Category: Personal Finance

Should You Bet On Banking Stocks In 2021?

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Banks fared COVID-19 better than expectations, say analysts

Analysts at Morgan Stanley said in a recent note that private lenders strengthened their capital, built excess provisions, improved liquidity positions, and increased digital adoption to come out strong from the COVID-19 crisis. A combination of these factors will help them gain rapid market share and materially lower cost to income ratios over the next few years, the note added.

Similarly, American brokerage BofA believes that the actual asset quality concerns in the calendar year 2020 turned out to be “much more limited than worried” possibly due to the banks’ already risk-averse approach over a couple of years leading into the pandemic.

It added that this means investors can now expect the focus to gradually shift from asset quality to growth in 2021.

Investors bet on banks on expectation of growth as the economy recovers

Investors bet on banks on expectation of growth as the economy recovers

Inflows from foreign investors into the Indian equity markets, re-rating, increased digital banking adoption and expectations of earnings upgrade have improved interest for banking stocks among investors.

Analysts at BofA Securities in a recent report said that they have “turned positive” on the Indian banking sector, and have upgraded Axis Bank, IndusInd Bank, and State Bank of India (SBI) on a “surprisingly” resilient asset quality outlook, and reasonable valuations.

CLSA remains optimistic on the sector on the expectation of benign credit cycle for retail and corporate sector. It sees further legs for re-rating in ICICI Bank, SBI, and Axis Bank.

As for PSBs, the mergers and subsequent measures taken to regulate the institutions have aided the rerating. Moreover, public sector banks (PSBs) make for the majority of the market share in India, which means that a pick up in the economy will also help also aid their growth.

RBI's concerns

RBI’s concerns

In his foreword to RBI’s biannual Financial Stability Report (FSR), released earlier this month, RBI governor Shaktikanta Das flagged the growing disconnect between equity markets and real economic activity and warning that the ‘stretched valuations of financial assets’ threaten overall financial stability.

“The disconnect between certain segments of financial markets and the real economy has been accentuating in recent times, both globally and in India,” he said.

The pandemic could also trigger balance sheet impairments and capital shortfalls, especially as regulatory reliefs are rolled back, Das cautioned.

“Congenial liquidity and financing conditions have shored up the financial parameters of banks, but it is recognised that the available accounting numbers obscure a true recognition of stress,” Das wrote.

As per the FSR, the gross non-performing assets (GNPA) and net NPA (NNPA) ratios of banks fell to 7.5% and 2.1%, respectively, by September 2020.

However, RBI warned that the withdrawal of pandemic-triggered reliefs could see a jump in bad loans at lenders.

“The improvements were aided significantly by regulatory dispensations extended in response to the COVID-19 pandemic. Macro-stress tests for credit risk show that SCBs’ GNPA ratio may increase from 7.5% in September 2020 to 13.5% by September 2021 under the baseline scenario,” RBI observed.



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Post Office Time Deposit Vs Bank FD Vs NSC: A Comparison For Tax Savers

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5 Year Tax Saving FD

The 5-year tax-saving FD scheme of banks will serve you if you are a taxpayer and want to seek tax advantage of your investment in bank FD. In compliance with section 80C, the investment made in the bank FD by a tax saver qualifies for tax gain. Under a tax saving FD as the interest is paid together with the principal after the completion of the maturity period one can even opt for either monthly or quarterly or cumulative payout options. No partial or early withdrawal is allowed under the 5-year tax-saving FD scheme and there is no provision for applying for a loan against tax saving FD. Whereas the presumed assurance exists for Bank FD, under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, the exact assurance is only up to Rs 5 lakh. The insurance policy is on the principal and interest gained and is applicable in every branch of a bank on deposits.

5 Best Tax Saving FDs

5 Best Tax Saving FDs

Banks ROI per annum in % for general public ROI per annum in % for senior citizens
DCB Bank 6.75 7.25
Equitas Small Finance Bank 6.75 7.25
AU Small Finance Bank 6.5 7
IndusInd Bank 6.5 7
RBL Bank 6.4 6.9

Post Office Time Deposit

Post Office Time Deposit

In a post office, the post office time deposit (TD) is much like a bank fixed deposit, however one can only deposit for a period of 1 year, 2 years, 3 years, and 5 years. The contribution made for a five-year term is liable for the tax gain under Section 80C. The interest rate on time deposit is kept at 5.5 per cent for 1 to 3 years of maturity period for the present quarter of January to March 2021, while the interest rate is higher on 5 years of deposit, i.e. 6.7 per cent. The interest gained is completely taxable and, as in the example of bank FD, which means that interest received from post office time deposit fall under the head ‘Income from other sources’. There is no chance of any default as the post office small savings schemes are backed by the government of India. There are no monthly, semi-annual or quarterly interest payout alternatives, which means that investors who want a regular income, post office time deposit is not the best.

National Savings Certificates (NSC)

National Savings Certificates (NSC)

Unlike bank FD and PO Time Deposit, NSC doesn’t provide regular or annual interest payout as the tenure of this scheme is 5 years. It is possible to have the amount invested in NSC only upon maturity. One can deposit in 5 Years National Savings Certificate (VIII Issue) with a minimum amount of Rs. 1000/- and in multiples of Rs. 100/- with no upper limit. The subscriber can receive a tax rebate under Section 80C for investments of up to Rs.1.5 lakh in the National Savings Certificate. In addition, the interest received on the certificates is also placed back to the initial investment and also qualifies for a tax deduction. For example, you are eligible for a tax benefit on that initial investment amount in the first year if you buy certificates worth Rs.1,000. But you can seek a tax benefit on that year’s NSC investment(s) in the second year, and also the interest gained in the first year. Which is why the interest is compounded annually and applicable to the initial deposit. Currently, the NSC interest rate is 6.8% per annum but paid upon maturity.

Our take

Our take

Even if the NSC interest rate is higher relative to 5-year tax-saving bank FD and PO 5-year time deposit, you can choose between bank FD and PO Time Deposit if you want to get a regular income after retirement. Although Bank FD has the option of paying monthly, quarterly or half-yearly interest payments, whereas PO Time Deposit only has an annual payout option. So bank FDs can be a good bet here for senior citizens as they relatively get additional interest rate compared to the regular one.



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Post Office Time Deposit Vs Bank FD Vs NSC: A Comparison For Tax Savers

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5 Year Tax Saving FD

The 5-year tax-saving FD scheme of banks will serve you if you are a taxpayer and want to seek tax advantage of your investment in bank FD. In compliance with section 80C, the investment made in the bank FD by a tax saver qualifies for tax gain. Under a tax saving FD as the interest is paid together with the principal after the completion of the maturity period one can even opt for either monthly or quarterly or cumulative payout options. No partial or early withdrawal is allowed under the 5-year tax-saving FD scheme and there is no provision for applying for a loan against tax saving FD. Whereas the presumed assurance exists for Bank FD, under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, the exact assurance is only up to Rs 5 lakh. The insurance policy is on the principal and interest gained and is applicable in every branch of a bank on deposits.

5 Best Tax Saving FDs

5 Best Tax Saving FDs

Banks ROI per annum in % for general public ROI per annum in % for senior citizens
DCB Bank 6.75 7.25
Equitas Small Finance Bank 6.75 7.25
AU Small Finance Bank 6.5 7
IndusInd Bank 6.5 7
RBL Bank 6.4 6.9

Post Office Time Deposit

Post Office Time Deposit

In a post office, the post office time deposit (TD) is much like a bank fixed deposit, however one can only deposit for a period of 1 year, 2 years, 3 years, and 5 years. The contribution made for a five-year term is liable for the tax gain under Section 80C. The interest rate on time deposit is kept at 5.5 per cent for 1 to 3 years of maturity period for the present quarter of January to March 2021, while the interest rate is higher on 5 years of deposit, i.e. 6.7 per cent. The interest gained is completely taxable and, as in the example of bank FD, which means that interest received from post office time deposit fall under the head ‘Income from other sources’. There is no chance of any default as the post office small savings schemes are backed by the government of India. There are no monthly, semi-annual or quarterly interest payout alternatives, which means that investors who want a regular income, post office time deposit is not the best.

National Savings Certificates (NSC)

National Savings Certificates (NSC)

Unlike bank FD and PO Time Deposit, NSC doesn’t provide regular or annual interest payout as the tenure of this scheme is 5 years. It is possible to have the amount invested in NSC only upon maturity. One can deposit in 5 Years National Savings Certificate (VIII Issue) with a minimum amount of Rs. 1000/- and in multiples of Rs. 100/- with no upper limit. The subscriber can receive a tax rebate under Section 80C for investments of up to Rs.1.5 lakh in the National Savings Certificate. In addition, the interest received on the certificates is also placed back to the initial investment and also qualifies for a tax deduction. For example, you are eligible for a tax benefit on that initial investment amount in the first year if you buy certificates worth Rs.1,000. But you can seek a tax benefit on that year’s NSC investment(s) in the second year, and also the interest gained in the first year. Which is why the interest is compounded annually and applicable to the initial deposit. Currently, the NSC interest rate is 6.8% per annum but paid upon maturity.

Our take

Our take

Even if the NSC interest rate is higher relative to 5-year tax-saving bank FD and PO 5-year time deposit, you can choose between bank FD and PO Time Deposit if you want to get a regular income after retirement. Although Bank FD has the option of paying monthly, quarterly or half-yearly interest payments, whereas PO Time Deposit only has an annual payout option. So bank FDs can be a good bet here for senior citizens as they relatively get additional interest rate compared to the regular one.



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Home First Finance IPO Opens January 21: Here’s What To Do

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Investment

oi-Roshni Agarwal

|

In IPOs investors invest assuming that stock will be available at a reasonable valuation and for listing gains, but as seen in the recent past where listing gains have been monumental, 30-40% gains are not much given the current scenario for listing.

And now as we shall the third IPO by home financing company Home First Finance opening tomorrow for public subscription. Here are things to note about the same:

Home First Finance IPO Opens January 21: Here's What To Do

Home First Finance IPO Opens January 21: Here’s What To Do

1. Issue details:

Issue size is Rs. 1153 crore and includes fresh issuance of Rs. 265 crore and an OFS of Rs. 888.72 crore by True North Fund V LLP and Aether (Mauritius), investor Bessemer India Capital Holdings II Ltd, and two individual shareholders.

The company has reduced its fresh issuance from earlier planned Rs. 344 crore because of its pre-placement to Orange Clove and employees.Investor can put in a minimum bid of 28 equity shares and in multiples of 28 equity shares thereafter.

The price band for the maiden public issue has been fixed at Rs 517-518 per equity share. The lower issue price band is 258.50 times the face value of equity share and the upper price band is 259 times the face value. The issue ends on January 25, 2021.

2. About the company:

Technological driven affordable housing company targets first time home buyers from low and middle income and started operations in the year 2010.

The company’s major areas of operations include states like Gujarat, Maharashtra, Karnataka and Tamil Nadu.

3. Issue objectives:

The proceeds from fresh share issuance will be put to augment the company’s capital and support in its growth going forward.

4. Financials:

The company’s clientele is primarily salaried class and its loan assets registered a growth of 63 percent between FY18 and FY20.

5. Valuations:

Valuations for the issue are deemed on a higher side in comparison to other listed peers. “A granular business with average ticket size of its housing loans of Rs 10.1 lakh, with an average loan-to-value on gross loan assets of 48.8 percent, as on September 2020 places it at lower competition intensity from banks and other peers. However, on a P/BVPS (of FY2020) basis, its valuation is on the higher side, as compared to peers,” said Sharekhan in its note.

6. Should you subscribe to the issue of Home First Finance?

There are divided views on the valuation of Home First Finance, while some see it to be aggressively priced in comparison to listed peers, some see it to be priced fairly. And while near term hiccups due to rise in NPAs cannot be ignored for such companies, government measures such as Housing for all initiative as well as the current consolidation in the real estate sector shall be beneficial for these companies in the long run.

But for now, investors can park the money in the IPO for listing gains given the grey market premium that it is commanding which is though less than that of Indigo Paints. Another point to be noted here is that the listing of this scrip shall be post budget so any favourable or adverse policy changes are likely to impact.

GoodReturns.in



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5 Banks That Offer Higher Interest Rate Up to 6.6% On 1-Year FDs

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1 Year FD Rates

Banks ROI in % per annum for general public
Equitas Small Finance Bank 6.60
IndusInd Bank 6.50
RBL Bank 6.50
Ujjivan Small Finance Bank 6.50
DCB Bank 6.25

Taxation

Taxation

By saving up to Rs.1.5 lakh in a tax-saver fixed deposit account, you can reap the benefits of the income tax deduction clause under Section 80C of the Income Tax Act. That being said, you must remember that the account’s interest income is completely taxable. For the financial year, the tax burden is totally contingent on the total income and your tax slab. The interest you receive from FDs falls under the classification ‘Income from Other Sources’. Moreover, if the interest received surpasses Rs.40,000 in a financial year from all the accounts kept with the bank, banks subtract tax at source. In order to validate the specifics of the deduction, a TDS certificate will be provided.

Importance of FD on your personal finance

Importance of FD on your personal finance

For those individuals who don’t want to take the uncertainty, fixed deposit banks are an outstanding investment option. You should go for FD accounts if you want to retain the money over the years and are not searching for increasing wealth or if you are seeking for healthy returns. The capital is deposited in FD accounts by many pensioners, who have a lump sum stemming from retirement so that the monthly interest benefit from the investment can be used as regular expenses. For the benefit of your kids or minors, you should even put aside a lump sum, so they can use the amount for higher education at a later date. If you are trying to create an emergency fund, you must consider FD undoubtedly.

Tips to opt the best-fixed deposit scheme

Tips to opt the best-fixed deposit scheme

Here are some significant considerations that should be considered by any FD investor to optimize good returns:

  • For savers, the interest rate for a given tenure is of key significance. For various tenure preferences, some banks have high FD interest rates. You must first have a clear financial target in mind in order to pick the best possible FD scheme. You can check for a bank that offers the best FD interest rate in the tenure in which you can remain invested but only after considering your financial target.
  • As described above, when determining the right fixed deposit plan, the duration you can deposit your money is a significant factor. Banks have fixed tenure deposits that range from 7 days to 10 years. Based on the financial purpose, you can still invest in a fixed deposit and pick the deposit tenure that fits your goal.
  • A plethora of companies are currently paying higher FD interest rates, but some risk must be noted. Deposits are always recommended for scheduled banks and NBFCs that are approved by ICRA, CRISIL, and so on.
  • And, you can choose company funds dependent on the credit scores on deposits issued if you choose to contribute towards Corporate Fixed Deposits. Company deposits with strong credit scores are deemed healthy (e.g. FAAA, FAA). These scores display a layer of safety with respect to the prompt payment of interest and principal.
  • To verify and compare FD rates of different banks and the maturity amount you will earn on the maturity of your deposit you must go for a Fixed Deposit Calculator. By selecting your deposit amount, tenure, and the relevant fixed deposit rate you can determine your maturity amount. In this aspect, since they have an estimate of returns, individuals can manage their investments carefully.
  • While deciding the right fixed deposit scheme, the payout alternative offered by your bank also serves a significant role, 2 types of fixed deposits are issued by banks in India, i.e. Cumulative and Non-Cumulative FDs. The FD interest will be compounded per quarter, half-year or year under a Cumulative FD Scheme, but will be paid at the completion of the deposit period. You will be paid per quarter, half-year or year under a Non-Cumulative FD Scheme, based on the payout level you have decided with. Mostly for senior citizens who want regular income for their retirement, it is ideally suggested. Alternatively, you must consider cumulative FDs for compounding interest rates if you’re a salaried individual.



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10 Best 2-Year FDs With Good Returns Up To 7%

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2 Year FD Rates

Banks ROI in % per annum for general public ROI in % per annum for senior citizens
Utkarsh Small Finance Bank 7.00 7.50
Suryoday Small Finance Bank 6.75 7.25
Yes Bank 6.50 7.00
DCB Bank 6.50 7.00
RBL Bank 6.50 7.00
ESAF Small Finance Bank 6.50 7.00
KTDFC 6.00 6.25
Axis Bank 5.25 5.90
IDFC First Bank 5.20 5.70
ICICI Bank 5.00 5.50

Why you should opt FD on your portfolio?

Why you should opt FD on your portfolio?

When investing in market-linked securities to gain better returns, investors can be exposed to risks. Therefore, investors often need to pursue stable investment alternatives to ensure sustainable profitability. Fixed deposits are stable and, as compared to highly risky instruments, relate to assured returns. Firstly, even though an investor misses capital on other financial strategies, a part of its losses will be recovered from FD deposits.

Pros and cons of fixed deposits

Pros and cons of fixed deposits

Investors looking to invest in FDs, the following advantages can be beneficial for them:

  • FDs provide assured returns on the invested amount, unlike most other investment vehicles.
  • When it applies to the tenure of the scheme, the best FD plans provide flexibility as the tenure varies from 7 days to 10 years of most financial institutions.
  • For non-cumulative fixed deposit plans, the lender can specify the frequency of the interest payout. They will, thus, serve as an additional income source.
  • Though bank fixed deposits are of great value to many, they often suffer from some drawbacks. Fixed interest rates on deposits do not escalate with time or are in step with inflation. Consequently, if a person is attempting to beat inflation, they are not the right option for investment.
  • For a fixed time, a lump sum balance is locked-in. If you wish to maintain reasonable returns from the deposit, you should not use this money in case of an emergency. Premature withdrawals relate to penalties and unwanted charges.
  • When an investor wishes to pursue a premature exit from an FD, a part of their investment income from the scheme will end up being forfeited.
  • Investors are not eligible for any tax deductions or rebates on fixed deposit interest earnings until an investor actively chooses for tax-saving FDs.

Why you must invest in fixed deposits?

Why you must invest in fixed deposits?

For potential investors, fixed deposits are ideal investment vehicles. In addition, such structures can significantly benefit risk-averse people. There is almost no chance of principal failure, as FDs give guaranteed returns. That being said, investors should note that, as opposed to other high-risk alternatives, the rate of return on such an investment is restricted.



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10 Best 2-Year FDs With Good Returns Up To 7.15%

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Investment

oi-Vipul Das

|

Fixed deposits are a stable investment alternative that promises stable interest rates, special interest rates for seniors, multiple options for paying interest, and tax benefits. Before opening a new fixed deposit or renewing a current one, it is essential to measure the recent fixed deposit rates among the major banks in the country. There is a range of banks and Non-Banking Financial Companies (NBFC) that provide decent guaranteed returns on 2-year FDs. On 2-year FDs the current interest rates go up to 8.25 per cent for the general public and 0.50 per cent additional interest rate to senior citizens. Considering the assured returns, premature withdrawal, loan against FD, nomination facility and so on term deposits can be a good bet for the general public as well as senior citizens. Hence, considering your 2-year of investment horizon we have framed below the top banks that can currently fetch you an interest rate up to 7.15%.

10 Best 2-Year FDs With Good Returns Up To 7.15%

2 Year FD Rates

Banks ROI in % per annum for general public ROI in % per annum for senior citizens
Suryoday Small Finance Bank 7.15 7.65
Utkarsh Small Finance Bank 6.75 7.25
Yes Bank 6.50 7.00
DCB Bank 6.50 7.00
RBL Bank 6.50 7.00
ESAF Small Finance Bank 6.25 6.50
KTDFC 6.00 6.25
IDFC First Bank 5.75 6.25
ICICI Bank 5.15 5.65
Lakshmi Vilas Bank 4.75 5.25

Why you should opt FD on your portfolio?

When investing in market-linked securities to gain better returns, investors can be exposed to risks. Therefore, investors often need to pursue stable investment alternatives to ensure sustainable profitability. Fixed deposits are stable and, as compared to highly risky instruments, relate to assured returns. Firstly, even though an investor misses capital on other financial strategies, a part of its losses will be recovered from FD deposits.

Pros and cons of fixed deposits

Investors looking to invest in FDs, the following advantages can be beneficial for them:

  • FDs provide assured returns on the invested amount, unlike most other investment vehicles.
  • When it applies to the tenure of the scheme, the best FD plans provide flexibility as the tenure varies from 7 days to 10 years of most financial institutions.
  • For non-cumulative fixed deposit plans, the lender can specify the frequency of the interest payout. They will, thus, serve as an additional income source.
  • Though bank fixed deposits are of great value to many, they often suffer from some drawbacks. Fixed interest rates on deposits do not escalate with time or are in step with inflation. Consequently, if a person is attempting to beat inflation, they are not the right option for investment.
  • For a fixed time, a lump sum balance is locked-in. If you wish to maintain reasonable returns from the deposit, you should not use this money in case of an emergency. Premature withdrawals relate to penalties and unwanted charges.
  • When an investor wishes to pursue a premature exit from an FD, a part of their investment income from the scheme will end up being forfeited.
  • Investors are not eligible for any tax deductions or rebates on fixed deposit interest earnings until an investor actively chooses for tax-saving FDs.

Why you must invest in fixed deposits?

For potential investors, fixed deposits are ideal investment vehicles. In addition, such structures can significantly benefit risk-averse people. There is almost no chance of principal failure, as FDs give guaranteed returns. That being said, investors should note that, as opposed to other high-risk alternatives, the rate of return on such an investment is restricted.



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PMVVY Vs SCSS: Where Should I Invest?

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Tenure

Both PMVVY and SCSS are applicable only to senior citizens with a minimum age limit of 60 years and over. Both PMVVY and SCSS are applicable only to senior citizens with a minimum age limit of 60 years and over. So this is your guide to who can invest in SCSS and who can invest in PMVVY. Only, SCSS can also be acquired from those who have received VRS. PMVVY’s maturity period is 10 years. Whereas the maturity period of SCSS is 5 years which can be further extended to a block of 3 years.

Interest rate

Interest rate

One has to address LIC and invest either offline or online through the official portal of LIC in order to invest in PMVVY. Investment in PMVVY can be made till March 31, 2023 and with a policy duration of 10 years you will get an interest rate of 7.4 per cent. That being said, in the instance of the SCSS, at the beginning of each quarter of the financial year, returns are set by the government. For the quarter of January to March 2021, the interest rate is kept at 7.4 per cent same as that of PMVVY. Under PMVVY the minimum pension amount is capped at Rs 1000 per month up to Rs 9250 per month. The maximum pension cap will not be met by the total amount of pension approved per senior citizen. The minimum contribution was also updated to Rs 1,5 6,658 for an annual pension of Rs 12,000 and Rs 1, 62,162 for a minimum monthly pension of Rs 1000 under PMVVY.

Maximum deposit limit

Maximum deposit limit

Rs 15 lac is the maximum amount that can be invested in PMVVY (for monthly pension alternative). For other pension kinds, it is marginally lower (such as quarterly, half-yearly, annually) but because the PMVVY’s upper limit of Rs 15 lac is per elderly people, if both the husband and wife are senior citizens, the family can spend Rs 30 lakhs towards PMVVY. Per senior citizen, the overall investment in SCSS is also capped at Rs 15 lac. Multiple SCSS accounts can be opened, but the cumulative total of all contributions in all SCSS accounts for each senior citizen should not surpass Rs 15 lac.

Payout frequency

Payout frequency

In general, PMVVY is a pension scheme which provides regular income on a monthly, quarterly and semi-annual and annual basis. In SCSS, having quarterly returns is the only alternative. Depending on the individual criteria, a senior citizen must decide appropriately.

Can I go for both SCSS and PMVVY?

Can I go for both SCSS and PMVVY?

In case you and your spouse are over 60 both of you will be entitled to spend Rs 15 lac in both strategies. In sum, a senior citizen couple with Rs 15 lac in SCSS for Husband, Rs 15 lac in SCSS for Wife, Rs 15 lac in PMVVY for Husband, Rs 15 lac in PMVVY for Wife, can spend Rs 60 lac in both the schemes.

Maturity benefit

Maturity benefit

The pensioner gets the full tax-free interest amount at the completion of the 10-year under PMVVY. Similarly, after the maturity period of 5 years one can withdraw the entire corpus from his or her SCSS account. The matured SCSS account can also be extended for another 3 years, although the interest rate will be according to the prevailing rates at the time and not exactly the same as the initial one in the initial 5-year term.

Premature exit

Premature exit

Only in exceptional situations PMVVY account can be closed prematurely. But in this case a penalty of 2 per cent will be charged only 98% of the invested amount will be credited back to the bank account of the subscriber. SCSS makes it possible to close prematurely any time after the date of opening the account, but no interest will be charged if the account is closed before the completion of 1 year of service. A penalty of 1.5 per cent will be deducted from the principal amount if the account is closed after 1 year but before 2 year from the date of opening. Whereas a penalty of 1 % will be deducted from the principal amount if the account is closed after 2 year but before 5 year from the date of account opening.

Taxation

Taxation

For PMVVY investors, no tax benefits are eligible. But tax benefit under Section 80C is available for the contribution made to SCSS. Interest income earned from both PMVVY and SCSS is fully taxable according to the tax slabs of the senior citizen and under the category of ‘Income from Other Sources’.

Our take

Our take

Instead of investing in each of these two investment alternatives a senior citizen should consider investing in both PMVVY and SCSS after making a distinction between PMVVY and SCSS. Though SCSS may be the first option, it is also possible to invest a portion of the funds in PMVVY for 10 years. There are clearly a few variations. Compared with the lock-in period of 10 years of PMVVY, SCSS has a lesser lock-in of 5 years. But again, it also implies that at the end of 5 years, there will be a reinvestment possibility in SCSS in order to pursue a comparable return-yielding player. So if anyone determines that the rate will be lower than what they are now after 10 years, then PMVVY is a safer alternative than SCSS.



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Home Prices To Increase From 2021: End Users And Investors Need To Act Now

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Investment

oi-Roshni Agarwal

|

After a prolonged downturn, the residential real estate market in India is set to pick up as both the end users as well as investors are now showing interest. As per report from a leading research firm Jefferies, there is an expectation that the inventory in the segment could go down to an 8-year low and prices shall also spike by over 10 percent in the next two years.

Home Prices To Increase From 2021: End Users And Investors Need To Act Now

Home Prices To Increase From 2021: End Users And Investors Need To Act Now

Real estate market in 2020

While the sales of residential units across 7 major cities saw a decline, there is seen a decline in inventory overhang by 19 percent from the peak levels of 2016. Also, prices during the Covid 19 hit year were largely steady and infact to push sales, there were offers being put on by developers in the market.

“In the southern cities, price discounts were limited to 1-2 per cent as these markets remained correctly priced and were driven by stable economic activity and end-user demand. In other cities, where inventory levels remained high, developers had to offer slightly higher discounts to push sales. But, even there they were not very high. Developers had limited headroom to cut prices as they have been trending down since 2017”, said Shalin Raina, managing director – residential services, Cushman & Wakefield.

And as the financially distressed players are finally expected to move out there is consolidation currently vigilant in the real estate market.

Real Estate Price appreciation of a meager 25-30% in 8 Years

In the year gone by there was seen a push in demand for residential real estate in the second half and this is positive for the ongoing year. And now, after just 25-30% rise in residential unit prices in eight years, it is highly likely that prices shall again trend higher beginning second half of 2021 as raw material prices are also surging such as those of steel and cement.

So what prospective real estate buyers should do?

Now as interest rates on home loan as well as prices remained and continue to be low, prospective buyers should seal the deal at the earliest. And buying real estate is lucrative owing to various incentives such as GST (goods and services tax), stamp duty, and registration costs.

Also, instead of price appreciation, investors can for now focus to get rental income as price appreciation can be reaped over the long term.

For better and yet more optimal cost on your purchase, you can avail of benefits under Pradhan Mantri Awas Yojana. Also, when buying for investment purposes, go for areas where there is a flux of economic activity as there is no extra efforts required to scout for tenants at such a place and you can also expect rental appreciation.

GoodReturns.in



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IIFL Finance, Standard Chartered enter into co-lending partnership, BFSI News, ET BFSI

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Fairfax and CDC-backed IIFL Finance on Tuesday said its wholly-owned subsidiary IIFL Home Finance Ltd and Standard Chartered Bank have entered into a co-lending arrangement for extending MSME loans. Under this partnership, IIFL Home Finance Ltd and the Standard Chartered Bank will co-originate these loans and the IIFL Home Finance Ltd will service the customers through the entire loan life-cycle including sourcing, documentation, collection and loan servicing, IIFL Finance said in a regulatory filing.

“We believe this is one of the first co-lending partnerships after the RBI’s revised guidelines,” Monu Ratra, the CEO of IIFL Home Finance, said.

IIFL Home Finance in December partnered with ICICI Bank to provide affordable housing and MSME loans as a sourcing partner. In October CSB Bank had also partnered with IIFL Finance for sourcing and managing retail gold loan assets.

IIFL Finance is a retail-oriented non-banking finance companies (NBFC) with about 90 per cent of its Rs 41,000 crore loan book under the retail category.

In November last year, the Reserve Bank had came out with a Co-Lending Model (CLM) scheme under which banks can provide loans along with NBFCs to priority sector borrowers based on a prior agreement.

The CLM, an improvement over the co-origination of loan scheme announced by the RBI in September 2018, seeks to provide greater flexibility to the lending institutions. NKD MR



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