Affordable home loans for affordable homes?

Post-demonetisation, more and more home buyers are pushing their advantage in a market where home loans are more affordable and opting for cheaper housing. Real estate developers are now allocating resources for affordable houses.

It’s always the old story – demand always determines supply in an open market. This is amply illustrated in terms of the real estate sector in the country. Pushed to living in rental accommodation due to the spiraling property costs, first-time buyers were left with little buying choice when most developers sold luxury housing units. These projects were aimed at investors and second home buyers and were often 2 BHK or 4 BHK ones. Obviously, the cost of these houses was quite out of the reach of most first home buyers.

But demonetisation happened in November 2016, and a few weeks later, banks and financial institutions announced lending rate cuts for home loans. This was done in response to the high volumes of money that banks had in their coffers. From a high 9.6% to 10.5% across banks and financial institutions, the rates were reduced to 8.5%. Today, reputed finance companies like PNBHFL offer 8.5% interest rate on new home loan products.

As per this news report, real estate developers are now changing course and developing affordable residential projects. There are three reasons for this:

1 Buyers are signing up enthusiastically for homes costing below Rs 30 lakh. Meanwhile, the luxury home segment is at a near standstill, so there are many unsold units.

2 Home loan rates have dropped, and there is an increase in the numbers of first-time buyers queuing up to buy homes, albeit in the affordable segment.

3 The Union Budget 2017-2018 offers many tax deductions for the affordable housing segment.

At a time when housing space is at a premium, especially in the country’s metros, many buyers are also making their peace with smaller homes, some of them not measuring over 500 square feet. A smaller house is also priced lower, which means the loan borrowing is correspondingly lower. Many investors are also buying into the affordable housing segment, but most of these houses contribute to the rental economy.

Look for the best lenders

The best lending institutions today offer customers the opportunity to apply for housing loans online. The process is simple and quick, and the approval comes through quite quickly as well. Many good lenders offer doorstep services for home loans – this is convenient and time-efficient. Loan applications from NRIs are also processed quite speedily, considering that they do not have too much time on their hands between making the application and finalizing the purchase.

Use the lender’s EMI and eligibility calculators to find out how much home loan you can get, basis your age, income and credit history.

The time to buy is NOW

First-time buyers should take advantage of the competitive home loan market to eke out the best loan products for their dream homes. Apart from offering attractive interest rates at the moment, housing finance companies like PNBHFL have longer tenures (up to 30 years) and a high LTV (up to 90% of the property’s price). This is a win-win situation for buyers.

Whether a price correction in the market is expected to take place or not, the right time to buy a house in India is now. You might not want to spend too much money on a costly home in the metro. It is wiser to look for Tier II cities and upcoming Smart Cities for housing opportunities. The house sizes in upcoming markets are quite large, and the prices are competitive.

Featured Image Courtesy: Telstar Logistics via VisualHunt / CC BY-NC