A Good Year For House Warmings And Loans

By | June 9, 2016

A Good Year For House Warmings And Loans

With so much happening in the banking world, it’s wiser to keep a tab on all the changes taking place. If you are looking to get a loan or thinking about buying a house, this year may just be a good one to do these things. Read on to find out what’s happening.

1. Let’s Scrap Service Tax On Home Purchases

2016 is turning out to be a good year for property buyers. First came the Real Estate Bill and now the scrapping of service tax by the Delhi High Court on purchase of flats and apartments.

Construction of a complex essentially has three broad components, namely:

  • Land on which the complex is constructed
  • Goods which are used in construction
  • Various activities which are undertaken by the builder directly or through other contractors

As per the ruling, builders and developers cannot levy a service tax on the purchase price of an apartment/flat as the cost is inclusive of all the above three components. As per the ruling, Service Tax is to be levied only on the activities that are involved in the construction of the complex and the resultant value created by such activities. The court further opined that as there is no mechanism to ascertain the “service component” which separates it from “value of the land” and “goods used in construction”, the levy of service tax is not correct.

The court has also asked builders, who have collected service tax, to return the same to the buyers with 6% interest. However, service tax on preferred location charges (PLC) is still applicable.

This decision stems from the ‘Suresh Kumar Bansal vs Union of India and others’ case. The petitioners contested that service tax should not be levied “in relation to the construction of complex” under the Finance Act, 1994 because the agreement with the builder cannot distinguish the “services rendered” and “value of the land” as there is no provision under the law to measure the same.

What Is Service Tax On Property?

A Service Tax of about 15% is levied by the Central Government on all construction services offered by the builder to the buyers. This extends to under-construction property as well.

2. What About The Lending Rate?

About two months ago, the RBI asked banks to adopt a new lending rate calculation to ensure that cuts in the central bank rates get passed on to the end customers. While prospective borrowers were eagerly awaiting a cut in the lending rates, RBI Governor Raghuram Rajan, has stood back from doing so, at least for the time being. Rajan is looking to smooth out the creases in the new system before softening the rates. Rajan has asked borrowers to look forward to a drop in the interest rates in the coming months.

How are the banks reacting?

HDFC Bank lowered its lending rate a tad bit –by 5 bps to 9.20% for two years. This is largely in-line with the 9.15% lending rates of SBI.

Bank of Baroda, on the other hand, raised its lending rate by 10 bps points to 9.40%.

3. Isn’t SBI Looking To Merge With Subsidiaries?

The Union Cabinet on Thursday approved the merger of SBI with its five associate banks and the newly-created Bhartiya Mahila Bank, in a move expected to usher uniformity across the bank’s operations. As per media reports the merger will morph SBI into a Rs. 37 lakh crore behemoth with over 50 crore customers.

Last month the biggest lender, SBI, gave green signal to a proposal to merge its five associate banks and the newly-created Bhartiya Mahila Bank with itself, in a move touted by experts as one that will boost the bank’s market share. Last week, Finance Minister Arun Jaitley, gave an informal nod of approval to the merger.

SBI Bank’s associates include – State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Patiala, State Bank of Mysore and State Bank of Travancore. SBI is the single owner of State Bank of Patiala and State Bank of Hyderabad and is a majority shareholder in the remaining three.

With so much happening in the banking world, it’s wiser to keep a tab on all the changes taking place. If you are looking to get a loan or seeking to buy a house, this year may just be the right one to do it. Hopefully, the RBI Governor will provide us some relief by lowering the lending rates soon.

4. A Health Insurance Plan For All

In a bid to strengthen the healthcare system of India, the Delhi cabinet has taken a step towards providing Health Insurance schemes to all residents of the state. Due to be rolled out by the end of 2016, the Insurance Plans will be accepted across all Government and private hospitals.

Media reports have cited Health Minister, Satyendar Jain, as saying that there will be three grades of premium with the highest amount payable not exceeding Rs. 3,000 annually. Hoping to cover individuals from all rungs of society through and through, the Government will pay premiums for those below the poverty line. The plan also envisions opening private healthcare clinics for those who have been unable to afford the cost of top-class healthcare clinics so far. For enrolment, people need a valid proof of residence in the capital and they will be eligible to receive cover for 1800 medical procedures. Also count in an accident insurance.

The scheme, which will set the government back by over Rs. 700 crore, has borrowed from healthcare schemes currently active in Andhra Pradesh and Tamil Nadu. For a country grappling with poor mortality rates among many sections of society, a Healthcare Plan of this sort could lead the healthcare industry to a new path of success.

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