Are you aware of these latest home loan updates?
The last few years have proven to be quite dynamic for India’s home loan sector. Backed by government incentives like PMAY to boost the country’s real estate sector, and lending rate reforms, availing housing loans have become easier and much more beneficial than it was a few years ago. This has been evident from the 16% growth in housing credits over the fiscal year 2018. With the Central Bank and Government introducing new multiple amendments in the sector constantly, it is crucial for borrowers to remain updated about the same to maximize their benefits from such advances.
Brief Overview of India’s Housing Loan Sector
●10% – Mortgage penetration level in FY 2018, which is the percentage of housing credits against India’s GDP.
●300-500 basis points – Expected mortgage penetration level growth in India in the next 5 years.
●17% to 19% - Expected growth in housing credits for FY 2018-19.
The most recent surge in housing credit demands has been prompted by updates from the RBI which mandate financial institutions to link their lending rates to external benchmarks such as the MCLR. This is a crucial update for borrowers as it is set to directly affect their home loan interest rates.
Following is an elaboration on the latest updates in the housing loan sector and how it will impact borrowers.
1.Introduction of Repo-Linked Interest Rates
Perhaps the most important change in housing credit lending, the introduction of repo-linked interest rates can help borrowers avail low-interest home loans much more easily.
Previously, under base-rate linked and MCLR-linked lending regimes, borrowers were not completely able to benefit from repo-rate cuts put forth by the RBI. But now, the transmission of repo-rate cuts to borrowers will be carried out much faster and with greater transparency via the MCLR.
For instance, some of the financial institutions in the country have already adopted this system of lending and have reduced their interest rates according to the latest repo-rate cut, which has put RBI’s rate at 5.40%.
It is, therefore, important for individuals to check if their financial institutions have integrated this new regime into their housing credit lending system to lower their EMI payments. They can further know the change in their repayment liability by using an online EMI calculator.
Apart from lowered interest rates, the introduction of repo-linked interest rates will also impart the following benefits to borrowers –
●It will make comparing loans easier.
●It will promote transparency in loan transactions.
●Faster transmission of repo-rate cuts to borrowers.
Government-backed incentives like Pradhan Mantri Awas Yojana for home loans and Real Estate Regulation and Development Act have also aided in boosting the growth of the country’s housing loan sector to quite an extent. For instance, under the PMAY Urban scheme, about 65.43 Lakh houses have been sanctioned in total. Apart from this, the credit-link subsidy scheme under PMAY, which allows individuals to avail home loan at subsidized interest rates has been availed by a total of 93,000 beneficiaries as of now.
While PMAY has provided individuals with the perfect opportunity to buy their dream home, the implementation of RERA has made investing in real estate much more secure for borrowers. As of 2019, 29 states/union territories in India have been brought under RERA to safeguard the interest of homebuyers.
These are the most crucial updates in the housing credit sector that borrowers should familiarise themselves with to maximize the benefits they can avail. Apart from these, to enjoy the best home loan offers, individuals should look for factors like a high loan amount value, flexible tenor, minimal documentation, balance transfer facilities, etc. to ensure that they avail the best housing credit available in the market.
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