As the dynamics of the Indian consumer class undergoes a transformation, there are some interesting changes in the housing segment as well.
Buying a house is perhaps a lifecycle milestone that’s an aspiration from the time a person enters his first job! As the dynamics of the Indian consumer class undergoes a transformation, there are some interesting changes in the housing segment as well. One, a predisposed regime that is propagating ‘housing for all’; secondly, proliferation of realty options within the affordable housing segment; and thirdly, access to easy finance options.
Today, the affordable housing segment has grown significantly and we expect this will drive the real estate sector in 2018 and beyond. The end-user demand in this segment along with a conducive ecosystem will ensure rising appetite for such projects across the country. As per government estimates, over 40 million urban homes need to be constructed by 2022 in order to achieve its housing for all targets.
Here are 10 things one should keep in mind when applying for a home loan this festive season:
1. Legality of the property: Before finalising on the property, builder credentials need to be checked. Builder’s reputation, past projects’ delivery track record are important to be checked. For RERA- approved projects, the builder’s profile and project details can be checked online on the RERA website. The legal vetting of the property papers should be done with a good lawyer before finalising the deal.
2. Affordability: Customers should figure out the EMI which they can pay monthly. EMI will be dependent on the loan amount , tenure of the loan and the margin money being paid towards customers’ initial contribution. The more the initial contribution, the lesser will the loan amount, resulting in lower EMI.
3. Interest Rate: Customers must check out with various banks/HFCs on the rates being offered on the home loans. One has to also decide if one wants a home loan under floating or fixed rate of interest.
4. Check associated fee and charges with the loan: Home loans have associated fee and charges. Processing fee is the most common fee payable at the time of application. It is advisable to choose a lender with a reasonable fee.
5. Tenure of Home Loan: Customers can avail home loan up to 20 years. Some of the companies and banks even extend home loans up to 30 years. The tenure of the loan will also depend on the retirement age of the customer. Most of the companies extent loans up to 65 years for self-employed customers. The longer the tenure of the loan, the higher will be the interest pay-out.
6. Direct Dealing: Buyers must avoid dealing with the middle man while taking a loan. They must insist on visiting the bank/HFC branch and must ensure that all payments they make towards any sort of fees is paid through the banking channel and through cheque/ECS only.
7. Tax benefits: The interest portion of the EMI paid for the year can be claimed as a deduction from the total income up to a maximum of Rs 2 lakh under Section 24. The principal portion of the EMI paid for the year is allowed as deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh.
8. CLSS subsidy under PMAY: The government has announced CLSS subsidy under PMAY. First-time home buyers are eligible for the same. There are certain conditions which have to be met. Customers should check if they fulfil those conditions to avail the subsidy benefit.
9. Documentation: Buyers while signing the loan application and disbursal documents must ensure that all documents are completely filled up in all respects. Nothing should be signed in blank. The cheque leaves which the lender will require must be properly filled with correct favouring and no blank cheques should be provided to the lending institution.
10. Insure home loan amount: Buyers should avail insurance to cover the home loan liability. The mortgage company offers borrowers an option for an insurance cover at a cost. It is a decreasing term plan where the cover amount decreases as per repayment of the loan.
(By Pavan Gupta, CEO, Muthoot Housing Finance Company Ltd, a part of the Muthoot Pappachan Group)