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Home loans in India - fixed or floating ?

Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Which one looks better ? With interest rates raising fixed looks a better option to me.


Groovy
Chetan Parekh
Ranch Hand

Joined: Sep 16, 2004
Posts: 3636
May be this is not attending your question. I have got following forward and I feel that may be not all, but many points are valid..


Save the IT People from Debts

* Property market in Year 2001 -2004 was quiet Ok , People were able to buy Flats in reasonable rates .

*Year 2005 -2006 , Some of the well known builders started the rates boom , flat which was at the cost of Rs.900 Sq Ft now became 2200 to 2800

Q: Are there any additional facilities ?

--> No Same Scheme/Area , Flat sold at 10 Lacks Now selling at 25 Lacks .

Q: Why Property increased so High ?

--> IT people competition to buy sweet home ..

Q: Who is going to Benfit from this Property Boom ?

--> Only Builders and some of the Politicians

Q: How is the Bank's support on Home Loans ?

--> Last Year , Bank gave the loan's at flexible mimimum rate,Now Banks has sufficient number of customers ,

(Trap) Slowly Banker's increasing interst at % 0.5 every month .

IT People Who bought house for 22 Lacks for 20 Yrs , Now became 23 Yrs with raise of 0.5 %

Q. How some IT people can face the problems in Future ?

--> Companies are Project Based , If Projects are there then People will not be there .

Q. IT salaries are high in Market , How much actually IT-people getting in Hand ?

--> People, Who bought house of 22 Lacks to 40 Lacks They need to pay EMI

15,000 to 35,000 for 20 Yrs. If Bank keeps same interst rates .

Suppose Salary is 35- 40 K Per Month, 20K will be the EmI

Q. Is there any "Terms & Condition or Processes to increase rates" ?

--> No , Depends on Buiders Greediness . Every builder follows the different strategies

Builder sold one flat 1500 Per Sqft in Morning and 1800 Per Sqft in the Evening ,

There are no records maitained ..



Q. Who made builders smart & greedy ?

--> Fool IT people ..

No body is asking , Flat was sold at 12 Lacks , Why now 24 Lacks ?

Q. Is Corporation water & MESB available to all schemes ?

--> Some of the area don't have the Corporation water at all , People surviving on Water Tankers.

** MESB .. Under Table ,can be managed easily .

Q. What will be the condition If We are not able to Clear the Loan ?

--> Depends on individual capabilities

Q. What wiil be the actual 'area of living' or carpet area if the builder proposes 1000 sft?

....> The actual carpet area will be 800-850 sft only. The common area is also included in the proposal.

If two flats are in the same floor, then the builder cheats both the residents by collecting

How do Builders cheat buyers? ... Let us see with a simple example

Builder XXXX proposes a flat in a decent residential area.

Rate ( Unit Price ) - Rs. 3500 sft.

Registration - Rs. 40 per sft.

EB and drainage - Rs. 50,000

Covered Car park - Rs. 1,25,000

Corpus fund - Rs. 50000.

For a 1000 sft flat ( 850 sft carpet area ), the approximate cost will be Rs.37,65,000. In the same plot area ( measuring 2 grounds) the builder would have constructed 8 or 10 flats.

Let us see how a builder earns his profit

Total sales for the builder - 37, 65,000 *10 = 3, 76, 50000 ( 3.76 crores)

Cost of the land - Rs. 40 laks per ground

1) Total cost of the land - 80 lakhs for two ground ------- A

Total builtup area for 10 flats - 10*1000 sft = 10,000 sft

Construction cost per sft ( for normal specification) = Rs. 900 per sft

2) Total construction cost - 10,000 * 900 = Rs. 90,00,000 -------------- B

3) Other expenses for the builder - Rs. 20 per sft = Rs. 2,00,000 ................. C

Total expenses for the builder = A+ B+C

= Rs. 80,00,000 + Rs.90,00,000 + Rs. 2,00,00

= Rs. 1,72,00,000 ( 1.72 crores approx)

Total Sales = Rs. 3.76 crores - Rs. 1.72 crores

Total profit of the builder = Rs. 2.04 crores.

Let us see the share of each resident

1. Cost of land = Divided share among the other 10 residents

= Rs. 80,00,000 / 10

= Rs. 8,00,000

2. Construction cost = Rs. 900 * 1000

= Rs. 9,00,000

3. Other expenses = Rs. 2,00,000 ( approx)

Total = Rs. 19,00,000 ( Nineteen lakhs)

The total share for each resident is Rs. 19,00,000 ( Nineteen lakhs only )

but he pays Rs. 37.5 laks for the flat.

Q. How We can stop Builders -Property Boom ?

1) IT People should stop buying flats for atleast next 1-2 Yrs .

2) Onces rates are reasonable , With some legal process get the Booking .

3) Check Facilities, Convince, Road Approach, schools & Mainly corporation water

4) Ask Questions If I buy 1/2 BHK at 12 to 30 Lacks , Do I get resale value in future?

5) Today you are capable for paying 1000 -3000 maintains per month ? Will will be the same case

after 20-30yrs after retirement .

6) In All, Don't stretch more to get the more & more loans other wise it will create unnecessary

pressure and tension .

7) Read the above mentioned calculation carefully, when you are about to buy a flat pls keep this in mind.
[ December 01, 2006: Message edited by: Chetan Parekh ]

My blood is tested +ve for Java.
shan Iyer
Ranch Hand

Joined: Jul 13, 2005
Posts: 391
Floating rate of interest is much better ! Floating starts at 8.5% or 9.0% and there is just a variation of (+-)0.5% normally . Fixed is at 10.5% in most banks , and over a period of 10 or 20 years , 0.5 or 1% makes a lot of differece .


Warm Regards, S.Iyer
SCJP1.4, SCWCD1.4
rajen kumar
Greenhorn

Joined: Dec 03, 2006
Posts: 21
HDFC has come up with "2 in 1 loan" scheme, which allows one the option of choosing part of it as floating and part of it as fixed.
one can get further details at http://www.hdfc.com/
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Originally posted by Shankar Iyer:
Floating rate of interest is much better ! Floating starts at 8.5% or 9.0% and there is just a variation of (+-)0.5% normally . Fixed is at 10.5% in most banks , and over a period of 10 or 20 years , 0.5 or 1% makes a lot of differece .


Yeah but do u think floating rates will climb in the future?
shan Iyer
Ranch Hand

Joined: Jul 13, 2005
Posts: 391
That depends on RBI guide lines . Normally the variation is just (+-)0.5% .
Majority opt for floating rate .
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Originally posted by Shankar Iyer:
That depends on RBI guide lines . Normally the variation is just (+-)0.5% .
Majority opt for floating rate .


Majority opt for floating loans becasue it is cheaper. People who opted for floating loans when fixed rates were around 7.5% are regretting now because floating rates have climbed. So my question is- will interest rates continue to climb. If yes, fixed would be better. And again fixed rate will hold good for some number of years usually 3 years and not for the life time of the loan.
R K Singh
Ranch Hand

Joined: Oct 15, 2001
Posts: 5371
Originally posted by Pradip Bhat:

Majority opt for floating loans becasue it is cheaper. People who opted for floating loans when fixed rates were around 7.5% are regretting now because floating rates have climbed. So my question is- will interest rates continue to climb. If yes, fixed would be better. And again fixed rate will hold good for some number of years usually 3 years and not for the life time of the loan.


With rising real estate prices I doubt that floating rate would go more higher..

but you never know ..


"Thanks to Indian media who has over the period of time swiped out intellectual taste from mass Indian population." - Chetan Parekh
David O'Meara
Rancher

Joined: Mar 06, 2001
Posts: 13459

variable.
shan Iyer
Ranch Hand

Joined: Jul 13, 2005
Posts: 391
With rising real estate prices I doubt that floating rate would go more higher..


Yes you are right ! And one can be rest assured that real estate prices are surely going to go through the roof in the coming years .
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Originally posted by David O'Meara:
variable.


Raghav Sam
Ranch Hand

Joined: Apr 12, 2001
Posts: 412
Originally posted by Pradip Bhat:
Yeah but do you think floating rates will climb in the future?

It already has!! I took a loan with LIC and the initial interest rate was 8.25, now it is 9%. But the advantage is that the EMI payable will still be the same, the tenor will increase marginally due to the increased rate. In my case I shall have to pay 8 months extra!!

May be the rates can go down also??!! you never know..


Be who you are and say what you feel, because those who mind don't matter and those who matter don't mind.<br />- Dr. Seuss
David O'Meara
Rancher

Joined: Mar 06, 2001
Posts: 13459



floating.
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Rates have gone up again.
shan Iyer
Ranch Hand

Joined: Jul 13, 2005
Posts: 391
Dont worry Pradip ! Buy a BDA site and watch it go up as well
Anoushka Sharma
Ranch Hand

Joined: Apr 10, 2006
Posts: 113
I took floating and I am repenting
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Originally posted by Shankar Iyer:
Dont worry Pradip ! Buy a BDA site and watch it go up as well


I already have a site but want to build a house.
Arjunkumar Shastry
Ranch Hand

Joined: Feb 28, 2005
Posts: 986
Originally posted by Pradip Bhat:
Rates have gone up again.

I think rates are stable but still very high.Builder and political lobby are waiting for customers to purchase at higher rate.If you see the ads,you see the same big builders ads are repeating.If you visit the site,you see the boards "Attractive home loan rates available'nearby.
Owning a site is a good option which you are doing.


Namma Suvarna Karnataka
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

The interest have gone up again. The Government of India (who talks for 'aam adami') is not able to control inflation has raised CRR resulting in higher rates. What a stupid step .Where will the money yo pay higher EMI come from ?
Those who have locked them in fixed rate are lucky. Home loan rates are all set to hit 14-15% soon.

The budget is round the corner. The Finance minister is planning to increase service tax to 14%. He will surely fill his pocket.
Rohit Nath
Ranch Hand

Joined: Jun 16, 2006
Posts: 387
Sadly, buying a home seems impossible these days!
I am in Pune. Thanks to the IT industry boom owning a piece of land is a distant dream, only option is a flat. For 2 BHK flat you should be ready to shell out more than 25 lakhs. (Easily more depending on location).
Also, builders are charging like hell especially for IT people.

Net price you pay ends up in higher figures due to higher interest rates on home loans which just keeps on growing.

Is there any regulation at all?

What does the common man do?


R.N
Arjunkumar Shastry
Ranch Hand

Joined: Feb 28, 2005
Posts: 986
Simple advice: Don't purchase.This bubble(read article in Economist about "Overheated India") which started in late 2003 is still not bursting.But it will.
RBI is increasing home loan rates because it fears someday banks will suffer as people won't be able to repay.
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Bengaluru is expensive city. construction costs are double than other smaller cities.
Rohit Nath
Ranch Hand

Joined: Jun 16, 2006
Posts: 387
Originally posted by Arjunkumar Shastry:
Simple advice: Don't purchase.This bubble(read article in Economist about "Overheated India") which started in late 2003 is still not bursting.But it will.
RBI is increasing home loan rates because it fears someday banks will suffer as people won't be able to repay.


I seriously dont think prices are going to ever come down they may stabilize however. Builders are too cunning for this to happen!
Amit Biswas
Ranch Hand

Joined: Jun 01, 2006
Posts: 52
This over-heated real-estate boom has to cool down. Else, it is just not sustainable.
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Home loans have climbed up again.
Pradeep bhatt
Ranch Hand

Joined: Feb 27, 2002
Posts: 8904

Guys,
Which banks are good for home loans ? How are PSU banks?
Thank you.
 
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