A roof over one’s head is a cherished dream that every individual has, and for any middle class salaried person it turns out to be the most important financial decision he is called upon to take in his lifetime. If you are willing to take that big step ahead and thinking whether or not this is the right time to invest in your own home, here are some answers that you will find useful, before you go out seeking the best home loans in India and compare home loans.
A conducive economic environment
Before making a purchase decision when it comes to property it is but natural that you need to check out the economic environment. The overall macroeconomic outlook for the nation has an impact not only on the real estate market but a direct bearing on home loan interest rates. From the latter half of the year 2015 there have been encouraging economic trends, with respect to the reducing inflation, cutting down of key short term rates by the Reserve Bank of India and a increase in GDP growth. With further rate cuts said to be in the offing, the stage is set for a revival in the real estate sector that has been in a state of turmoil over the past few years.
Changing stance of developers
Developers have a natural affinity to invest in big housing projects that have investors flocking in and raking in the big bucks. However, with a slowdown in the economy over the past few years, developers found themselves stifled with unsold inventory. As a result there have be property price cuts in the range of 20-30% across markets in India.
Besides, there was a gaping demand and supply gap as there was a severe shortage in housing in urban India. With a rapid growth in urbanization, developers are now realizing that affordable housing is a notion that is here to stay and notwithstanding the problems associated with dealing with buyers who come from the middle to lower income group, developers are realizing the tremendous potential that lies in this segment.
The Government too, in the latest Budget sweetened the deal for developers who are now eligible for a 100% deduction of profits for undertaking housing projects for flats up to 30 sq meters in the four metropolitan cities and 60 sq. meters in other cities, so loan as the projects are approved by June 2016 and completed within 3 years. This is a considerable benefit for developers who can now reap the benefits of a 15 to 20% upside even after paying Minimum Alternate Tax (MAT). This would also give them the opportunity to attract foreign and domestic investment for housing projects. Given these advantages, developers have already begun advertising a slew of projects that bear the affordable tag.
Advantage to the prospective buyer
The Government aims to extend the advantage of having a roof over one’s head to the entire nation. Towards this end, it has not just encouraged developers to launch more affordable projects with the exemptions as stated above, the new budget baits in the first time home owner who is willing to take a home loan of Rs 35 lakhs where the price of the property does not exceed Rs 50 lakhs. For such aspiring home owners, the Government has granted an additional tax exemption of Rs 50,000. Therefore, if you have been waiting in the wings to buy your own house, this is indeed good news for you.
Before you apply
Before you go about checking your expenses on a home loans EMI calculator, here is a word of caution. The RBI has made it mandatory for all lenders to check out your credit score as a part of their credit assessment process. Therefore having saved up for the down payment of your house may not be enough if you do not have a CIBIL score of 750 and above. Ideally therefore you should have been making continual attempts at improving your CIBIL score, at least a year or six months ahead. Before you apply for your home loan, make sure you pull out your CIBIL score and CIBIL report and see that you have a perfect credit score.
If there is anything amiss such as an error that has brought your score down, make sure it is rectified before you make that application. Finally, keep all your papers such as your salary slips, your bank statements, an employer certification and the likes in order before you apply so that your application process can go through smoothly. If everything is already in order and all you were waiting for was the “right time” to make the investment in your first property, there is indeed no better time than now!