Post-pandemic, there has been a renewed demand for buying homes, leading to higher sanctions and disbursals of home loans.
With a majority of banks cutting home loan rates, to pass on the benefit of the repo rate reduction by the RBI, there has been a surge in home loans.
According to data by NoBroker.com, there has been a rise in home loan applications by 25-40 per cent across cities. Industry experts say with people looking to shift to bigger homes due to the prolonged work from home, has led to an increase in demand for home loans.
According to the data, Chennai and Hyderabad have seen 40 per cent growth in the average home loans ticket size; while Mumbai and Pune are also showing an increase of 30 per cent.
Amit Agarwal, Co-Founder and CEO, NoBroker, says, “A key point to note is that affordability has increased as a result of government and bank initiatives such as reduced stamp duty and rock bottom interest rates. Therefore, homebuyers can get a bigger house in the same budget. This combined with attractive discounts from buyers has resulted in expanding the buyers’ budget.” Such reasons have pushed the buyers to borrow for more home loans and commit free capital to other investments.
Post-pandemic, there has been a renewed demand for buying homes, leading to higher sanctions and disbursals of home loans. According to NoBroker.com, the portal has witnessed an increase in disbursals of the loans by 200 per cent during the December 2020 – January 2021 period compared to YoY and has seen a growth of 250-300 per cent in cities like Mumbai and Bangalore.
The data states that most of these disbursals are seeing interest coming from mid and high range buyer brackets, who are opting for more expensive properties to meet their need for larger homes.
Various banks have reduced their home loan interest rates for borrowers earlier this month. For instance, HDFC bought in a reduction in its Retail Prime Lending Rate (RPLR) on housing loans by 5 basis points. ICICI Bank, Kotak Mahindra Bank, as well as the State Bank of India (SBI) also reduced interest rates on their home loans – most have slashed their home loan interest rates to 6.70 per cent p.a.
Things one should keep in mind while taking a home loan:
- Interest rate: One should check and make note of interest rates from all banks as well as their home-loan eligibility and then choose the most suitable one for their needs.
- Check tenure of home-loan: Many times, with a smaller EMI amount and longer tenure, buyers end up paying more interest on a loan than the principal amount. Agarwal says, “It is better if buyers can pay larger EMIs as that would result in lesser interest. However, one might need to make lifestyle changes to ensure that. Therefore, buyers must take their expenses into consideration and take a call.”
- Lower rates: If a home is taken in the name of a woman or women, the interest rates are cheaper. Many banks offer subsidised home loan interest rates to women which are 0.5-1 per cent lower than the market rate. These have a significant impact on the EMIs and make repayment easier for them.
- Ways to increase loan eligibility: A woman as a co-borrower can increase the loan amount resulting in a larger house and more tax benefits.
- Tax benefit: Buyers can avail tax benefits if they have taken home loans. A home loan is eligible for tax deduction under section 80C on the principal amount, along with multiple other tax benefits such as interest under section 24b and 80EE, stamp duty under section 80C and 80EEA, which significantly reduces the borrower’s tax outgo.