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Tips To Remember While Getting a Home Loan - Posted on: 05-08-2021

Eight lakh housing units are lying unsold across Indias nine major property markets

While developers are under pressure because of the rising inventory level, buyers are finding the current market convenient as they have huge options to pick ready-to-move-property from and at a good bargain.

Home loan rates are at a record low. India’s largest lender, State Bank of India (SBI) recently reduced the interest rate to eight per cent. On purchase of homes with values Rs 45 lakh or less, one can now get a higher tax deduction on the interest component. In the 2019-20 budget, the government has increased the deduction on the interest component up to Rs 3.50 lakh per annum on the purchase of affordable units. Data shows over eight lakh housing units are lying unsold across Indias nine major property markets and half of these are affordable homes.

These measures are increasingly encouraging buyers to invest in property now. Mentioned are pointers to remember while picking a home loan product in the current scenario.

Take home loan from a bank: Before the whole crisis involving non-banking finance companies (NBFC) unfolded, not many borrowers paid attention to whether the home loan lender was a bank, NBFC or a housing finance company (HFC). The recent crisis indicates that the health of entities other than banks might be questionable. It’s advisable to go to a bank with a solid financial standing, even if they are charging slightly higher interest.

Fixed rate interest may be a good idea: In today’s scenario, it’s wise to go for a fixed-rate home loan. Do note that such a product would invariably be priced higher than the floating-rate home loan product. However, the former would remain more viable considering the possibilities of an upward movement in rates in the future, making floating loans an expensive preposition. Try and negotiate a good deal with your bank. 

Know about repo-rate linked home loan products: If you would still like to go with floating rate home loan, know that it will be offered as repo-rate linked loans now. The Reserve Bank of India (RBI) directed banks (RBI) to replace the earlier marginal cost of funds based lending rate (MCLR) regime, with an external benchmark, starting October this year. If you have the enthusiasm of an eager investor and transparency is of utmost importance to you, this is the product for you. Also, maintain some balance in your loan account because in case the interest rate moves upwards, your monthly EMI outgo may increase as a result of policy changes.