Diwali is an auspicious occasion for many to make new beginnings. Buying a new home or moving into one for the first time is an important milestone in one’s life. And banks are only too happy to help, with their festive season offers that are usually abundant during this time.
But don’t get blinded by the glitter of Diwali, shining new houses on display and tempting loan offers. For starters, you must be able to afford paying back your housing loans through equated monthly instalments (EMI). And that is just the beginning.
What’s the offer?
This festive season, several financial institutions have announced multiple offers to lure the would-be homebuyer’s interest.
For instance, HDFC Bank has announced its ‘Festive Treats’ campaign. Under this, all existing and non-bank customers, including salaried individuals and business owners, can avail its XPRESS home loan at discounted interest rates starting from 8.35 percent onwards with a 50 percent discount on processing fees thrown in.
Similarly, Punjab National Bank and Bank of Baroda have announced special home loan offers with discounted interest rates starting at 8.40 percent per annum.
On its part, State Bank of India (SBI) is offering up to 65 basis points interest rate concession to customers at the highest tier of credit scores, or those with scores of 700 and above.
Money on the table
Ensure that you have sufficient savings for the down payment of 10 to 30 percent of your property value. “Aligning with the Reserve bank of India (RBI) guidelines that restrict LTV (loan-to-value) ratios, for properties under Rs 30 lakh the LTV ratios shouldn't exceed 90 percent, for Rs 30-75 lakh, its 80 percent, and above Rs 75 lakh, it's 75 percent. This means you must cover the remaining property cost with your down payment,” explained Rahul Mehrotra, managing director and chief executive officer (CEO) of Religare Housing Development Finance Corporation Limited.
The down payment is a significant initial cost. “Having a substantial savings reserve is essential to ensure that you can comfortably cover this upfront expense without straining your finances,” said Kamaljeet Rastogi, CEO, SahiBnk, a wing of Manipal Business Solutions.
Builder’s background check
Equally important is conducting a thorough background check on the builder. The reputation and track record of the builder play a crucial role in determining the quality and reliability of your future home. “Trustworthy builders not only deliver the promised quality but also provide peace of mind throughout the home-buying process,” said Rastogi.
Vishal Bhargava, an independent real estate analyst, cautioned, “It's important to not go for the builder who's offering the residential property at the lowest price because there's a very high likelihood that the builder who's giving you the least price will probably not complete the project.” So, you must choose a developer who has some reputation in the market.
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Check the project details on RERA website
On the website of the respective state real estate regulatory authority, you need to check for three crucial things. “First, you need to check the plan of the project. Then get the details of the architect and the contractor, and past projects they were associated with,” said Bhargava.
He added that these details will give you an idea of the quality of the building that will eventually come up.
Further, check the possession date on the RERA site. The possession date you will be told when you're taking a home will not be the same as the RERA possession date because builders keep a buffer. It means, the builder can give a possession date of December 1, 2025, but on the RERA website, the possession date for the same project could be December 1, 2027.
Lastly, check the cost that the builder is paying to its lender for construction of the project. If a builder is paying more than 16 percent interest rate per annum, that builder is a risky bet.
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Do not fall in a festive offers trap
Discounts offered by developers timed with festivals can be alluring, but it's essential to have a clear understanding of the property's actual pricing before such offers come into play. “Some builders may inflate prices before offering discounts, so diligent research is necessary to ensure you're getting a genuinely good deal,” said Rastogi.
“It’s always advisable to do a reality check to verify the authenticity of the schemes being floated by the builders,” said Aditya Damani, founder and CEO of Credit Fair, a non-banking financial company.
“Festive offers from the builders should not make your decision move from 50 percent conviction to 100 percent conviction to buy,” Bhargava said. He added that buying because of a lucrative festive offer is an awful way to buy a house.
Buy a property within your budget
Your home purchase should be within your financial means. “It is essential to ensure that the EMI amount does not strain the monthly budget and that it can be comfortably paid without relying on future income growth,” said Pramod Kathuria, founder and CEO of Easiloan, a fintech lender.
Also keep in mind that different builders may offer different payment structures, such as construction-linked or possession-linked plans.
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Know additional costs linked to your home purchase
Kathuria says that in addition to the down payment and EMI, first-time homebuyers should also budget for registration and stamp duty charges, apart from extra costs that could be added on, such as for interiors.
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