Demonetization : Relief to borrowers

With the government’s demonetization move affecting the availability of cash and also impacting banking transactions, the RBI has provided an additional 60 days, for the repayment of loans that are due between November 1 and December 31, 2016.


In view of the cash crunch being faced by borrowers, the Reserve Bank of India (RBI), on November 21, 2016, provided an additional 60 days, for the repayment of housing, car, farm and other loans, worth up to Rs 1 crore.


This is applicable to loans payable between November 1, 2016 and December 31, 2016, the RBI said in a notification. “It has been decided to provide an additional 60 days, beyond what is applicable for the concerned regulated entity for recognition of a loan account as substandard,” it said.

The above relaxation is available to entities running working capital accounts with any bank, with the sanctioned limit of Rs 1 crore or less. Term loans, whether business or personal, secured or otherwise, the original sanctioned amount of Rs 1 crore or less, on the books of any bank or any NBFC, including NBFC (MFI) would also get the benefit of this relaxation. This will also include housing loans and agriculture loans, it said.


The apex bank further said that all regulated financial institutions, should note that this is a short-term deferment of classification as substandard due to delay in payment of dues, arising during the period specified above and does not result in restructuring of the loans. The demonetization of higher value currency notes has affected normal banking activities, including clearing of cheques. Besides, borrowers are unable to get payments from their creditors, due to various restrictions including cash withdrawal limit of Rs 24,000 per week, limiting their options to repay their dues.


It is a welcome move by the RBI, as many people are experiencing inability to repay dues in time, because of the ongoing demonetization drive. For many of them, EMIs are due in the first half of the month. So, the relaxation will help to keep their account standard, even when the payment is not received. Neither will the borrowers’ credit score be impacted negatively due to non-payment, nor will financial institutions have to make additional provisions for sub-standard accounts.



Demonetization: Boon or Bane for foreign investors

With demonetization likely to have a major impact on cash transactions, the Indian real estate market may become more attractive to foreign investors, who are willing to bet long-term

The demonetization of Rs 500 and Rs 1,000 notes, is likely to result in an immediate reduction in cash transactions, in the real estate sector. Buyers are expected to shift towards more legitimate transactions, thus, having a structural impact over a period of time. Liquidity will contract over the short-term and prices will become more attractive. Investors will have fewer opportunities, for short-term gains.


Initiatives to attract foreign investors to Indian reality

Demonetization is the latest in a series of moves taken by the government in the last few years. The others include the introduction of the Real Estate Regulatory Act (RERA), improving the policy framework for real estate investment trust (REIT) regulations and liberalizing the foreign direct investment (FDI) policy.


These moves will make India more attractive for foreign investors and developers, as transparency is important. Earlier, they were competing with local developers and it was not a level playing field. This will send out a positive message about India to the world, with its move towards a transparent economy,

With increasing institutional investor participation, best practices are adopted and the sector matures. Thus, experts believe that we are at the start of a progressive growth cycle, in reality. One may also see consolidation among developers. These factors will surely attract more foreign investors into Indian real estate.


How demonetization affects the credibility of the property market

Demonetization could also improve the ease of doing business in the long term. Corruption in obtaining approvals is cited as the key impediment to improving ease of business in the country. By limiting the avenues to exhibit this behavior, there would be a definite positive impact on the ease of doing business. This will encourage economic growth and boost participation from local and global businesses.

However, demonetization by itself, will not bring about greater transparency or eliminate unscrupulous intermediaries.

This needs to be supplemented through appropriate regulation in real estates, such as eventual minimization of Benami property transactions, a ban on all transactions above a particular value in cash and a regime that naturally compels disclosure through the better understanding of valuations.


Impact of demonetization on REITs

Will demonetization force investors to consider other avenues for investing in real estates, such as REITs? Experts point out that investors typically engage with developers in the primary markets, which offer relative safety of their investments.


Demonetization will add to the credibility of developers, to the extent that there is likely to be less unaccounted cash transactions, even during the process of development. So, if anything, investors should actually feel safer working with developers.

Also, investors, who do not wish to get directly involved in the cycle of development and disposal of a property, typically prefer REITs. Moreover, REITs in India focus only on certain forms of income generating property, such as commercial offices, retail, hospitality, and warehousing. This leaves the residential market out of the ambit of REITs. Consequently, investors looking to invest in bulk in the residential market, will not shift focus to REITs.


Will demonetization result in lower interest rates?

With demonetization, banks are receiving massive amounts of liquidity, in the form of cash deposits. This means that there will be a surge in the funds available to them for lending and is likely to result in lower interest rates. Demonetization may also widen the tax base and improve the fiscal deficit position. A high fiscal deficit puts upward pressure on interest rates. Any improvement in the fiscal position could result in lower interest rates over the long term. Alternatively, the government can also pass on some of the additional collections to the public, through lower income tax rates. This would result in more capital in the hands of the common man and boost residential sales.




Bought a home with Vastu faults: Some tips for rectification.

While it is not possible for all homes to be Vastu Compliant, we list the faults that homebuyers should not ignore. Vastu Shastra has a lot of relevance in Indian households and business places. People buying a house or setting up an office or a shop try to adhere to Vastu norms for leading a stress-free homely life or running a successful business. Here under a brief on the methods useful in rectifying Vastu faults.

Is it possible for every apartment that is put up for sale, to comply with Vastu Shastra norms? The answer is no! So, how can homebuyers identify which apartments to buy and which one they should avoid vis-à-vis Vastu norms?


Vastu experts maintain that buyers should preferably focus on the most important rules of Vastu and make alternative arrangements or corrections, for construction aspects that do not conform to Vastu.

The arrangement of different areas in our home should be as per Vastu norms. Otherwise, it may create unrest in the occupants’ minds, health problems and other problems in life. One should buy a home that at least conforms to 70%-80% of Vastu norms.

Vastu norms to be considered while buying a home:

  • Opt for a house where all the four corners are intact, i.e., without any corner being cut.
  • Avoid southwest facing homes.
  • The staircase should always be clockwise and should not be in the northeast direction.
  • The kitchen should be in southeast or northwest direction. It should not be in the northeast direction.
  • The master bedroom should be in the southwest direction. It should not be in the southeast direction.
  • Toilets should be in the northwest direction. It should not be in the northeast direction.

Solutions for homes with severe Vastu faults

In case you have bought a house with a large number of Vastu faults, they can be rectified with the help of minimal expenses and changes.

The faults that cannot be rectified fully without demolition include problems pertaining to the wrong placement of toilets, kitchens, or staircases, especially if they are constructed in the northeast and if the main entrance of the house is in the south/southwest direction.

Some critical defects can be corrected with pyramids or crystals.

Traditional methods, using mirrors, colors and special metallic wires, can also be used for corrections, depending upon the individual case.

One can also demolish the wrong area and reconstruct it properly. However, this may involve substantial cost, time and complication.

Another Vastu defect is the presence of high voltage wires passing over a house and this can be corrected by incorporating a plastic pipe filled with lime, from one corner of the affected area to the other, in such a manner that both ends remain outside by at least three feet each, will eliminate the negative effects of energy being generated by the overhead wire.


To conclude, experts suggest that homeowners should not ignore Vastu defects that do not require structural changes, as these can be corrected by making internal arrangements.

Vastu defects that you can rectify, after buying the home.

  • Furniture that is placed in the wrong direction.
  • Inappropriate colors, including that of the flooring.
  • Cooking direction.
  • The direction of toilet basins.
  • An incorrect direction of the puja room.


Are Investors still relevant for Real-Estate Sector?

While the current market slowdown would suggest that investors have ‘deserted the real estate sector’, the fact remains that developers have come to rely on their funding and will continue to do so. A short analysis in this regard.

Although not many developers may be willing to publicly admit it, the fact is that developers find it advantageous to have investors as anchors for their projects. Developers need money, even before they can commence a project, to buy land and often, only the investors will give them money at that early stage, without any collateral or receivable.


Approvals can take any amount of time but not less than one year. During that phase, nobody is going to stand by you, except the investor says an expert on the advantages of having investors to anchor a project.

Even banks will not fund you. All the organized funding starts, only when you have something ready to offer to them. However, developers cannot keep waiting till a project gets approved, to launch it; you need some quasi-investment at each stage.


In this scenario, there are two models in real estate investment. The first involves a pre-launch with funding only from an investor and a minimum amount of understanding as to what kind of a project it would shape up to be, in the future. The second kind of pre-launch is crowd funding, where there is better clarity on the project’s details. In this case, the developer has the plans for the project (including layouts, floor plans and unit plans) ready but does not have sanctions. Consequently, this is a mass pre-launch and does not depend only on a select set of investors. Although laws do not allow such opaque transactions, it is an open secret in the Indian property market and akin to an IPO model. The advantage for developers is that the price point here is higher than the price point at which they offer it to the select set of investors.


Unlike end-users, investors are not problematic as they do not ask too many questions. Even if there are some escalation charges, it is easy to deal with one investor than 15 or 20 other people who will keep fighting. So, an investor is an easier person to deal with, once he comes in.

Developers have to brave various odds – courts, ministries, municipalities, local factors, environment and market forces. Under these circumstances, an investor is an asset for the developer. Even when an investor exits, in many cases, he does not sell it to the end-users but sells it back to the developer, who buys it at a thousand-odd rupees cheaper than the price at which the developer will sell to the end-user.



Benami Property Act to be effective from November 1, 2016

A new law to prohibit Benami property transactions and curb the menace of black money will provide for more stringent punitive measures comes into effect from November 1, 2016

A new law to prohibit Benami transactions, which provides for up to seven years’ imprisonment and fine, for those indulging in such activities, will come into effect from November 1. With a view to curb the menace of black money, the Parliament in August 2016, had passed the Benami Transactions (Prohibition) Act, after assurance from finance minister Arun Jaitley that genuine religious trusts will be kept out of the purview of the legislation.

“The rules and all the provisions of the Benami Transactions (Prohibition) Act, shall come into force on November 1, 2016. After coming into effect, the existing Benami Transactions (Prohibition) Act, 1988, shall be renamed as the Prohibition of Benami Property Transactions Act, 1988,” a CBDT statement said.

While the existing law provides for up to three years of imprisonment or fine or both, for carrying out Benami transactions, the amended legislation would provide for seven years’ imprisonment and fine. The act defines Benami transactions, prohibits them and further provides that any violation is punishable with imprisonment and fine.


The PBPT Act prohibits recovery of the property held Benami from Benamidar by the real owner. “Properties held Benami, are liable for confiscation by the government, without payment of compensation,” it said.

An appellate mechanism has been provided under the act, in the form of an adjudicating authority and appellate tribunal. A joint or additional commissioner of IT, an assistant or deputy commissioner and a tax recovery officer in each principal CCIT region, have been notified to perform the functions and exercise the powers of the approving authority, initiating officer and administrator, respectively, under the act, the statement said.

While the 1988 act has nine sections, the amended law would have 71 sections. “Section 58 of the law clearly states that in case of charitable or religious organisation properties, the government has the power to grant exemption,” Jaitley said, responding to concerns of some parliament members about the applicability of the amended law, on properties in the name of deities, churches, mosques, gurudwaras or temples.