If you have been dreaming of buying your own home for some time now, now may be the best time to do so. The Reserve Bank of India (RBI) had reduced repo rates which had a direct impact on the interest rates of home loans offered by banks. The recent Covid-19 pandemic resulted in further repo rate cuts by the RBI, thus lowering home loan rates even more.
Apart from all this, the expansion of the Pradhan Mantri Awas Yojana – Urban (PMAY-U) scheme, the launch of various smart cities across India, the regulation of the real estate sector by the Real Estate (Regulation and Development) Act (RERA), as well as the proliferation of Non-Banking Financial Companies (NBFCs) offering home loans at competitive interest rates and features, have all made this one of the best times to buy your own dream home in India.
Even when there are so many economic factors wreaking havoc with the economy, the real estate industry is one that will always be in demand. Here are details on why this could be the best time for you to take the plunge and buy that property you have always dreamt of, whether it is an apartment, an independent house, or a residential plot.
Home loan interest rate cuts
Banks have now linked home loan interest rates with the Repo Linked Lending Rate (RLLR) which is in turn affected by the repo rate set by the RBI. The system that was in use earlier was the Marginal Cost of funds based Lending Rate (MCLR) which is still in use by banks for loans that were started earlier. You have an option for switching from the MCLR to the RLLR system. With the RLLR system, interest rates are floating, which means that any time there is an increase or decrease in the RBI’s repo rates, banks follow suit and increase or decrease the home loan interest rates. So far, there has only been a reduction in repo rates, which means home loan interest rates have been going down for some time.
PMAY-U interest subsidies
The Pradhan Mantri Awas Yojana (Urban) scheme is available for various income categories, from the Lower Income Groups (monthly income of up to Rs.50,000) to the High Income Groups (monthly income exceeding Rs.75,000). Based on the income slab, interest subsidies of up to 6.5% can be availed, which is a considerable amount of savings during the course of the tenure on the interest component of a home loan. By applying for a loan under the PMAY scheme from banks and NBFCs that are authorised to offer the scheme, you can avail a home loan with significant savings on interest, provided you meet the eligibility criteria and get sanctioned for the scheme.
Smart Cities projects
Smart cities aim to provide world-class standards of living at lower real estate prices by keeping the developmental and operational costs low. If you invest in a property in a smart cities project, you will also be able to avail several other features that make it more cost-effective in the long run, such as smart energy and water saving measures, digitised commutes, digitised plumbing, etc.
RERA was passed in the year 2016 as a means of regulating the real estate industry and protecting the interests of home buyers. It encourages builders to complete projects on time and hand over the possession of the property to buyers within the scheduled timeframe. If commitments are not kept, buyers are entitled to a complete refund by the developers, which in turn ensures that they keep their promises. Apart from this, builders are not allowed to demand more than 10% of the property cost as down-payment, which means more people can afford to buy a property as down-payments are kept low.
Impact of NBFCs
With NBFCs being allowed to operate within the home loan space, there has been increased competition with banks, which has led to the customer becoming the proverbial king or queen. This has resulted in competitive interest rates and other features that are beneficial to the buyer who is in the market on the lookout for a new home. There are now a wide variety of home loan schemes designed to woo the customer, with features ranging from interest-only Equated Monthly Instalments (EMIs) for the first few years to EMI holidays and top-up loans.
All of the factors listed above are the reasons why you will be doing yourself and your family a huge favour by choosing to buy a home in the current real estate scenario.