Householder's Insurance - Know it in detail.

A small girl asked her teacher the difference between a house and a home. The teacher made her understand - A house is made of walls and bricks. And if that house is filled with love, care and warmth, it is called a home.

A mom always thinks of making the relations special by making great memories. A dad supports her ideas by providing everything needed. Whether it is a nice couch to be a couch potato and enjoy the leisure time, or a PC table to finish the work, or a well furnished kitchen and rooms to keep things tidy. If there is an incident that might cause loss of house, what will you be left with? No doubt the memories spent in that house remain in the heart. But, to make more of such memories in another house, opt for a house insurance. Loss of house and the content in the house should open doors to afford another one.

Householder's Policy is specially designed to meet the insurance requirements of a householder by combining, under a single policy, a number of standard policies usually taken by householders.

Who should buy?

Irrespective of the fact that whether you are a tenant or an owner, buying home insurance should be your top priority.

Inclusions in home And Property Insurance

• Aircraft damage

• Fire

• Lightning

• Riot, strike

• Storm, cyclone, flood

• Missile testing operations
• Fire and perils cover

Earthquake Cover

The policy offers coverage against loss or damage to any of the insured property. However, many policies do not cover flood or overflow of the sea, rivers and lakes, due to earthquake.

Burglary and Theft Cover

The contents of home are also covered against burglary or theft. The coverage will also be extended to silver articles, jewellery, precious stones and other valuable items, provided these are kept in a locked safe within your home premises.

Additional coverage available in home policies

Regardless of the type of ownership, you can specifically cover your precious household items under a home insurance package policy. Here is a breakdown of the things that you can include under the coverage.

Plate Glass(Fixed)

The glass and sanitary equipment which are fixed in particular places inside the home. However, the plan doesn’t cover movable glass equipment.

Home Entertainment (TV/Music System)

Home entertainment equipment like television and its accessories, cable or digital or /satellite television receiver, Video equipment etc.

Personal Computer –

The coverage is for mechanical and electrical gadgets and appliances that belong to you or your family members and up to 7 years in age. Expenses for damages of these gadgets is covered if the damage occurs inside your home due to mechanical or electrical breakdown.

Pedal Cycles

The wide range of additional coverage further includes pedal cycle owned by you or any member of your family along with the accessories of the cycle that has been permanently fixed.

Baggage

If your baggage is damaged due to accident during a journey, your expenses will be covered under a home package policy.

Personal Accident

This coverage encompasses both temporary and permanent disabilities. People those who stay indoors and affected by accident will only be covered.

Coverage for ‘All Risks’

Apart from these specific items, you can further insure your expensive belongings. In that case you have to submit the valuations of the items you want to insure. You can ask for coverage for jewelry, clocks, watches, furs, photographic equipment like camera and their accessories, musical instruments and sports equipment and their accessories.

Present scenario of home insurance in India

A home insurance plan, usually, covers the costs for rebuilding the structure, not the value of the property. Reconstruction costs do vary and for a no-frills structure the cost is around Rs 1,800 per square foot. It will cost around Rs 3,500 per square foot for a better construction. If you possess a 2,000 square foot residence you can insure your house for Rs 35-70 lakh. In that case, you have to pay Rs 2,100-4,200 for premium each year. You can reduce the cost by opting for a long-term policy with the tenure of 10 years. But you cannot predict the cost of construction, also most likely the expenses will rise after 10 years.

How to Lower Your Home insurance Premium?

There are many such things in our house which are precious to us but there is no point in insuring them if they are too old. The depreciation is to be considered.

Also, if you are setting up a house, you will surely have guarantee for all the things. It is advisable to take insurance after the guarantee expires. So be clever while taking the policy.

How to File for a Home Insurance Claim?

Almost every insurance company is having its own deadline within which you have to inform about your loss. These can vary between 7-15 days so make sure you do it as soon as possible. Some companies even let you do with an email or SMS. Before you file for a claim, you will have to lodge an FIR and the copy of which you need to submit with insurance company.

Tips for Choosing a Home Insurance in India

There are various home insurance providers in India that offer different plans as per individual needs.

• Check premium and coverage : Firstly, evaluate risks which your home is facing or might face in  future. For example, if you live in a flood prone area then you should ensure that your home insurance policy is covering these risks also. Also, while checking coverage, it is prudent to check if the premium fits within your budget or not. You can solicit premium quotes of individual insurers or use comparison chart to compare premium quotes.

• Check claim settlement ratio : A good company is judged by the turnaround time of settling claims. The very purpose of insurance will be defeated if you do not get a claim when it is required. So, it is worthwhile to check the claim settlement record of companies before zeroing in on one insurer.

• Look at company’s reputation : The first and foremost characteristics of a good company is that it has customer friendly staff. Does your insurance company have competent customer service representatives who are capable enough to resolve your queries quickly? It is always important to choose a company who is well equipped to assist you at any point of time.

There is no denying of the fact that house insurance is a must, however, there are other benefits and riders to buying such a policy that will add convince you totally. Don’t wait for a calamity to remind you the need of buying a home insurance, opt for it beforehand!

Property Tax - Explanation with an Illustration. Also Know the Hot Tips to be Cautious.

A property tax (or millage tax) is a levy on property that the owner is required to pay. The tax is levied by the governing authority of the jurisdiction in which the property is located.

In other words, Property tax or 'house tax' is a local tax on buildings, along with appurtenant land, and imposed on owners. It resembles the US-type wealth tax and differs from the excise-type UK rate.

What properties come under property tax?

• Residential house (self-occupied or let out)
• Office Building
• Factory Building
• Godowns
• Flats
• Shops
• Any land attached to the building (e.g. Compound, garage, garden, car parking space, playground, gymkhana, etc.).

With whom lies the authority?

The tax power is vested in the states and it is delegated by law to the local bodies, specifying the valuation method, rate band, and collection procedures.

How is it calculated?

The tax base is the annual rental value (ARV) or area-based rating. Owner-occupied and other properties not producing rent are assessed on cost and then converted into ARV by applying a percentage of cost, usually six percent.

Vacant land is generally exempt. Central government properties are exempt. Instead a 'service charge' is permissible under executive order.

The tax is usually accompanied by a number of service taxes, e.g., water tax, drainage tax, conservancy (sanitation) tax, lighting tax, all using the same tax base. The rate structure is flat on rural (panchayat) properties, but in the urban (municipal) areas it is mildly progressive with about 80% of assessments falling in the first two slabs

Under a property tax system, the government requires and/or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value.

How to pay?

You can pay online. Also you can go to the e- counters or the zonal office.

Which Banks allow to pay property tax over-the-counter?

Canara Bank, Corporation Bank, HDFC Bank, IDBI Bank, Induslnd Bank, Indian Overseas Bank, Kotak Mahindra Bank, ING Vysya Bank and Yes Bank.

Tax Planning for Income from House property

You can minimize your tax out go in the following cases:-

(1) Owing more than one property – If you own more than one property, then only one house of your choice will be considered as self-occupied and others will be considered as let out or Deemed to be let out (if not let out). Therefore, you should carefully evaluate and choose a property with less tax liability.

Illustration:

If Shiva has two houses than he can choose one which will minimize his tax liability.

Particulars (If Deemed Let out)	House 1	House 2
Annual Value	3,60,000	7,00,000
Less: (Municipal Taxes)	(40,000)	(54,000)
Net Annual Value (NAV)	3,20,000	6,46,000
Deductions u/s 24
(a)30% of NAV	(96,000)	(1,93,800)
(b)Interest on borrowed capital	(1,75,000)	(2,50,000)
Income from House Property	49000	2,02,200

If Shiva considers House 1 as Self-occupied and House 2 as deemed to be let-out then his income from house property will be Rs. 52,200 and it will be negative Rs. (1,01,00) vice-versa. Therefore, he should consider House 1 as deemed let out and House 2 as self –occupied.

(2) Joint Home Loan – If you are a Joint owner and also apply for a joint home loan then both the co-borrowers can take a maximum deduction of Rs.1,50,000 each. In case you have a working son or daughter and the bank is willing to split the loan three ways, all three can avail deduction up to Rs  1,50,000 each.

(3) First house is in a single name and planning a second home – If your first home is in single name then you can buy a second home in your spouse’s name to help you avoid tax on ‘deemed to be let-out’ property.

(4) Joint Ownership – Income from house property can be divided between both the co-owners which can reduce overall tax liability.

Your home and a meticulous planning can lighten up your tax burden to a great extent.

Realty Expectations from the Budget - Interesting Article with True Expectations.

Recently, an article from The Hindu, Property Plus edition, had dragged my attention. From the celebrations of the new year, will slowly go our mind to the goals and targets to be achieved this year. Very soon will be thinking of the our budget too!!! Yes, same with the government as well.  So, what are the things an investor likes to see in the forthcoming Union Budget, with respect to realty, is the article about. Here it goes. (A little cut short) . 

The Union Budget is an eagerly-awaited annual event which Indians follow closely, as the decisions and allocations announced by the Finance Ministry have great pertinence to both individuals and industries. The real estate sector is sensitive to many of policies that are announced both for various industries and individuals. The sector is just emerging from a prolonged and painful slowdown, and is looking for all and any signs of light at the end of the tunnel. This fact makes Union Budget 2016 all the more critical, and the real estate industry has many expectations from it.

Offer financial protection from project delays to home buyers

The Union Budget should pay heed to this pressing need. On purchase into an under-construction property, buyers can only claim tax benefits of Rs. 2 lakh after possession if construction is completed within three years. The benefits reduce to Rs. 30,000 if the builder delays construction beyond this, and they pay higher interest. First-time home buyers purchasing properties for self-use additionally pay rent.

Instead of allowing home buyers tax benefits post-possession, the Union Budget should make a provision that allows these from the time they start paying interest on housing loans.

This will ease their monetary burden considerably and make increase the velocity of home loan disbursements. Similarly, if an under-construction property is purchased from capital gains, its construction must be completed within three years of its sale to avail exemption. There can be delays by developer in such cases too. These deductions should be brought at par and the construction timeline should be extended from the current three years to five years.

Provide more tax saving on housing loan and house insurance premiums

The government should increase the tax deduction limit for housing loans, especially for buyers in metropolitan cities. The current limit of Rs 2 lakh is insignificant given the ticket sizes in cities like Mumbai, where most houses are priced at Rs 1 crore and above.

Also, tax concessions on house insurance premiums could be introduced to encourage end users to insure their homes. Similarly, the tax exemption limit should be increased by about Rs 1 lakh and be auto-set to match inflationary trends in a financial year.

Raise house rent deduction limit

Salaried persons get house rent allowance (HRA) as a component of their total salary, and can therefore claim a deduction. This deduction can be substantial in cases where the salary and its HRA component are higher. However, self-employed persons and those who draw lump sum pays without an HRA component can only claim a maximum deduction of Rs 2,000 a month under Section 80GG. The Budget can and should address this anomaly.

Provide more incentives to boost development and consumption of sustainable real estate

The Budget should provide clear and convincing benefits to buyers of green real estate in the country.

Stakeholders of the residential real estate sector definitely require more encouragement to press the 'green' button.

Most home buyers in India are averse to paying an extra premium for such projects, and the low demand means that developers are not sufficiently active in this segment.

The Budget should provide a combination of incentives to boost the development and buyer interest in green real estate in the country as this will pay off in the long run.

Make additional allocation for infrastructure development in peripheral areas of metros

Although the previous Budget prioritised affordable housing, the upcoming Budget should allocate an amount specifically for building infrastructure and improving connectivity in the peripheral areas of cities, especially the metros.

Without this, it will be difficult to provide affordable housing in the cities. Developers entering this segment should be allowed cheaper financing options, thereby also providing a shot in the arm for government’s ‘Housing for All by 2022’ target.

In the whole article, what is interesting for me is Green Real Estate. Hope, the new buildings constructed will be reasonably energy-efficient green buildings. Praying for the government to take proper care.

How Banks evaluate borrower if he is eligible for Home Loans, using Risk Rating Parameters.

All home loan applications are subject to Risk Rating Model Table. Total maximum marks a person can get is 168 and the cutoff is set at 96. 

The details of the various ‘Rating Parameters and Risk Rating Model’ are given here. Most of the Banks in India, take the decision, whether the borrower is loan eligible or not, based on number of points the borrower gets  from the below table.

‘Rating Parameters and Risk Rating Model  Table’

Sr. No.	Variable	Score	Max	Min
1	Borrower Age (in Year) (a)0–8 (b)Above 18–upto 25 (c)Above 25–upto 40 (d)Above 40–upto 50 (e)More than 50	0 1 4 5 0	5	0
2	Education Qualifications (a)Doctorate/Post Graduate (b)Graduate (c)Diploma (d)Higher Secondary (e)Less than Higher Secondar	5 3 2 1 0	5	0
3	Marital Status (a)Married (b)Single	12 3	12	3
4	Mobility of Individual-Location (a)Has not changed location in past 3 years (b)Changed location once in past 3 years (c)Changed location more than once in past 3 years	10 3 0	10	0
5	Number of dependents (a)Zero (b)One (c)Two (d)More than two	8 5 2 0	8	0
6	Number of join applicants (a)0 (b)1 (c)2 or more	0 5 9	9	0
7	Relationship with bank (a)All banking done through bank (b)Good track record of banking with bank (c)Short term relationship (d)No existing relationship	14 12 3 -4	14	-4
8	Employer type (a)Govt./Public sector (b)MNC (c)Listed private sector companies (d)Professional (e)Unlisted private companies (f)Own business (g)Self Employed (h)Pensioner drawing pension through Bank of Baroda (i)Pensioner drawing pension from others (j)Others	9 9 9 4 8 2 2 0 0 0	9	0
9	Designation (a)Senior Management (b)Middle Management or Self employed (c)Junior/Clerical/Pensioner	5 3 0	5	0
10	Stability of Income (a)Income has been steadily increasing over the last 3 years (b)Income has been almost the same over the last 3 years (c)Income has beenunstable over the last 3 years (d)Income has been steadily decreasing over the last 3years	12 7 0 -5	12	-5
11	Proof of Income of borrower (a)Income tax returns (b)Salary slip (c)Letterhead (d)No proof	3 3 1 0	3	0
12	Marketability of property (Marketability will increase if significant developments are happening in nearby areas,also it will depend on the condition of the property etc.) (a)Very good (b)Good (c)Fair (d)Poor	15 10 5 -8	15	-8
13	Housing loan purpose category (a)Construction (New) (b)Purchase (Old construction) (c)Improvement (d)Foreclosure (for borrowers who borrow in order to repay a previous housing loan) (e)Loan given under the rural housing scheme	4 0 8 8 2	8	0
14	Loan to value ratio (a)Less than 0.5 (b)0.5–0.7 (c)Above 0.7–upto 0.9 (d)More than 0.9	18 12 7 0	18	0
15	Net worth to loan ratio (a)0–0.5 (b)Above 0.5–upto 0.75 (c)Above 0.75–upto 1.0 (d)Above 1.0–upto 1.5 (e)Above 1.5–upto 2.5 (f)More than 2.5	0 1 2 3 4 5	5	0
16	Net annual income of the borrower (in) (a)Lessthan 1,00,000 (b)1,00,000–2,00,000 (c)Above 2.00,000-upto 3,50,000 (d)Above 3,50,000–upto 6,00,000 (e)More than 6,00,000	-5 2 4 6 10	10	-5
17	Fixed obligations to income ratio (a)0-0.3 (b)Above 0.3–upto 0.5 (c)Above 0.5–upto 0.7 (d)More than 0.7	12 8 4 0	12	0
18	Guarantor’s net worth to loan ratio (a)0–0.5 (b)Above 0.5–upto 1 (c)More than 1	-4 4 8	8	-4
	Sum		168	-23

So, 

Did you calculate your Risk Rating Points?

Where do you stand?