturday afternoon in July 2007 and booked a 4800 sq. ft. plot and a potential built up area of 4200 sq. ft., for which he will have to sit with their architect for the plans. The villa will be ready in 24 months post finalisation of the plans.

He paid a token sum of 11 Lacs for the 2.12 crore worth bungalow, but the payment schedule had taken him by a little surprise. The payment for the land had to be made immediately, which was 1.60 crores. The villa project hadn't received all Govt. statutory approvals and hence the bank loan were not possible. He didn't have that large a sum of cash reserve. He discussed this issue openly with the builder's rep before booking and she promised to get back.

Gupta received a call from a private bank within 7 days who claimed to have taken some 'special approval' and are willing to give him a loan on this project. He immediately called the builder to double-check the matter and found it relaxing to know that it is a fact.

He paid 10 Lacs more to make it a 10% contribution of the total cost and the bank disbursed 1.39 crores on basis of an allotment letter issued by the builder. Nitin was told that sale agreement can not be signed unless the plan approval number etc comes in. As long as the bank was okay with the arrangement, he had no reasons to worry.

Nitin was happy to be able to pay the sum so easily and was paying a Pre-EMI of approximately 1.50 Lacs every month to the bank. Up until 8 months passed by and Nitin suddenly remembered that there was no call from the builder to get the sale agreement made or to sit with the architect for the design planning, he wasn't worried. He called the sales lady who responded to him saying that the approvals are yet to come-in from the government authority and hence taking some more time.

Over a cup of coffee at a friend's place next weekend, Nitin mentioned this delay when someone in the group asked him how well was his villa progressing, and then realised that there was neither an agreement or a registration on the land for which he has completely paid for !

He called the builder's office and got a prompt reply that they have a 'policy' of not registering the land unless possession of the villa is handed over! But when will the construction start? -"Sir, we are awaiting some approvals."

One year had gone by. Nitin had paid 1.50*12=18 Lacs of interest to the bank by now. He called the bank officer for his opinion. The guy handed over the phone to his senior who explained that they can not do anything if the builder isn't getting the required approvals. That meant Nitin will have to pay 1.50 lacs per month even till his retirement if the approvals do not come? -"No, Sir", smiled the bank officer, "You can prepay the amount with a 2% penalty too and close the loan."

Story 2: Meera Sawant worked all her life for a developer and suddenly realised that in the business of helping people owning a home, she had forgotten to buy one for herself! Meera, a VP-operations with a reputed builder in Mumbai started looking at weekly newspaper Ads more diligently and finally chosen one in Thane which had all amenities and her children of 11 & 8 will surely love it. The builder is offering an interest subvention scheme and she will have to pay no interest on her loan for the next 18 months. The property is 50% complete and possession is promised within 15 months.

Taking this as a golden opportunity, Meera booked the flat on one Sunday morning. She paid 25% of the flat cost, an amount of 46 lacs to the builder and the loan was done immediately by the lender already tied up with the builder for the scheme on mortgaging the allotment letter. The builder offered this one more savings for her that she can register the property after an year or so and save the immediate payment of 5% stamp duty and 30,000/- of registration charges. Wow! She can now peacefully forget about it now till the next 12 months! Happy, she was on her decision.

One year had passed by. The builder did not come back asking her to register, but where was Meera in a hurry? During this time, Meera wanted a small vehicle loan for a new sedan she was buying and her application was declined due to poor credit report. She was shocked! She downloaded the report herself to find that the home interest payment is overdue by 3 months and it was going on for the last 8 months! She called the bank to ask what was the issue to which she was informed that she needs to speak with the builder since the bank is in the receiver's end. They also added that, to maintain good credibility, she herself needs to pay up the amount promptly if the builder faulters and it was because of the bank's 'good relations' with the builder that they did not bother her till now.

The builder's office executive was a new recruit and he divulged that the commencement certificate for the 27th floor is yet to come and hence there's a high possibility that the building would end at 25 floors. If she wants a refund, the builder is willing to add a 8% interest to her portion of 46 Lacs and return the money to her. The executive was repetitively trying to draw attention to the matter that the builder was paying her part of the bank interest, hence it is more loss-making for the builder than to her. She can alternately choose a new flat in the new tower where the foundation is yet to start, but the rate will be that of current, which is higher, and there is no subvention scheme available. The 'offer' is open for her to decide for three days only, and hung up the phone.

Nitin and Meera are the victims of various schemes that are run today which they did not do much research on. They should have asked the following questions:

Nitin should have enquired- What is the 'special approval' that you have taken in the bank. How can you fund on a property which has not received any approvals and all other lenders are refusing to do loan on it? He would have found that the builder has merely given an indemnity on a 200/- stamp paper to the bank that they will get all statutory requirements cleared within 3 months, but there was no clause of what will happen if that doesn't happen. Nitin is now liable to continue to pay the interest to the bank and the only alternate is to close the loan and keep his own 1.60 crores locked with the builder till eternity.

Meera should have asked whether the CC is available with the particular floor, especially when she was buying such a high floor when the building was only half-way. She got carried away with the opportunity of not registering the flat immediately and taken that as a big saving. Banks get approvals for many such deviations, but ultimately, the responsibility lies with the borrower to pay up. Meera lost the time and her credit report now got negative remarks since she was not careful.

Both Nitin and Meera were established and well-connected people in the similar industry and had they been appraised of such issues in advance, they would have not risked all their faith on a gas-filled balloon called "scheme".

If you have a loan advisory service available to you, which is unbiased and can guide you, you must try that option. The most expensive purchase in your life for which you check out multiple homes for months before you buy, you do not check out your lending options or realise what kind of financing you are opting for and basis which documents from the builder the loan is being done, isn't a good judgement at all.

13/09/2015

20 Quick FAQ on Credit Score in India.

In India, there are 4 credit information companies licensed by RBI. The Credit Information Bureau (India) Limited(CIBIL) started functioning from January 2001. Subsequently in 2010, Experian, Equifax and Highmark were given licenses by RBI to operate as credit information companies in India.

You may be knowing that CIBIL uses a three-digit numbering system for the scoring which ranges between 300 to 900, the higher the score is better. They have recently started an new version 2.0 for doing the credibility check by a different method, which is yet to catch up.

Here are 20 frequently asked questions that our team faces from the borrowers on a regular basis & hence I thought of compiling them here for all to read and share the knowledge.



1. What happens when I have a great credit score?

Truly, it doesn't enhance your loan credibility as of now. The direct effect is yet to be designed by the lenders. As of now, only the credit appraiser feels comfortable that you are not defaulting on any other credit. So, the impact is that of your not being bad, not being very good.

2. Can a credit score be really improved?

Good practice of returning borrowed funds on time enhances your credibility and improves the score. But the score is a trend, which develops gradually. Same like a character of a person. It can't be drastically improved or altered. So, if you suddenly pay off all your debts, your credit score does not jump up immediately.

3. Will a lender give me loan at a better rate if i have a good credit score?

Lenders look at various comforts in a home loan application and credit score is one of them. The profile of the borrower, his educational background, number of years in service, number of dependents, income, savings, other assets, property he chooses to buy and many more. So, it will be wrong to say that one gets a better deal just for great credit score.

4. Will i get a loan quicker if i have a good credit score and submit the report?

That is completely untrue. Unlike the commercials which come on media, the processing of any loan takes a basic period of time as the credit appraiser waits for reports from various other agencies to issue a loan approval letter. Credit score is available online and rather a very less time-consuming thing. By having a credit report in hand, doesn't enhance the process-time. Most of the lenders anyways does the credit check once more.

5. What if one credit report company shows bad numbers but another one shows good?

Most of the lenders now are using one major credit scoring service & others are yet to catch up. Even then when above is the scenario, the final call lies with the credit appraiser of the lender. There has been cases where though the credit report has come unsatisfactory or low in numbers, with clear justification & supporting proof of the reason, credit managers have agreed to do the loan. They are authorised to take calls on such home loan applications.

6. If I have never borrowed or never even had a credit card, will my score be low?

Yes, it will be. Gone are those days when our previous generation boasted of never borrowing a single penny. Credit looks at a new borrower with a magnifying lens and scrutinises more critically thinking 'why no one has ever lent him a single penny?' Don't get it wrong. You are not being encouraged to borrow more than you can pay up, but a basic credit card facility or a home loan for tax-savings will be no harm to have.

7. What if a wrong report has been uploaded on one of these bureaus? How to address that & get rectification?

Please understand that all these credit bureaus are maintaining a mere databank and has no direct influence on a low or high score. Yes, they draw up the numbers, but strictly basis the input they receive from various lenders where the individual has borrowed from. If you ever notice any anomaly, you can download the report yourself, find out the flaw, speak with the lender who has wrongly uploaded erroneous data, ask them to send the corrected information to the credit bureau and the bureau will correct it within 3 days. But if the discrepancy isn't resolved between the borrower and the lender, then credit bureau can not change anything on their own accord.

8. What if I can not contact the lender who uploaded the issue and sold the portfolio to another unknown company?

That is a big concern as contacting the current portfolio holder, if not the lender, is a tough task. Generally customers with very old issues face this. But in the current digital world, is it that impossible to find a company out, especially when they are also trying to locate you?

9. Will my employment get affected because of my low score?

These days, many employers have started perusing credit scores of potential employees, especially the financial services companies. As mentioned earlier, many consider the credit report as reflection of the character and try to read the person through that. Without saying that it is the right way, I am only presenting facts here.

10. Will my employing company's credit history affect my credibility?

Yes, it will. If you are employed by a company which is defaulting on their own loan to one or various lenders, then being an employee of that company, lenders may refuse to extend a loan to you, basis 'unstable job'. They might simply consider that the financial strength of the employer is poor and your pay might get affected too, if it already has not!

11. Will my colleague's bad credit history affect me in any way?

Surprising, but yes! If many employees of a company had defaulted in the past, the lender may blacklist the company and decline to lend you without any fault of yours.

12. Does cancellation of a credit card affect my credit score?

It does not if you inform the bank, pay up the dues, take a no-due letter and then cancel the card. But if you just decline to pay any dues and think that destroying the card is the end of it, it is not.

13. NRI-s who apply for loans will also have a credit rating?

NRI-s will have credit rating in their respective countries. Those reports are generally required to process a home loan in India. However, countries where credit scoring system is not followed, no such report can be provided by the potential borrower. Please note that credit score report of an NRI also is also generated by the lender here in India, basis PAN card and Indian address. So, those you think getting an NRI status is end of the problem, it is not.

14. What happens to my credit score when I negotiate with the bank/lender and do a settlement payment?

Credit reports are quite categorised. Closing a loan by paying the complete due amount and closing with lesser amount by negotiating a deal doesn't get reported in the same way. So, potential borrowers who exclaim-"I don't have either credit or default elsewhere." need to introspect on that statement. If you pay, say, 20,000/- as 'settlement amount' to a lender when they claim to have a 80,000/- due, they will report that to credit scoring company too.

15. What happens when banks/lenders writes off a loan against my name and I never pay?

That's truly bad and if the amount isn't a small one like a couple of thousand, which can be considered 'overlooked', all lenders in future may decline to lend you. 'Write-off' means you never paid off the dues and the lender had to let go of the money completely either because they could not trace you or you have denied to pay. That is not a welcome 'character' by the new lender.

16. Can my house-renting, applying for a gas connection or getting a post-paid connection be affected because of my credit score?

In India, though this practice is yet not so prevalent due to lack of knowledge, but the day is not far away when all credits are going to be routed through this check.

17. Will my credit score impact my family members such as wife, children & siblings?

It does. Lenders upload your address, DOB, landline and mobile number, father's name, spouse name(if available) etc. along with the data. This is to ensure that people with same name do not get each other's report. So, if you default in a loan & your brother applies later, his loan might get rejected. Sounds unreal, but there has been incidence when son-in-law's home loan application was denied for bad credit report of father-in-law where wife was co-applicant and her PAN card showed her father's name!

18. Does being a guarantor also gets me reported at the credit bureau?

Of course. Please read my article "5 Factors to check before being a guarantor" which was published in moneycontrol.com to know more about it.

19. Can I raise a dispute with the credit scoring company, if I identify any anomaly in my report and/or scoring?

As explained earlier, please raise the dispute with the reporting lender instead of the credit scoring company, since the scoring company bases their numbering on the data reported and available with them with no power of alteration.

20. Can I access my own credit report since the lender I have applied with, isn't telling me which bank has reported my default?

The lender who is perusing your loan application now, has a limited access to your data. Though they can see the score and the default type, they can not see the uploading lender's name. For getting that information, you can download the report yourself by paying minimal fee online and then take necessary course of action with the reporting lender for rectification, if any.

13/09/2015

Real Estate: a Real Asset in Emergency- A story and a Solution.

Urban India has seen a world of revision in pay structure in the past 15 years. IT and ITeS industry has given the boost to the economy and qualified people in all major cities have experienced entitlement of various bonus & incentives by being productive to these companies.

Looking at this growth pattern, the FMCG, Telecom and Financial services sector has also enhanced pay-scale for their talent. Perks and other benefit has touched a great height with deserving assets(people) of these companies. Employers recognised the importance of experience, deployed more human resource managers for keeping the well-being of these top-rated employees in good humor.

Hence, no emergency is a 'real emergency' for most of the LinkedIn readers here. Credit is easily available in form of- loan from office, personal loan and credit cards. Banks run after you all day and night. There is loan available for buying everything today. Car, home, jewellery. Easy installments for buying any and everything starting from electronics to undergarments under credit card schemes.

Then where is the question of 'emergency' for this category of people?

Well..... it starts from over-leveraging oneself. Since one can buy almost everything on credit, there is no limit of buying. You buy what you need but mostly what you don't need. What happens when your card gets maxed out, your pay almost completely gets flowing out towards your EMI for car, home, personal loan and the balance is left for 'minimum payment due' to banks for the cards?

Your biggest asset is your health, as they say. But anything can go wrong.

Take an example of Ajitesh Mathur, 38. He stays in his plush penthouse in Bangalore, employed by a top-brass MNC in senior VP position, awaiting his new promotion and an increment soon. His family is happy and waiting too......for the world tour he has promised his wife and teenage daughter with the incremental pay. But these days at night, he is unable to get a good sleep. His colleague Narayanan just had a stroke and is not likely to come back to work in a year's time. Narayanan was a VP too, occupying Ajitesh's next chamber. Every day Ajitesh walks past the empty cabin, and his heart sinks. Today, a new VP has taken his position, given the fact that Narayanan will not be coming back soon.

What will happen to his family and 'status' if the same happens to him too? Though Narayanan's medical bill will be footed jointly by his insurance and the company, what will happen to his loans? Company will at best pay him for a couple of months, not beyond that!

Next morning, Ajitesh went office an hour late. He sat down on his home comp and made a list of credits and expenses he is running, which looked like this:

Home loan--------138990/- per month, taken in 2013 while buying the penthouse.

Personal loan 1--------8354/-, taken while falling short of some amount while buying the house.

Personal loan 2---------39808/-, taken while doing up the upholstery, designer wares, crockery and cutlery for home.

SUV loan-------44987/-, against the Merc he bought. the offer was excellent. He only had to shell out 10%, balance financed by Merc's internal finance company. By the way, he followed footsteps of Narayanan who bought it too. Ajitesh diluted his stocks earlier for buying the home and never thought he could afford this without Narayanan's telling him.

Card EMI(total)-------102335/-, this was against numerous purchase his daughter made on online shopping. Mostly gifts, garments and junk jewellery.

Card minimum payment every month------65000/- approx., this was usage from dining out, movies and a big amount spent on a hotel during his daughter's birthday party. She begged him to give her his credit card to have the bash in the most popular disc in the city.

Monthly living expense touches an additional amount of almost 2 lacs which takes care of the mini-office his wife runs at home-- for paying gardener-driver-maids-cook-laundry-dogwalker-homegym trainer-cooking classes-kitty parties-fashion-parlour-household-food items(though God only knows when and who eats at home) etc. etc.

Total is 599474/-. Oh, the annual insurance premium and maintenance of the house is still not included in this. Ajitesh gets a little over 6 lacs in hand as net salary. To everyone he is a 'wealthy man'. But he probably has lesser spare money than the cook he employed, he thinks sadly.

Now, what is the way out? This has to end. You will surprised to know that your real estate will actually come in handy now. I am sure a lot of you are guessing that I will ask Ajitesh to go for a loan against property. I won't. The reason is, the rate will be higher than his current loan.

Ajitesh can switch his loan to another lender and can take a topup upto 100% of his loan principal amount from some couple of lenders who offer this product at the same home loan rate of interest. His property cost is way up now than the time he purchased it. So, the loan to value ratio(LTV) will be quite good. Given that he is about to get an increment, then instead of taking the foreign trip right away with the extra amount in hand, he should take the advantage of the enhanced eligibility to leverage up. With the extra top-up money in hand, he should start closing the loans in this descending order- (1) credit card dues other than the amount converted to EMI, (2) vehicle loan, (3) personal loan, (4) amounts converted to EMI is cards[this will have a pre-closure penalty, but never mind].

Additionally, he must rethink on his expenses at home and sit with his family to explain the situation. A lot of times we assume that they will not understand or better to keep them unaware of any stress that the bread-earner goes through. My personal advise will be to try out an open dialogue. That might make you feel free from the pressure and the support might actually work wonders for you. After all, they are your family.

Your real estate is the real asset you have. The rest of the ones are all liabilities and bad loans

06/10/2014

http://content.magicbricks.com/industry-news/ahmedabad-real-estate-news/gujarat-as-a-role-model-for-smart-cities/76492.html

06/10/2014

Mumbai Property News : http://content.magicbricks.com/industry-news/mumbai-real-estate-news-industry-news/good-days-ahead-for-malad-investors/76552.html

07/09/2014

We are one stop solution provider, working with 20+ Financial institutions , Including all MNC Banks, Indian Private Banks and NBFCs.

07/09/2014

Why consider a re-sale apartment ???

Click the link and find your answers !!

http://content.magicbricks.com/industry-news/why-consider-a-re-sale-apartment/75412.html

01/09/2014

RBI gives 30 days to banks on loan disbursal timelines

http://www.business-standard.com/article/reuters/rbi-gives-30-days-to-banks-on-loan-disbursal-timelines-114090101037_1.html

Asks banks to maintain a monitoring mechanism to check any delays

01/09/2014

Housing for All by 2020, Says Urban Development Minister Venkaiah Naidu

Visit The Link :

http://www.ndtv.com/elections/article/election-2014/housing-for-all-by-2020-says-urban-development-minister-venkaiah-naidu-532140

Creation of 100 smart cities and reducing interest rate on home loans to ensure housing for all will be the focus of the new Urban Development and Housing and Poverty Alleviation Minister (HUPA) Venkaiah Naidu.