Home Loans in India from Banks

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Also Watch our Videos explaining various aspects on Home Loans at http://iedubook.com/tutorial/cl/23/Finance-and-Life/Borrowings.html

Home Loans

Housing Loan  is a secured loan given to a Borrower who wants to purchase a House or property. The loan is given by the bank/ housing finance company, which also keeps the property purchased through the money borrowed as collateral.

Purpose of Home Loan

• Purchase a residential apartment which could be ready to move in or under construction.
• Transfer outstanding balance from one housing company to another, which may offer a better rate
• Repair and renovation of existing house, which may already have a loan
• Plot for construction of house, along with the cost for construction

Maximum Amount of Loan

The amount of home loan which a bank gives to a customer depends on his/her repayment capabilities, like your income, age, job etc, and is generally restricted to a maximum of 70-85% of the cost of the property. Normally this percentage is more in case of Flats and little lower in case where a user purchases a plot of land and carries out construction thereon.

Tenor

Maximum tenure of home loan from various banks is 20 years. In case of salaried individuals who are approaching retirement within a period of less than 20 years, the tenure is capped at retirement age.  

Maximum Eligibility

Each bank has its own criterion to determine the individuals eligibility for loan. However, if the spouse of the borrower also earn, they can be made co-applicant and their income would then be considered to arrive at total eligibility.

Rates and Fees

Rates and Fees on Home Loan depend on the period and amount of Loan. Normally these have ranged between 7-12% in the past, and vary depending on the economic conditions and rates fixed by RBI, which are taken as benchmark by the Banks or Housing Finance Companies to grant Loans.

Insurance

When you take a Home loan, these days certain companies also insure your Home loans. Many banks are willing to provide additional loan to cover up the insurance amount, which is normally one time. The impact is that they increase your EMI on account of insurance premium so paid.

Tax Break

Interest paid by a person on Home loan is also allowed as a deduction for income tax purpose. In case of self occupied property, this is restricted to INR 150,000 (subject to change from time to time under tax laws) per borrower. In case of property which is rented out, the actual interest paid can be claimed as a deduction, subject to certain conditions.

Increase in rate of interest on Home Loans

Whenever there is an increase in the rate of interest in case of floating loans, the bank has two options : -

• Increase the Equated Monthly installment payable by borrower
• Increase tenure of Loan

Prepayment

The Borrower has the option to prepay the loans whenever they have surplus money. Some banks have restrictions on minimum period before which the repayment can be made. However, continuous and regular payments can significantly reduce your tenure of loan. Refer our Video on how the prepayment of 10,000, 20,000  a month can reduce the tenure of Loan from 20 years for a loan of Rs. 20,00,000, other things remaining the same at the following link : -

The Author can be reached at arinjayjain@iedubook.com

Types of Loans Available in India

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Types of Loans Available in India

Normally, an individual can opt for the following types of Loans in India : -

·         Home Loans

·         Car Loans

·         Loans against Property

·         Personal Loans

·         Education Loan

Depending on the eligibility criterion, the quantum, and type of loan may vary from individual to individual. We have broadly explained each one of these loans in our Video at www.iedubook.com at the following link :

You can also visit independent Article on each of these Loans in our Blog, and in separate Videos.

Foreign Currency Convertible Bond Woes of India Inc. - What are FCCB's and the Problem therein

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Generic Information about FCCB to understand concept of FCCB - Please refer the relevant prevalent guidelines of RBI from time to time for acting on professional matters.

Foreign Currency Convertible Bonds are issued in India in accordance with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993, as amended and supplemented from time to time.  FCCB are bonds issued by an Indian company, which are subscribed by non-residents in foreign currency and have the following features : -

• They are convertible into equity shares, either in whole, or in part, on the basis of any equity related warrants attached to debt instruments, at the option of the Non resident investor;
• Are entitled to a low interest rate on the Bonds;

These Bonds were generally issued by the issuing companies at very high price vis a vis the existing market price of shares in 2005-2006. Now when the redemption time has arisen, the prices of the shares are well below  redemption price, because of which conversion option is  not exercised by the non resident Investors for such shares. Hence the issuing companies are suppose to redeem them at issue price and accrued interest, as applicable. However, since raising of funds has its own challenges, and one needs to keep the regulatory guidelines in mind, options are limited, but the relevant authorities are working on the matter to come up with possible solutions.

The attached Video explains the basic concept of what FCCB are and what is the problem associated with these FCCB as they come up for redemption.

Accounting Equation and Impact of various adjustement on Accounting equation

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Accounting equation forms the basis or the foundation for the double entry bokk-keeping system. According to this equation, for each and  transaction, the total debits equal the total credits.

It is also represented as under : -

Assets = Liabilities + Capital

Impact on Accounting Equation - Introduction of Capital  in business

When capital is introduced in Business, Cash available with the business increases. An increase in asset is debited and added to the asset side. Similarly, the business owes the same amount to owners for capital and this amount is credited, and hence shown on other side of Accounting equation.

Impact on Accounting Equation for Salary payments

Payment of Salary in cash reduces the Asset side of the Accounting Equation. Similarly, given that Salary is an expenditure, on a standalone basis without any income it would increase the loss of the Business and reduce the Capital of owners.

Impact on Accounting Equation - Purchased Plant and Machinery  in Cash Credit

Purchase of Plant and Machinery  in Cash or Credit would increase the Asset available in Business, namely Plant and Machinery and hence be Increased in the asset side by that Amount. When its purchased in cash, it would reduce cash balance on Asset side. On the other hand, when purchased on credit, it would increase the liability to the Supplier of Plant and Machinery

Impact on Accounting Equation -  Capital withdrawn by owners

When the owners of business withdraw capital, Cash is reduced from the Asset side to that extent since its paid to the owners. At the same time, since amount due to owners from Business is reduced, capital account of the owners is also reduced by an equal amount

FDI – Permissible Capital Instruments for Investing in India under FEMA

Under the existing FDI policy, the following Capital  Instruments for permissible for Investing in India under FEMA

·         Equity Shares

·         Fully, Compulsorily  and Mandatorily Convertible Preference Shares

·         Fully, Compulsorily  and Mandatorily Convertible Debentures

·         FCCB’s

·         Subscription to American / Global Depository Receipts of an Indian Company

Interest on Other type of Preference Shares/Debentures, would be denominated in Rupees and hence interest thereon has to be based on swap equivalent of LIBOR + permissible spread for corresponding maturity External Commercial Borrowings.

The Law is based on Consolidated FDI Policy Circular No.1 of 2012. Prepared by Mr. Arinjay Kumar Jain

Foreign Direct Investment - Permitted and Prohibited Sectors

 The Law is based on Consolidated FDI Policy Circular No.1 of 2012 

1.    Permitted Sectors – Investment in Permitted Sectors can be made under the following two routes : -

a.    Automatic Route

No  prior approval  required from the RBI or the GOI.  Only Reserve Bank of India needs to be informed within specified period. 

b.    Government Approval Route (‘FIPB’)

Proposals falling outside the prohibited Sectors and not falling under automatic route require prior approval of Foreign Investment Promotion Board (‘FIPB’) 

2.    Prohibited Sectors

Foreign investment is not permitted in companies engaged in prohibited sectors – Refer Para 6.1 of the Policy.

 

Physics - Concepts relating to Laws of Reflection from Plane Mirros

Incident ray : -   The ray of light which strikes the Plane mirror, or any other surface is known as incident ray. 

Point of incidence : - It is the point at which the ray of Light hits the Mirror.

Reflected ray – All reflected ray correspond to a particular incident ray. A reflected ray, as it corresponds to a given incident ray, represents the light which is reflected by the surface, as an incident ray falls on it.

Normal Ray – It is a light ray which is perpendicular to a surface, i.e it hits the surface at 90 degrees.

Angle of Reflection - The angle formed between the surface, normal and the reflected ray is known as angle of reflection.

Angle of Incidence  -   The angle between Incident ray and the normal to the surface is known as the angle of incidence. 

Laws of reflection – This law states that when a ray of light hits a surface, angle of Incidence is always equal to angle of reflection. Further all of the following, namely, an incident ray, Reflected ray and Normal ray, all lie on the same Plane.

Watch this and many more Videos on Physics at http://www.iedubook.com/tutorial/su/33/CBSE,-ICSE/Class-X/Physics.html