According to a financial report by the Reserve Bank of India, the total outstanding balance in the housing loan segment stood at Rs.13.3 lakh crore, as of February 2020. Home loans in India have grown in popularity by leaps and bounds over the past decade.
However, due to an economic slowdown in effect since 2019, demand for real estate plummeted. In response, RBI and the Government of India implemented a slew of measures to revive this demand, making home loans a much viable and economical option to finance a property purchase.
- RBI’s Monetary Policy Committee slashed repo rate by 250 basis points since February 2019.
- In May 2020, the Indian Finance Ministry sanctioned a liquidity stimulus of Rs.30000 crore for NBFCs and HFCs.
- Home loan interest rates are at a 15-year low.
Thus, the present situation might be the most advantageous to apply for a home loan. It would allow you significant financial flexibility in achieving homeownership in the current scenario.
Why should you avail a home loan now?
The three primary reasons why availing a home loan in India currently puts you in a considerably beneficial position are:
Low GST on property purchase
The Goods and Services Tax on real estate is considerably low at present. According to the GST council’s 33rd meeting –
- Applicable GST on residential properties is 1% without ITC if it is part of the affordable housing segment.
- It is 5% without ITC on residential properties, not part of the affordable housing segment.
In a metropolitan area, like Mumbai, Delhi, Hyderabad, and Kolkata, a residential property with a floor area of up to 60 sq. m and priced within Rs.45 lakh is considered a part of the affordable housing segment. On the other hand, in non-metropolitan areas, a property with a carpet area of 90 sq. m and priced similarly belongs to the affordable section. These properties are taxed at 1% without ITC, ensuring significantly low prices.
Thus, with the GST rate cut, the best time to plan your new home is now. You can apply for a home loan to facilitate your purchase.
Low real estate prices
Real estate is one of the sectors hit the hardest by the economic slowdown snowballing over the past few years. As an effect, realtors across India have lowered the prices of residential properties to ensure demand remains steady.
With real estate price drops, you can buy a larger property with the same budget or save on your finances. Moreover, it allows you to assume a lesser burden when applying for the best home loan to finance your property purchase. You can either opt for a lower down payment or choose to secure a smaller loan amount.
Reduced home loan interest rates
The Reserve Bank of India has been in the forefront to induce market demand for residential properties. Among its several measures, one of the most pronounced has been the reduction in repo rate.
As mentioned earlier, RBI has reduced repo rates by 250 bps (100 bps = 1%) since February 2019, resulting in 15-year low interest rates in the home loan sector.
- Currently, the repo rate is 4%
By availing a home loan with low interest rates, you can ensure lower EMIs or a shorter tenor. This way, you can reduce your cost of a loan significantly.
Apart from these, several financial institutions also provide pre-approved offers on loans to ensure faster and more efficient loan processing. These offers apply to a host of credit facilities, like home loans, loans against property, etc. You can check your pre-approved offer by providing your name and phone number.
What are the features of a home loan?
Alongside the benefits mentioned above, you can also enjoy the following advantages when you apply for a home loan –
Flexible tenor
A home loan comes with a repayment period ranging up to 20 years or 240 months. You can opt for any tenor that suits your affordability. In general, if you choose a shorter period, the EMI amount will be higher, but the overall cost of a loan shall be lower. Conversely, you may opt for a more extended tenor if you want to keep EMI burden to a minimum. A home loan EMI calculator might come in handy when choosing which tenor will be ideal for you.
PMAY
If you are a first-time homeowner, you may be eligible for the Pradhan Mantri Awas Yojana. Under this initiative, you can avail a home loan at a subsidised interest rate, further reducing your interest burden.
Top-up loan
Certain financial institutions provide a top-up loan facility over and above the existing credit you avail. You can utilise this option to mitigate ancillary costs associated with being a new homeowner, like furnishing expenses. One of the things you need to know about a top-up loan is it does not involve any additional documentation.
Alongside these features, you can also utilise facilities like part prepayment and foreclosure. Nevertheless, when you apply for a home loan, be thorough about your repayment planning to ensure efficient handling.
