Usually, property dealers and builders have tie-ups with banks to offer funding options to customers as a packaged deal that comes with a home loan. Banks charge a higher interest on furnishing homes as compared to that on home loans. Loans are provided for home improvement, on a case-to-case basis, and on amenities. "There is a lot of competition among banks to provide loans on furnishing homes. The rate of interest varies from 8.25 to 9.25 per cent," says Mr Asif Shakh, home loans consultant, Mymakaan.com.
Finance Your Furnishings
| Many banks offer financing for renovation and furnishing of homes. |
ICICI Bank has a home improvement loan (HIL) that gives customers tax benefits. Currently, customers wanting an improvement loan have to take a loan against property, which is expensive and without any tax benefits. The ICICI Bank HIL would give tax benefits under section 1 and 6 for the interest component only (subject to the conditions of the IT Act). Also, the rates for HIL is the same as home loans.
The minimum amount that a person can borrow under this scheme is Rs 1 lakh, while the maximum is Rs 50 lakh. The maximum tenure for all borrower categories is 15 years. For security, ICICI Bank demands an equitable mortgage of the property financed by deposit of title deeds or extension of the mortgage of the property financed.
Moreover, the bank stresses that only those companies, which are going to be completed within 12 months from the first disbursement, will be financed.
Moving along, Bank of India has an offering known as the BoI Star Mortgage Loan. One of the purposes of this loan is to undertake repairs/ renovation/ extension to the residence. The loan is for people engaged in trade, commerce, business, professionals and individuals with high networth, salaried people and agriculturists. For this product, Bank of India charges an interest rate of 1 per cent above PLR or 0.5 per cent above PTLR, presently 12.5 per cent per annum with quarterly compounding upto March 31, 2003 and monthly compounding effective from April 1, 2003.
For agriculturists, the minimum loan amount is Rs 50,000 and maximum Rs 2 lakh. For others, the minimum Rs 1 lakh; there is no upper limit though the same is related to the repayment capacity of the borrower.
The tenure of repayment is within 60 months (excluding moratorium period, if any) by way of EMI. The repayment commences from the month subsequent to the month in which final disbursement is made or six months from the first disbursement, whichever is earlier. In case of agriculturists, the repayment will be related to the generation of income including cropping pattern and other subsidiary activities.
With property rates coming down and the interest rates on loans also at historic lows, consumers are giving a serious thought to interior decorating their abodes. A combination of increasing levels of status-consciousness and disposable incomes have led to booming times for interior decorators and the furnishing industry. "The present day customer is more aware of interiors and is also cost conscious because of the availability and exposure of different products in the market. Compared to previous years, the customer spends more to improve their style of living," says Ms Mahimtura.
Once the financing is tied up, the real task is to hunt for a good interior decorator and a durable range of furnishings. This would vary with the persons choice and style of living. An initial inquiry will yield a list of furnishing stores which include names like Pinnacle Saporiti (Italian Designer Furniture), Poggen Pahl, Glitters International, Ideas Galore, The Living Room, Damian, among others.
While most rates are fixed on products, discounts are being offered depending on the level of purchases. For instance, LVista offers architects discounts on all its products and purchases. On purchases above Rs 5,00,000, LVista offers more discount ranging from 15 to 20 per cent. As per rough estimates of the cost involved, a flat or apartment furnished can vary from Rs 1,000 per sq ft to Rs 5,000 per sq ft.
Over and above this, a consulting fee is charged by the interior decorator which may vary. Ms Mahimtura, for instance, charges a fee of 10 per cent for consulting customers on interior decorating their homes and the fee structure varies from clientele to clientele depending on the cost of interiors.
Says Yamini Interiors Pvt Ltd chief executive officer Sherree Carlos: "All our stores offer credit/debit card and cheque payment facilities to our customers, but we do not have a specific tie-up for payment of large amounts. We do, however, offer our regular institutional buyers credit periods based on our existing relationships with them."
As the product is aimed at women, Yamini has recently been associated with the Standard Chartered Banks Diva card. "We also have a promotional tie-up with American Express," says Ms Carlos.
Due to the highly-fragmented nature of this market and the fact that the unorganised sector is huge -- including women working out of their homes and the presence of traditional upholsters -- it is very difficult to determine the size and growth rate of this industry.
According to Ms Mahimtura, there has been a difference in the last two years because of exposure to different materials and awareness of the clientele, along with many furnishing showrooms opening up in the city. "The industry has been growing, and as I see, it will be growing by say 50 per cent to 100 per cent more in the next five years," notes Ms Mahimtura.
"As the market begins to show signs of being large enough to support long-term investment, there will a growth of more organised players who will bring with them lower costs, stronger marketing, more investment in production/ merchandising/ logistics infrastructure which, in turn, will provide customers with better prices, more design orientation and higher quality of product," feels Ms Carlos.
While earlier consumers considered painting their homes to give it a new look once in five years, and seldom thought of changing their furniture, today accessories like candleholders, book shelves, CD-racks, value additions like outdoor flooring slats, cane baskets, table bases, platters and even a large collection of art works from upcoming artists have found their ways into consumers buying list. Furnishing stores like LVista offer a whole range of such accessories in addition to furniture.
The change has been dynamic -- although there has always been a desire in people to keep their homes looking beautiful, there has been a major change as it moves towards becoming a ready-to-use market. "Although 10 years ago, people still had curtains in their homes, the process of procuring those curtains, (and upholstering those sofas, matching those carpets etc.) was considered to be a once in a long time process, and the idea of being able to go and buy a ready to hang curtain was completely alien to the Indian market," comments Ms Carlos.
As a result, the home furnishing market acted like a "consumer durables" market, with high costs and lots of effort going into a one-time purchase. The frequency of purchases was low. Also the expectations of the market was different, with more emphasis on "durability" and ease of coordination.
Now, with the consumers having a variety of options with which to play, some dont seem to bat an eyelid at changing the accents/colour schemes once every 3 months. Take for example cushions, which are ready-to-use with standard size covers in silks, cottons, organzas, solids, printed, embroidered, embellished, banded, bordered, are available at Yamini from Rs 150 upwards. The minimum cost involved to change the look of a room thus costs just about Rs 600!
Clearly, there is a sea-change in the attitudes of the burgeoning middle class towards spending and consumption. Whereas, 10 years ago, making money was all about saving it and spending only on durables, gold and real estate, today people are open to spending their earnings on products such as clothes, accessories, and entertainment.
"Our customers can afford the products and are used to a high cost of living in order to afford their purchases. The profile of our normal average customer is middle class to upper middle class and to the elite," says Ms Mahimtura.
Adds Ms Carlos, the individual customer profile is mostly women between the ages 20-55 years belonging to SEC A & B, who are design-oriented yet price-conscious. A large portion of our customers is also institutional, such as architects & interior designers.
With mushrooming furnishing stores, customers have a wider choice to choose from, with by and large the same price range. For instance, products at LVista, a new lifestyle and furniture store opened at Phoenix Mills, Lower Parel, Mumbai, products are ranging from Rs 500 onwards till Rs 1,90,000.
Yamini Interiors offers textile-based home products including upholstery fabric by the meter, bedspreads, cushion covers and ready-to-hang curtains, bed and bath linen, table linen, kitchen linen, in the price range of Rs 150 for basic cotton cushion covers to Rs 3,500 for high-end bed spreads such as Maheswari/Jamewars.
Besides Yamini, other home decoration stores include Fab India (Fabrics, made ups like ready curtains, cushion covers, bed & table linen, but primary focus is in the ready-to-wear garments area), The Home Store (merchandise mix is more hard goods-oriented but some amount of softline made-ups), and The Good Earth (merchandise mix is more ceramics and hard goods-oriented, but some amount of softline made-ups).