In this unprecedentedtime of the coronavirus, it seems like we are bombarded with bad news everyday.Rising cases, loss of lives, high attrition rate, companies grappling with theunique situation, children adjusting to online classes and the inevitable slowdownof the economy has put life, as we know it, on hold and forced us tore-evaluate our habits and practices. Everyone is coping to the best of theirabilities and the pandemic has proven that nothing can break the indomitablehuman spirit. Contrary to general belief, real estate as a vertical has beenless affected than others because housing is a basic need and this pandemic hasmade people realize the importance of owning a home. The age old saying- “ApnaGhar to Apna hi hota hai” has made a comeback with people giving more value toowning a home in a township or society instead of renting one. Real estateindustry is one the highest contributors to the economic growth of the countryand also employs the highest number of labourers. In order to kickstart theeconomy, the Govt. would first have to bring in changes which positively impactstakeholders of the real estate industry, and the announcement of reduction inhome loan interest rate is the very first step in this regard.
The RBI took apositive step in this direction by reducing its repo rate to 4%. In response,Housing Development Finance Corporation (HDFC), India’s largest private sectormortgage financier has also provided much needed relief to all its existingretail home loan and non-home loan customers by reducing its RPLR (retail primelending rate) by 20 basis points to 16.2% following which its new rates willnow range between 7.5-8.5%. Let’s take an example to understand the impact ofthis change on your wallet a little better. If the loan amount is ₹33 lacs,previous EMI would have been ₹27,911 per month which has now reduced to ₹25,486per month. This would lead to huge savings for the customer. The lending rate cutwill also positively impact home buyers affordability, which means that becauseof reduction in home loan interest rate your eligibility for the home loan hasalso increased. Let us understand with an example: Suppose your loaneligibility is 50% of your monthly take home salary, so for an individualearning Rs.75000, the loan amount worth Rs.44,33,675 would increase to Rs.48,55,623 which broadens the scope to opt for bigger size flats or home in ahigh quality township that provides world class facilities for the entirefamily like swimming pool, club house, reading lounge, AC gym etc. The ratereduction has increased the purchasing power of the customers by about 15%, sofor an EMI of Rs. 27911 your home loan would be worth Rs. 33 lacs but now foran EMI of Rs. 27957 you can get a loan of Rs. 36.2 lacs. This piece of good newsin this difficult time is bound to bring a smile on every customer’s face.
Keki Mistry, ViceChairman of HDFC stated to Economic Times that the rate cut reflects its lowercost of funds which have been passed on to the existing home loan and non-homecustomers and easy liquidity has also made funds cheaper for future home buyersand increased their loan affordability. HDFC charges between 7.5%-8.5% intereston home loans. In lieu of the changes, Home Loans up to Rs 30 lacs will becharged lower rates while home loans above Rs 50 lacs will be charged at theupper-end of the band. HDFC charges a processing fee of up to 0.05% of loanamount subject to a maximum amount of Rs 3,000 plus GST.
Infographic shownbelow throws light on the recent changes:
Source: times nownews
So, in conclusionhome buyers can now rest assured with respect to the profitability and securityof their real estate investments. The Govt. is taking adequate measures toensure all industries including real estate is back on track at the earliest.Home buyers can easily buy their dream home now as buying rates have beenreduced to attract them and lending rates on home loans have also been reducedby banks to convenience existing customers and captivate new ones. The cut inlending rates also increases the purchasing power of the home buyer; hencethey’ll be able to afford a bigger and better property with the same amount ofinvestment. By investing in real estate now, investors would be directlyhelping the economy and industry get back on track which is a win win foreveryone involved.
Ashiana, Ashiana Housing build homes. Homes surrounded by vast green spaces and fresh breeze. Homes cocooned in secured gated complexes. Homes where futures are forged and there are opportunities to grow. And Homes in environments brimming with healthy activity, trust and respect. At heart, we build communities with care.
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