Hidden Charges in Home Loan

Home is a place that gives you emotional warmth. The growing real estate price has, however, made buying a property a daydream for most of us. Home Loan is the most convenient way, which brings you closer to your 'dream abode’.

Well, you need to be exceedingly careful while you decide to avail a Home Loan. The financial organisations (Banks, NBFCs) will not tell you about many hidden charges. The initial charge that you come across while applying for a home loan is the processing fee. There are, however, several hidden charges in a home loan that you would come to know afterwards. In this article, I tried to cover few home loan hidden charges that you may come across at various stages of your loan tenor.

The banks and other finance lenders are constantly working to find newer ways to make more money out of a borrower.  There are actually no clear cut guidelines regarding Home Loan hidden charges. Banks keep changing the explanation as per their convenience. In India, regulatory bodies are turning blind towards Home Loan hidden charge and transparency is taking a back seat. Let’s go through some of these Home Loan hidden charges.

Conversion Fees

The most regular among all Home Loan Hidden Charges is the Conversion Fees. It is the amount you need are expected to pay to cut your Rate of Interest (ROI) during the loan tenure. Let’s consider that you availed a home loan @ 12% i.e. Base Rate of 10% + 2% markup. Now during your loan tenure, the bank reduced mark-up for new customers to 0.25% and thereby offering home loans @ 10.25%. You are, however, still paying 12%. Now if you wish to lessen your ROI only by reducing mark you need to pay the bank a conversion fee. It generally varies from 0.5% to 1% of your outstanding loan amount.

MODT Charges (Memorandum of Deposit of Title Deed)

Memorandum of Deposit of Title Deed (MOT) is an undertaking by the borrower that he has submitted the title documents of the property to the bank or NBFC at his own wish and will. It is given as a security to the financer. Govt levy stamp duty on this document to register the same. Charges vary from state to state. Generally, it is 0.1% to 0.2% of Home Loan amount. It is one of the most parts of the Home Loan hidden charges.

Document Retrieval Charges

This is the charge levied at the time of loan closure/pre-closure. It is principally a cost of transferring original documents from central document repository to the borrower. Usually, all original documents received by banks or the NBFC  are divided into 2 parts (a) Important documents like Sale Deeds, Sale Agreement etc and (b) General Documents like Search report, Tax bill, NOC from association etc. The first sets of documents are kept in safe custody at the central repository. General Documents are usually kept at Loan Location.
 
Suppose you availed Home Loan from a Bank in Kolkata and the central repository of that bank is in Mumbai; all essential documents will be shifted to Mumbai and general documents will be in Kolkata. When the loan is closed, the financer would charge document retrieval charges to transfer documents from Mumbai to Kolkata. First class courier service providers are used for safe transfer. These charges are generally included in processing fees.

Administrative Charges

Most people have a tendency to confuse it with Processing Fees. Some banks charge administrative charges separately while some take it as a part of the processing fee. This is a charge levied to recover administrative cost of processing the application. If we define precisely; then processing fees refer to the front end cost like DSA cost etc while an administrative charge is levied for back-end processing of the loan application. Bank at times might waive off processing fees.

Legal Fees

There are few Banks with no in-house lawyers to validate the legal status of the property. They engage lawyers (external) for this job. The fees of these lawyers are taken from customers under the head Legal Fees.

Valuation Fees / Inspection Fees

Before sanctioning the loan, physical inspection of the property is done. This is done to decide the property valuation. It is done to make certain that bank is not over lending. In the case of default, the bank needs to recover their dues by auctioning the property. There are Civil Engineers to evaluate the property. The charges incurred for the process are recovered by the customer as Valuation Fees.

Documentation Charges

To approve a Home loan the financer necessitates a lot of documentation; say, for example, Home Loan agreement, MODT, Indexing etc. Despite the fact that standard formats are used still there are charges involved in completing these documentations.

Switching Loan Package

Suppose you availed floating rate of interest for your Home loan at the time of application and now you wish to switch to fixed Home Loan or vice versa. In such cases, the lender would charge usually 1% of outstanding loan amount to process your request.

Changing Loan Tenure

If you to wish to increase/decrease your loan term that change your Equated Monthly Instalment (EMI) anytime during the loan tenure the Bank would charge fees for the same.

Statement of Account

One annual account statement is given at no cost. However, in case you request for another statement from the bank; they might charge up to Rs 500 per statement.

Copy of Original Documents

It is recommended to keep 2-3 copy of original documents before submitting to the bank. In case you appeal for a photocopy from the bank then they might charge for same. Charges vary from Rs 2 per page to Rs 1000 for the entire set.

Late payment charges

In case you fail to pay your EMI within the set date, a late payment charge will be levied by the bank @ 2% per month on the deferred time period with a minimum of Rs. 500 penalty. 

Recovery Charges

In case you default on payment the bank will charge to complete the cost of recovery i.e. Recovery Charges from you. Charges are generally Rs 250/instalment. 

Pre-Payment Charges

Well, pre-payment charges are abolished but only for candidates availed for floating home loans. Some banks charge a pre-payment penalty if funding is not from own source. In the case of 3rd party funding or Balance Transfer (take over by other bank); Pre-Payment penalty is applicable. 

Don’t fail to notice the clauses mentioned in the home loan agreement and end up paying several hidden costs. Understand the details of all hidden costs at the time of loan processing and avoid inconveniences at a later stage. Be a Smart Real Estate Investor!

A Comprehensive Explanation of Carpet Area, Built Up Area/ Plinth Area and Super Built Up Area

Planning to buy a property? Well, it is essential that you have a clear understanding of what are Carpet Area, Built up Area, Plinth Area and Super Built Up Area.

Carpet Area, Built Up Area/ Plinth Area and Super Built Up Area is a puzzle for most home buyers. Almost everyone who has purchased a property or about to purchase one are worried about how to calculate the area. Generally, the explanations available on the internet add to the puzzle. The fact is that there are no read standard guidelines available for Indian real estate industry. Pointless to state, most developers take advantage of this information crack.

Let me give you the most logical definitions and analysis on the subject, so that you are much more self-assured when you go property searching next time.

What is Carpet Area?

As the name suggests, carpet area refers to the area of the property where you can lay your carpet (wall to wall measurement). This is the actual area which you may claim as your personal space. This is the area you should be actually concerned about.

Areas incorporated in Carpet Area

• All Rooms – Living Room, Dining Room, Bedrooms, Dressing Room, other rooms.
• Kitchen
• Bathrooms
• Stores
• Balconies
  

Areas not a part of Carpet Area

• External and Internal walls
• Common Areas
  

It is important to keep in mind that balconies are included in carpet area calculation but terraces (if any attached to a unit) are usually sold independently at a lower per sqft rate. The reason being terraces are not included in FSI calculation (Floor Space Index) also known as Floor Area Ratio of the developer.

Once you ask, the marketing staff may say that they are offering the highest carpet area ratio and are just using a loading factor of 25%. He will show you the carpet area calculation as follows:

Carpet Area = 1500 * (100-25)%  = 1125 sqft, this is a wrong method to work out the carpet area.

The correct method for carpet area calculation
 
Carpet area * 1.25 = Saleable Area
Carpet Area = Saleable area / 1.25 = 1500 sqft / 1.25 = 1200 sqft.
You should have got 1200 sqft with 25% loading.
Keep in mind that the loading factor is supposed to be loaded (added) and not subtracted.

Conversely, if the real carpet area is 1125 sqft (can be calculated from the layout in brochure), the super built up area should be 1125 * 1.25 = 1406.25 for which you are expected to pay, while the builder may charge you for 1500 sqft. i.e. for 93.75 sqft. extra. 

What is Plinth Area / Built Up Area?

This is the gross area of a flat. Above and beyond the carpet area, it includes the space covered by the wall thickness and ducts. Normally, it is 10-15 per cent more than the carpet area of the flat. As a rule of thumb, built up area can be computed by adding 10% loading factor on carpet area. This is however, not so essential while buying a property as nearly all developers sell the property on super built up area. Nevertheless, this term becomes imperative while dealing with government departments as in many states; property taxes are levied on built up area/ plinth area.

Areas included in Plinth Area / Built Up Area

• Whole carpet area
• Internal and External Walls
• Utility Ducts within walls of the unit

Areas not a part of Built Up Area/ Plinth Area 

• Common Areas

What is Super Built Up Area?

Super Built up Area refers to the built up area added to common areas proportioned to a unit. The super built up area can be calculated by adding a loading factor to the carpet area, which could fluctuate from 15% to 50%. The lower the factor the better it is for you as a customer. You get a higher carpet area for the same amount.  You should pay most attention to areas included in Super Built Up Area and Entire Built Up Area.

Common Areas – lobby, staircases, lift ducts, air ducts, pipe ducts/ shafts, clubs, covered community centres and other covered common facilities.

Areas generally not to be included in Super Built Up Area

• Open Areas like parks, gardens, play areas etc.
• Roof Terrace

At times, Super Built Up Area is also called as usable area, saleable area or just super area.

Hope you enjoyed this post. What is your experience? You may add if I missed something. Please leave your comments below.

To know more about Carpet Area, Built-up Area & Super Built-up Area Click

Looking to buy a Flat? Things to remember before you book any flat

Real Estate in India has become a growing business because this is something which is available in every part of India. The high rise of building for commercial purpose and residential matter real estate business is very common.

It is depending on person to person that what kind of flat they want to buy. Investing in properties should be done judiciously as it means spending a huge amount of money. The range or price of a flat generally depends on the location, affordability, luxury. Thus a small mistake can cost you a lot. Thus here are some guidelines you may follow before buying a flat:-

1. Knowing the purpose – Before investing in properties, you must know why you are buying it. You want to stay or to give it on rent? A flat purchased for living and a flat purchased for rental needs should be taken care differently.
2. Cost – The price trends in India of any flat mainly depends on the total area. Flats are usually priced on the basis of the area. Though, the definite usable area of the flat may differ from the one you are charged for, or, the saleable area. Built Up Area or Plinth Area is the total covered area of the apartment. The super built-up area is considered as the saleable area. It is calculated by adding the common spaces to the built-up area. These common spaces lifts, staircases, entrance lobby, electrical room, pump room, flower beds etc.
3. Work of the builder – It is very important for the buyer to check the work of the builder before investing in a property. The reputation of the builder is exceedingly essential.
4. Legalized – It is important to check the papers of the property you are buying. There are lawyers and legal consultants to review the papers and confirm if the property is free from litigation.
5. Specifications – In every flat, there should be some basic facilities. Check them carefully before you invest. Sometimes builders make fake commitments; confirm everything is mentioned in the agreement.
6. Details about the current home loan rate – With the rise in price a buyer might need to avail housing loan to invest in real estate in India. Gather information about the current home loan rate. Do not trust agents assuring lower interest rates.
7. Hire a good broker – We all know about real estate agents and most of the people hire them. It is important to hire such a broker because they could help you to find the required property that suits your budget and also reduces your burden. Real estate agents also have better knowledge about the property, and can guide the clients about the price. But make sure you hire a good one otherwise; they could easily come out as a fraud.
8. Agreement time – Try to take enough time for signing the agreement so that you could cross check the papers from your side as well.

Happy living!

Investing in Noida Properties

For investors, Noida properties have emerged a new important place for real estate business. The price of the property raised about 21 percent in Noida in last few years. Experts are saying that the investors cannot make any marketplace in Noida but the properties which they are buying would result in a good residential deal and could expect a good share of return in next few years.

The price of Noida properties have increased because of many reasons like the investors they don’t need to face many risks in those properties, the economy at that part is not so fast. Moreover, investors are thinking that in next decade it will become a hub of industries and residential place thus the cost of the property will raise a lot.

The investors are investing in Noida properties because they will be benefited of its geographical settlement like Yamuna Expressway, Greater Noida and also Noida has a good potential and infrastructure to attract the investors too. Moreover, the place will be very easy to connect with as the government have started to launch the facilities of a train and metro railway to connect Delhi and Noida.
 
Investors also tend to Investing in Noida properties because the future of Noida seems to prosper as most of the people would like to relocate to a city like this where they will get a wide greenery, better job opportunities, apartments, villas and what not.

Another reason of growing scenario of real estate in Noida is because Noida is one of the cities among the best-planned city in India. Hardly one could see any congestion of traffic, the roads are newly built thus they are smooth to run vehicles on which helps to travel at any parts of the Noida.

Investing in real estate in Noida is also a good idea because as more educational institutions will grow here, more growth for the property could be seen. With more population obviously more shopping malls, multiplexes will grow and thus Noida will also become one of the modern cities of India.

The property price trends in Noida have gone through several ups and downs in past several years. During 2014 the price went down to about Rs.4, 848 per sq. ft. But prices again rose at the end of 2014 which was about Rs.5, 004 per sqft. Since then till 2015 it is still high.

The areas nearby Noida have still maintained proper price trends in Noida. Investors’ likes to buy properties in the sectors like 78, 137, and 76 as these areas the prices are more flexible.

The new project in Noida by the government has helped this city to gain more importance. Projects like Dwarka – Noida City Centre, Noida metro rail corporation, Greater Noida Industrial Development has pulled the investors to invest here.

With the upcoming of new projects in Noida, the investors should not hurry to buy properties. They should check the details of the properties and take proper precautions before investing. As because there might be different kind of brokers who may cheat you.