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The rising cost of residential accommodation has led to the popularity of Home Loans in India. Home loan is the finance borrowed from a bank or financial institution to buy or modify a residential real estate property. Any Resident or Non-resident individual who is planning to buy a house in India can apply for a Home loan. If you have decided to buy a property in the near future you can even apply for a loan before you select your property. It becomes easier if the property you are planning to buy is in a condominium or township that is pre-approved by a bank or financial institution.
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The steep rises in the real estate prices in India are mainly due to the disparity in supply and demand of quality residential accommodation. The largest group of the Indian demography, the middle-class Indian population avails the major bulk of home loans in India. Home loans are facilitated by all public and private sector banks operating in India. Financial institutions specializing in home financing are also cashing in on the latest boom in home loans.
The recent downturn in the economy resulted in buyers constituting the 'end-users' segment rather than investors and speculators. Since the new class of buyers is a relatively younger set of customers, more aware of legal documentation, approvals and due diligence, we have seen the much-needed professionalism and accountability become more prevalent in the industry.
Today, the amount of money that a city dweller spends on rent is roughly the same, or only slightly less than the amount he pays as the EMI (Equated Monthly Installments) on a housing loan. Home loans are made available by financial institutions to both Indian and NRI applicants at floating or fixed rate of interest and also at attractive EMI options:
• For construction or buying a new home
• For purchase of plots for construction of house
• For home repairs and renovations or extension of an existing house or flat
• Against mortgage of property
• Purchase of home consumer durables and furnishings as included in the project cost
The buyers should try to take loan from established banks and financial institutions that screen the entire project before approving a loan for an apartment or plot in that project. In the course of approving a project, these institutions ensure that the developer has all the requisite approvals and sanctions. The government has recently announced interest rate subsidy of 1% for housing loans up to Rs. 10 lakhs and earmarked Rs. 1,000 crores for the scheme. The subsidy of 1% will be available for the first 12 EMIs on loans up to Rs. 10 lakhs for houses costing less than Rs. 20 lakhs.
For those planning to take a loan to buy a house, there is good news. The prevailing home loan rates from nationalized banks and housing finance companies are fairly reasonable:
• State Bank of India (SBI): 8% – 8.5% for Rs. 30-50 lakhs loan for 20 years (8% fixed for 1st year and 8.5% fixed for the next two years)
• Punjab National Bank (PNB): 8.5% for Rs. 30 lakhs and 9.25% for Rs. 30-50 lakhs loan for 20 years (fixed for three years)
• Life Insurance Corporation (LIC): 8.75% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• HDFC: 9% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• ICICI: 9.25% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
• Dewan Housing Finance Corporation Limited (DHFL): 9.25% for Rs. 30-50 lakhs loan for 20 years (floating home loan rates)
Further, various banks and finance companies are coming up with schemes ahead of Diwali. Deals include low, adjustable introductory rates for initial years, with some lenders giving the option to shift to either fixed or floating rates in subsequent years. Lenders like Canara Bank, Bank of Maharashtra and Dena Bank are offering fixed-rate loans for the first 5 years, and subsequently, linking the loans to their prime lending rates. While others like Bank of India are offering fixed-rate loans for the first 2 years. India’s largest bank SBI is offering fixed rates for the first 3 years. Development Bank of Credit introduced a fixed rate of 7.95% for the first year, the lowest, at least, for the first year.
Moreover, in order to attract investors, Housing Finance Companies are offering incentives like:
• Free accident insurance & property insurance
• Waiving of pre-payment penalty & processing fee
My advice to all prospective home buyers: Be diligent, be bold and fulfill your dream as it is a buyers’ market at present. Just one word of caution; check the credentials and track record of the Developer you are buying from.
