[ecis2016.org] With interest rates on a downward trajectory, this may be the best time to avail of a housing loan. We look at the options available for home buyers and the factors to watch out for
For many, the decision to buy a home, depends on whether one is able to get a home loan on time, or not. Most housing finance companies ask the borrower to pay 10-20 per cent of the total value of the property as margin money, to get the home loan. Interest rate, eligibility norms and charges related to the home loan, such as processing charges, legal fees, etc., are other factors that impact the home buying decision.
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Nevertheless, obtaining the finances to buy a home, has become easier now, owing to several factors. The government too has stated its objective of providing ‘Housing for All by 2022’ and has also launched the Pradhan Mantri Awas Yojana (PMAY).
Benefits available on home loans
“The PMAY is an enabler for households having an income of less than Rs 20 lakhs, to be able to benefit from various interest subvention, credit and tax relief schemes, making the entire process of buying their first home possible in a faster and cheaper manner. Several housing finance companies have also focussed on providing mortgages towards purchase of such affordable homes, including to prospective buyers who may not have a strong credit history or substantial proof of income to support such house purchase,” says Amit Goenka, MD and CEO at Nisus Finance Services Co Private Ltd (NiFCO).
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After demonetisation and the implementation of the Goods and Services Tax (GST), the real estate market has witnessed a slowdown. With home loans being a big source of revenue for the banking industry, they are now trying to revive growth, by offering attractive loan schemes to home buyers.
ICICI Bank, for example, is giving its customers one per cent cash-back on each EMI, for the entire loan period. The minimum tenure to avail of this offer is 15 years. Similarly, Axis Bank under its Shubh Aarambh scheme is offering 12 EMI waivers, if the borrower repays the EMIs regularly. The EMIs will be credited in three instalments of four EMIs each after four years, eight years and 12 years of the loan’s tenure.
Charges and other factors to consider, while applying for a housing loan
While considering a home loan under a special scheme, compare it with regular home loans and figure out the advantages and disadvantages of both, over the long term. While special schemes may seem attractive in the short term, assess its long-term impact, as home loans are generally taken for more than 10 years tenure.
[ecis2016.org] Tips to get the best home loan product
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“Identify the approximate eligibility amount from a bank, to know the maximum loan amount. It is advisable to check whether stamp duty, registration charges, GST, etc., will be included in the total loan cost. The buyer will also have to bear payments after possession, such as common maintenance charges, clubhouse charges, etc.,” advises Babu Sivaprakasam, partner – head banking and finance, real estate, Economic Laws Practice.
At present, home loans interest rates are in the range of 8.15-8.5 per cent and several banks have waived the processing charges. Experts believe that interest rates are unlikely to move higher from the current levels, for at least three years. With developers keen to offload their inventory and adhere to the Real Estate (Regulation and Development) Act’s rules, this may be a good time for home seekers to apply for home loans and buy their dream home, with attractive deals from banks as well as developers.
Home loan interest rates
| Lender’s name | Floating interest rate (Per cent, per annum) | Processing fee |
| Punjab National Bank | 8.35-8.45 | Processing fee waived from October 1, 2017 to December 31, 2017. |
| State Bank of India | 8.35-8.65 | Zero processing fee for loan from September 1, 2017 to December 31, 2017. |
| United Bank of India | 8.55 | Processing charges are waived till December 31, 2017. |
| Axis Bank | 8.35-8.75 | Up to one per cent of the loan amount, subject to a minimum of Rs 10,000. |
* As on Oct 18, 2017, for salaried applicants.
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