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Last Updated : Jan 06, 2017 04:13 PM IST | Source: Moneycontrol.com

Home loan rates reduced! It is time to buy a home

With real estate becoming cleaner after the arrival of RERA, the trust deficit for home buyers has reduced and there is also a price rectification in place.

Vineet Jain

What a splendid start to the New-Year 2017! Declining interest rates from lenders has added colours to the festive season especially if you are an aspiring home buyer. The whole housing finance industry is transforming on the wave of positive changes in the lending landscape. With a lot of positive sentiment driven by the downfall in the interest rates and opening up of housing sector by new schemes announced by the government, real estate off take is going to see a positive upturn which was long pending.   

In fact, let’s look at the overall new picture in lending. The government is pushing reforms both on the cash less front and also in real estate sector. Real estate was bogged down by high dependence on cash and suffered short term shock at the hands of demonetization.

With real estate becoming cleaner after the arrival of RERA, the trust deficit for home buyers has reduced and there is also a price rectification in place. Both will lead to higher demand on real estate as brakes are going to get loosened from the customer’s end. As a perspective, Maharashtra alone has 29 % month of month rise in property registrations with close to 1.5 lakh properties getting registered in the month of December 2017.

The subsidy schemes in the affordable housing segment will trigger heavy buying in that space, and the government is expected to further help in infrastructure creation in Tier 2 and Tier 3 cities where bulk of these transactions is likely to happen. The new subsidized rates announced will take some time for the whole blue print to come in effect with lot of implementation responsibility on NHB’s shoulders. This should become a reality in a couple of months. Players like AU Housing Finance are poised to be big fulfillers of the surge in home loan demand in this segment. Affordable housing will see a huge upside as governments across many states are pushing the agenda of housing for all.          

The opportunity in the home loans space has triggered a war on lending rate slashes across the industry with SBI, PNB, HDFC and ICICI leading the pack trying to out- smart each other and driving the interest rates as low as 8.65 % for home loan borrowers and 11.29 % for personal loan borrowers. This has come in effect by a 45-60 bps drop in six to twelve months marginal cost of funds based lending rate (MCLR).

The latest home loan rates look like this:


This will also trigger a transfer scenario wherein customers can go for a transfer of their loans and save a lot of money on EMI. Customers can save INR 1700 per month on a Rs 50 lakh loan for 25 years tenure because of this interest rate reduction.        

It’s like an increase in monthly income of a new borrower as well, as the same income of Rs 1 lakh rupees per month will fetch him or her loan of INR 58 lakh against an earlier loan of Rs 55 lakh for a 20 years tenure.

It is clear that all the lenders are offering similar rates, the lowest being available as women power scheme wherein there is a woman borrower on the loan structure.  
Overall, there is a big circle of positivity all around home loans industry and residential properties both in affordable housing segment as well as the higher value segments. Lower interest rates, inventory clog driven pricing discounts on real estate and a regulatory push around real estate sector is going to drive home buying northwards and home loans rates downwards with the banks having excess liquidity for some time to come.                   

The message is very clear that home buying season has come , take advantage of low property prices and bottomed out interest rates and stop the wait and watch policy, go for it, the best time is Now.
First Published on Jan 6, 2017 04:13 pm