Arun Jaitley home loan proposals: Check out schemes that may boost your ‘affordable’ home ownership dream
Budget 2016 is just behind us and its nuances are still being figured out. While the common man is a tad disappointed because no increase in income tax exemptions have been announced, it will be a gross understatement to say that the FM Arun Jaitley has not paid heed to the needs of the salaried tax payer at all. In fact, many announcements were made specifically with regards to the dreams of a home owner, especially if he is seeking property in the affordable segment. We break down FM Arun Jaitley Budget 2016 proposal: (Reuters)
For a home buyer, purchasing a property for the very first time, an additional deduction of Rs 50,000 is allowed by the Budget 2016 proposal if loan amount is less than Rs 35 lakhs and loan is sanctioned in 2016-17 and cost of house is below Rs 50 lakhs. If by such moves, if you are looking at some home loan products, here is a kitty of interesting products that have been launched recently. (Reuters)
Wooing the young customer: State Bank of India (SBI) the largest commercial bank of India launched a new home loan product targeted at young professionals that it christened “FlexiPay Home Loan”. This product proposes to take into consideration the net monthly income of the prospective borrower and disburse a higher amount as opposed to what he would have been eligible for under normal home loan schemes. It also offers them an interest moratorium of 3-5 years. According to the bank, this is a product that is looking at the “aspirational customer” who can choose to pay only the interest component of the loan for the first three to five years after which he is in a position to pay a regular EMI, as he moved upwards in his career path. The bank envisages that a product like this provides the much needed bridge between the demand for quality residential spaces and the affordability of the customer when he is young, ambitious and aspiring.
For the middle aged aspirant: Some of you may have dared to dream of purchasing your own property a little late in life, but are skeptical of approaching a lender because you feel that your application may be rejected just because of the age factor. Sensing the need to cater to this large middle aged segment in particular, ICICI Bank in mid 2015 launched a product called “ICICI Bank Extraa Home Loan” suitable for salaried borrowers up to 48 years of age. The essential difference between regular home loan products and this particular product is that it allows the borrower to enhance his home loan amount by 20% and the option to extend his repayment period up to the age of 67 years, i.e after his retirement. This is the country’s first mortgage backed product and is suited for not just the salaried individual but the self-employed as well who may have had the confidence to purchase a property after a few initial years they have invested in establishing themselves as a proprietor.
For the small borrowers: The thrust of the NDA Government is on development and the Finance Minister in his budget speech too clearly indicated that his Government stands by the weaker sections of the society. Lenders thus are busy designing products that caters to the lower middle class and the lower income group. Already some interesting products have made a foray into this space. For instance, there is Fullerton India Housing Finance Company, a part of the TAMASEK Group of Singapore that is offering home loans specifically designed for agriculturists and allied groups under a brand of loans christened “Grihashakti”. The average size of the credit in the range of Rs 7-10 lakhs and the annual gross household income for eligibility is Rs 1.20 lakhs. These loans will be made available to the agricultural segment of the society for both purchase as well as construction of property.
Doling out similar kind of loans in the lower income group and targeting the women borrowers in particular, Aspire Home Finance Corporation Limited (AHFCL), a subsidiary of Motilal Oswal Financial Services has launched “Mahila Awas Loan from Aspire” that is being popularized by its acronym MALA. With a credit disbursal range kept in the range of Rs 2 lakhs to 12 lakhs this product is being sold to salaried working women in private companies, small scale industries, housekeeping staff, and other self-employed women running their own business. (Reuters)
In keeping with the Government proposal of providing housing for all by 2022, the lenders are going all out to cater to untapped segments of the society that they realize have large aspirations. In the days to come, one can say with reasonable assurance that there will be many newer products that will tailor-made to cater to affordability. If you are a middle class salaried individual gearing up to buy your first property, this may be a right time to take a plunge. But before you do that, do bear in mind that your CIBIL score will have a key role to play in your credit assessment. Therefore, it is an imperative that your CIBIL score remains at the level of 750 and above (out of 900) and your CIBIL report is blemish free.
By CreditVidya (Reuters)
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ANALYSIS / EXPERT COMMENTS
- Meghnad Desai
India needs a body like the UK’s Office of Budget Responsibility
- Anita Rastogi
In addition to simplifying the taxation structure, implementation of the GST regime will help eliminate most indirect tax issues
- Nirvikar Singh
Repressive regimes fail to deliver inclusive and substantive economic growth
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Extend duty incentives for mobile phones and tablets to all Information Technology Agreement goods
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Will this Budget be an enabler for ‘Make in India’, ‘Make for India’ and, most importantly, ‘Make India’ is something that will soon be answered