You have done the research. Scouted a hundred properties. Had late night discussions with friends and family. Finally, you think, this is the house you have been waiting for. The home that is yours to make. You take a deep breath and take the plunge. You commit to what might well be the most expensive purchase of your life. You will buy an apartment. Not with your Dad’s money, of course. You decide to take a loan. And that’s when your learning curve begins.
Economic growth spurs interest rate cuts
Getting a home loan has become easier in India over the years. Driven by a rise in middle-class spending, more and more banks are pulling out every rabbit from their hats to lure the homebuyer into choosing their schemes and their loans. Powered by the economic growth of the world’s fastest growing major economy, interest rates for home loans have fallen over the past five years.
Home loan rates were at their lowest in the past six years when India’s largest lender, the State Bank of India, cut interest rates earlier this year. Shantanu Mukherjee was worried that demonetization last year would affect his plans of buying a house. But the Indian government has since urged banks to use that move to help provide easier loans to the middle-class and lower middle-class segments of the Indian society. “I waited until this year before I decided to apply for a loan. I was pleasantly surprised when interest rates actually fell.”
Credit scores make an entry
Credit scores have always been an important factor in mortgage payouts in the US. It wasn’t the case in India until recently. For the first time, home loan interest rates are now directly linked to the customer’s credit history. You can check your credit history through the Credit Information Bureau of India’s (CIBIL) website. CIBIL says that 79% of the loans are approved for individuals with a score greater than 750. A good CIBIL score automatically heightens your chance at getting easier loan approvals. Always been the one who paid your credit card bills on time? Never defaulted on any payment? Now is the time to reap the benefits for that goodness. Banks like the Bank of Baroda have already implemented credit scores in their loan approval process, and other banks may soon follow suit.
Special schemes for special loans
More women are now independently pursuing their dreams of buying their house and banks are now floating loans to lure them. SBI’s ‘Har Ghar’ scheme offers concessional interest rates to women and the private sector bank, ICICI, also offers special schemes for women. Tata Housing and HDFC Bank are a few of the other banking and financial institutions that are also laying out the red carpet for women.
Special housing loan schemes exist for government and public sector employees. They can enjoy home loans at lower interest rates and discounted processing fees. “I have been working in a PSU for more than 12 years now. I bought a house last month because I received an attractive rate from Punjab National Bank. Working in a government job means greater security, yes, but it also doesn’t give me the kind of regular pay hikes that private sector employees get. So, it was good to choose a home loan that catered to us,” says Arvind Bhat. SBI also offers the ‘Privilege Home Loan’ for government employees with low interest rates and zero processing fees.
The Assam government recently signed a MoU with SBI for housing loans for its employees at interest rates as low as 5%. There’s even a home loan tailored for army and defence personnel with features such as longer repayment period of the loaned amount.
Technology Touch
There is prime real estate to be sold on the digital commerce front. Confused about your eligibility for a home loan? Worried about your credit score? Not sure which loan scheme choose from? There are many online portals and apps now that help with calculating your EMI and loan eligibility and even helping you compare and contrast from all the loan schemes out there.
Compare this scene to one even a decade ago. A creaking economy buffeted by recessionary headwinds and lack of trust led because of the sub-prime crisis in the US had led to many pitfalls in the home loan industry. But things have changed. From then to now, the Indian real estate industry has grown in maturity and scale. The homebuyer is reaping the benefits now and laughing all the way to the bank.
