Real Estate News on Home Loans

The formation of a new central government brought back a positive momentum in the real estate segment. With plans to increase the LTV ratio as high as 90% by the National Housing Board and discounted interest rates being offered by top lenders ICICI Bank and State Bank of India, the home loan market has witnessed a good month. The Reserve Bank of India kept the repo rates unchanged helping in continuation of home loan interest rates devoid of any hike. Now with the annual budget just a few weeks away, the real estate industry and home loan seekers are bracing for positive announcement in the budget that can bring back the buzz in the home loan segment and the real estate sector as a whole.

RBI keeps repo rates untouched:

In a positive development announced in the beginning of the month of June, the Reserve Bank of India kept key rates unchanged. The repo rate was unchanged at 8% while the reserve repo rate was fixed at 7%. The SLR however was cut by 50 basis points. The announcements were largely as per market expectations and meant little or no change in home loan interest rates for new or existing borrowers.

High expectations from Union Budget 2014-15:

With the new central government likely to present its annual budget on the 10th of July, there are high expectation from both real estate developers and potential buyers. A vast majority of people expect the Narendra Modi government to announce a real estate regulatory or watchdog much on the lines of TRAI for the telecom sector. While developers expect change in laws for easier clearances, home loan borrowers are expecting deduction on home loan interest rates making buying a home more affordable to the common man.

NHB to allow up to 90% LTV:

Earlier the national housing bank NHB announced its plans to increase the LTV ratio for home loans above Rs. 20 Lakhs to 90% of the property value. If approved the NHB plan would allow more users to avail home loans as it would reduce the margin money required by individuals seeking home loans. With the sluggish gains in the real estate sector in the past year, NHB plans to increase LTV ratio is likely to trigger a positive impetus in the domestic housing real estate market. 

ICICI Bank cuts home loan rates:

ICICI Bank, India’s largest private bank and also the biggest home loan provider in the private sector announced a 0.10 percent cut in home loan interest rates. The limited period offer ending on June 30th brings ICICI Bank home loan interest rates at par with the discounted home loan rates of State Bank of India, the country's largest home loan lender. ICICI Bank offers home loans up to Rs. 75 Lakhs 10 10.15% while women borrowers would be given a further 0.05% discount with loans available at 10,10%.

SBI extends discount scheme for women borrowers:

The State Bank of India extended its home loan interest scheme especially designed for women borrowers. The scheme which was originally to expire on March 31, 2014 has been extended for an indefinite period allowing women borrowers a discounted interest rate of 10.10% for home loans above Rs. 75 Lakhs. For home loans above Rs. 75 Lakhs, women borrowers are eligible for home loans at 10.25% compared to 10.30% for other borrowers.

Developers want Home Loan Interest Exemption to be upped

The real estate market in India exhibits a practical example of demand and supply – basic law of economics. The soaring prices of property depict its excess demand which is making investment more expensive with each passing day. The high appreciation in property prices, ranging up to 50%, has not only caught the common man’s attention, but has even tempted NRIs to invest their funds. At this point, the government has to play a crucial role in the revival of residential real estate prices with new policies, increased tax exemption, and reduced interest rates, etc.

Home Loans in India

The boom in the real estate sector has given home loan business a new dimension by attracting various investors to build their dream house. Though home loans have always been the best choice for the end customers, but in the recent times, constant home loan tax exemption of Rs 1.5 Lakhs has failed to match the inflation. The middle income groups, especially the salaried individuals’ feel prohibitive prices and a few incentives make their dream beyond reach. Furthermore, the current tax benefits are too less to fuel the demand and propel growth in infrastructure.

Need for Increase in Tax Exemption on Home Loan

With the entry of a stable government, everyone is expecting the upcoming budget to provide the required policy incentives, stability and tax concessions for promoting the investments and economic growth of the country. The new government should primarily focus on continuing stimulus measures, seeing the delicate situation of economic recovery.

Specifically, in the context of real estate, developers feel a strong need for tax exemption in order to make home loan finance sector affordable. Few of the key recommendations for the upcoming budget are listed below:

·          Infrastructure status to be given for affordable housing: In this scenario, once the infrastructure will fall under priority sector lending of banks, it will provide funds at less rates.

·         Increase in exemption limit for home loan interest: The tax benefit for home loan interest has been the same at Rs 1.5 Lakhs since 2001. Since, the real estate prices have increased manifolds; the amount of loan required by an investor has also been directly affected. Developers are of the opinion that if this limit is increased to Rs 3 Lakhs, it might help in bringing back the boom in the real estate industry. This would surely be quite lucrative for the investors as it would imply additional tax savings as well.

·         Revision of home loan limit for PSL: The housing loan limit should be revised from Rs 25 Lakhs to Rs 35 Lakhs under PSL as this move would help buyers who are struggling to buy property due to soaring prices.

·         Income tax rebate should be extended to the private sector for the development of affordable housing

To sum up, the raised expectations of developers should be considered in order to review the benefits that housing loans provide under the various sections of income tax act. This move will definitely help people at all levels to borrow in order to fulfil their dream of owning a property.

How to Choose the Best Home Loan in India?

There are a number of financial institutions and banks in India that provide varied banking solutions, loans, investment options and many more services according to an individual’s requirement. All banks are competitive in terms of offers, discounts and the interest rates; hence, it becomes worrisome to select the best amongst the hundreds of alternatives.

There are more than a hundred banks in India which provide home loans to all classes of people on the basis of affordability. The main and foremost feature to look in the home loan is the “home loan interest rates” along with the repayment methods. It should be competitive enough with no hidden charges, quick processing time and the transparency throughout the procedure.

Understanding the types of home loan interest rates helps to select the ideal one.

Ø  Secured Home loan: These are loans provided against some kind of security or guarantee, such as a loan against property, any valuable asset, or jewellery or some legal documents. If any default situation arises, then the pledged thing becomes the lending institution’s property. In this case, the interest rates are comparatively less.

Ø  Unsecured Home loan: Loans are issued without any security, but the interest rates are higher as the loan is disbursed under the lender’s risk.

Ø  Variable Interest Rates: The interest rate may increase or decrease depending on the market fluidity.

Ø  Fixed Interest Rate: Here, the rate of interest is fixed throughout the loan tenure.

Ø  Split Loan: Some lending institutions or banks also provide split loans in which half of the loan amount is of variable type and the rest would be of fixed type.

Along with home loan interest rates, there are a few other features to be looked into while going for a home loan.

1. The EMI concept - The Equated Monthly Installments (EMI) are calculated using the home loan EMI calculator, depending on the down payment amount, and the loan amount. The loan amount includes the principal rate and the rate of interest. The more the down payment, the lesser the EMI would be. Calculate and think about the size of EMI you can afford every month till the loan tenure.

2. Loan Tenure - Loan tenure can be adjusted according to the affordability of the EMI. The increased loan tenure contains the increased rate of interest as well.

3. The Processing and other hidden charges -  There are banks, which believe in serving the people in any way, thus such banks waive off the process fee with an affordable interest rate. Compare the banks for the transparency in the procedure.

4. Ensure the Eligibility criteria and the documentation process - Compare the eligibility criteria, some banks are not stern about the eligibility and also provide a relaxation in the age and income factors. Ensure the facts and ensure a hassle free documentation check process.

5. Prepayment / Foreclosure options - The home loans can be closed anytime after six months of loan disbursal with a small percentage of foreclosure charges of the outstanding principal amount.

Thus, narrow down your search after considering and understanding the features to choose the best home loan, which can be applied either online or at the nearest branches with the required documents. Then the essential verification are done to disburse the home loan in 3-4 days.