Booked your house before COVID struck? Here are your options

A glimmer of hope comes in the wake of reduced home loan rates. Interest rates linked to the marginal cost of lending, as well as repo rates have dropped. If you have taken a repo-linked loan, the interest rate will come down. Do check if the lender will pass on the benefit to you if you have an MCLR loan.

For example, on a 20-year outstanding loan of Rs 50 lakh taken at 8.75 per cent, you pay an EMI of Rs 44,185, whereas at 8 per cent, the EMI works out to Rs 41,822 – a saving of Rs 2,363 every month.

As far as possible, avoid hopping banks. “As the balance transfer of a home loan requires a technical assessment of the property and physical movement of documents from one lender to another, it is difficult to complete it during lockdown. It is better to renegotiate the interest rate with your existing lender, rather than scouting for deals with other lenders,” says Sukanya Kumar, founder and CEO of RetailLending.com.

In case of a cash crunch, it is better to approach the bank and apply for an extension of the loan tenure. The EMIs will thus reduce, though you will end up paying more over the tenure of the loan. Do not opt for the moratorium as far as possible. Doing so would add to your outflows later.

Dealing with falling property prices

You may have bought your house at a certain price, only to see the property’s value fall later. “As the demand for homes has gone down, developers have to reduce the prices to get rid of unsold inventory,” says Naushad Panjwani, founder and managing partner, Mandarus Partners. He expects real estate prices to move downwards in the near future.

There is little you can do about it. But the falling prices will play a key role if you chose to refinance a loan from another lender. “The lower valuation of the property will be taken by the lender if you want to refinance your existing home loan,” says Kumar.

Deleveraging and raising cash

If you can prepay your home loan, do so. Avoid touching your retirement savings though.

There is a lesson for future property buyers: first sell your existing house and then scout for deals, especially in a slow real estate market. This way, you also know your budget and affordability based on the amount you have actually realised.

Cancelling the booking

If you face a serious strain on your finances, you should explore the option of cancelling the booked house. “Properties booked prior to the lockdown may not have the provision to get full refund – there would be some cancellation charges levied by the builder,” says Prashant Thakur, Head-Research, ANAROCK Property Consultants.  Do read the sale agreement and understand the clause. Many developers charge 5-10 percent of the ‘agreement value’ as the cancellation charges.

“In case the builder declines to repay the money, there are various options such as approaching the respective RERA authorities, as well as consumer courts,” says Thakur.

Interiors come later, focus on getting possession

Be prudent with the expenses to be incurred on your new house. Avoid pre-booking appliances meant for your new property, just because discounts are available. You may take longer to get your house and the pre-booked items may have conditions attached, which will make you spend on them much before you get the possession.

The ground rules for negotiating rates,moving home loans and the regal recourse available to buyers have been discussed here. In the next part, we will look at various financing schemes offered by builders to lure buyers and dwell on whether buying a property makes sense in these pandemic times.