Good News: Home Loans Cheapest In 6 yrs 

Banks, including the country’s largest lender State Bank of India, have signalled reduction of their retail lending rates over the weekend by slashing their Marginal Cost of Funds based lending rate (MCLR). The reduction in MCLR has pulled lending rates to multi-year lows.

After Prime Minister Narendra Modi’s directive to banks on New Year’s address to act in “public interest” by focusing more on aiding the poor, lower middle class, middle class and senior citizens, several banks announced steep cuts in borrowing rates. 

A home loan of Rs 75 lakh which was earlier available at 9.1%, will now be available at 8.6%. Apart from SBI, several other banks including Union Bank of India and the Punjab National Bank have also decide to cut down rates.

Here is a list of banks and their new home loan interest rate:

  • SBI home loan interest rate: 8% from 8.9% 
  • IDBI Bank reduced its MCLR by 15 basis points to 9.15 per cent.
  • Union Bank home loan interest rate: 8.65% from 9.3%
  • IDBI Bank home loan interest rate: 9.15% from 9.3%
  • SBT home loan interest rate: 9.2% from 9.45%
  • IOB home loan interest rate: 9.15% from 9.5%
  • PNB home loan interest rate: 8.45% from 9.15%

The steep cut has been facilitated by the surge in deposits during the demonetisation period, which led to a substantial fall in cost of funds for lenders. Banks have mobilised an estimated Rs 14.9 lakh crore of deposits following demonetisation during the last 50 days.

Interest rates cuts will give a big push in Real Estate feels Sudhir Agrawal, Managing Director, Victory One. “The new home loan rates are the lowest in the last 6 years and is surely going to give a dream home to a lot of people,” Agrawal said.

However, should the current round of reduction of lending rates, be the only criteria to prompt you for home buying ?

No, “Interest rates is one of the factors and probably the most important one to consider while taking a loan. However, there are other things that are important to consider such as spread and processing fees that you should look for while availing a loan. These factors can have a considerable effect on your outflows,” Adhil Shetty, CEO, Bankbazaar.com.

Spread is a percentage added to the loan on top of the minimum rate. This is usually in the range of 0.25-0.5 per cent However, there might be special schemes or offers where the spread of the loan is 0%. The spread is charged at the discretion of the bank and usually remains the same throughout the loan tenor unlike the interest, which is volatile and would change at frequent intervals to reflect the change in repo rates and market conditions. “The lower the spread, the better. Select the lender with the lowest spread as the market forces and regulatorypolicies would bring the rates at par eventually, however the spread would remain constant,” says Shetty. 

The next important criteria are the processing fees and repayment terms. The terms and conditions pertaining to the repayment of loans depend on the type of loan and vary from lender to lender. “Potential borrowers must clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, prepaying a part or full amount of home loan, and other things, before finalizing a lender. There are also processing and legal fees associated with home loan approval and disbursal. Make sure you understand them well before applying,” Shetty advises.

But with the government’s announcement of rebate on lending rates along with the banks providing rate cut cushion to the public, affordable housing segment is the biggest gainer of all. 

“Citing the example of the lowest rate in the market at present, 8.60 percent; affordable housing prospective buyers will be basically borrowing now at 4.60 percent or 5.60 percent for loans upto Rs. 9 lakhs and Rs. 12 lakhs respectively. EMIs for this category has fallen by almost 40 percent, which will enhance the demand for housing amongst the buyers”, says Yash Miglani, Director, Migsun Group.

Property For Sale Magazine | Published 2016

Will The Real Estate Bill Finally Become A Reality? – Property For Sale Magazine 

 

Anuj Puri, Chairman – JLL India
 
Several amendments to the Real Estate (Regulation and Development) Bill, 2015, suggested by the select committee of Rajya Sabha, have now been accepted by the Union Cabinet. This is a major step towards introducing the amended bill in the Rajya Sabha. The bill will bring in much-needed transparency and accountability in the real estate sector. It will create a much-needed consumer right protection umbrella for buyers of real estate, thereby increasing consumer confidence as well as creating lasting developer brands strong on quality and timely delivery of their projects. 
Story Sponsored by – Cengres Tiles India
 
Although there will be strict punishment for developers under this bill, the relevant government agencies and approval processes have not been brought under its ambit. Without achieving single-window clearance, there may be cases where bona-fide delays by developers may still result in an unfavourable penalty on the developer community. Without ensuring that the approval process is not delayed by civic agencies’ inaction or bringing in single-window clearance, the regulator may inadvertently add another layer to the longer processes already delaying projects.
The government has indicated that it will streamline the approvals’ process and finally move towards a ‘single-window clearance’ system. This, in conjunction with the regulator, will provide a positive impetus towards achieving the housing dream while ensuring a level-playing field for developers and buyers.

 

Story Sponsored by – Cengres Tiles India
 
However, given the quantum of projects that the state regulator will have to cover now – due to norms on size of projects having been relaxed further from 1,000 sqm to 500 sqm – the onus on the state regulator will be huge, particularly for realty-heavy states like Maharashtra, Karnataka, etc. In such a scenario, the regulator could operate through a hub-and-spoke model, with separate districts having a dedicated branch.

The major amendments okayed by the Union Cabinet now include: 

· The money collected from buyers is to be deposited within 15 days. It is to be maintained in an escrow amount, which will be 70% of the construction cost, and is meant to be used only for the specific project.

· The term of imprisonment of three years recommended by the government has been upheld for all contraventions and even in cases where the developer does not abide by the decision of the appellate tribunal imprisonment has been recommended.

· The bill will be applicable on commercial or residential properties which are more than 500 sqm in size or have eight flats or more.

· Carpet area has now been defined as the net usable area

· All financial statements have to be audited within six months of financial year closure by a practicing chartered accountant.

· The interest payable by defaulting parties (developer or buyer) has been brought at par for both in case of default by either.

  The bill will have far-reaching positive consequences for the sector in terms of its operating procedures as also create a comprehensive consumer redressal mechanism. Overall though, the real estate industry is waiting with bated breath for the Rajya Sabha to finally pass this bill. It will prove to be a year-end bonus by the government to the struggling sector.

 Reputed developers who have been following financial best practices and corporate governance have welcomed the move. At best, they may have differences of opinion as far as certain nuances are concerned.

Comments From Various Developers :- 

 

​”​The Regulatory Bill by the cabinet should also engage Approving authorities so that the real estate project don’t get delay on getting approvals and timely deliveries can be given to the customers. This move will enable a boost in the realty sector as well as help increase investment figures in the industry. The approving authorities will help in sharing the desired timeframe to sanction and completion of the projects in a timely manner. Also the regulatory authorities will encourage the single window clearance for real estate projects and assist in fostering the construction work which is an utmost important step in the amendment system​”
 – Mohit Arora | Supertech Ltd.

 

Real estate bill is expected to protect the interest of both buyers as well as developers. However, the bill has not covered few major issues such as sanctioning authority has not been made part of this bill, which leads to delays in many projects. We are disappointed with the clause which mentions the inclusion of old & ongoing commercial & residential projects. This is the time when the sector needs a push from the government with friendly policies but unfortunately the particular clause dampens the spirit of the developers. We have always been saying that balanced Real estate regulatory bill once implemented would improve the scope of realty operations and will give the much needed boost to the sector. Apart from that there are many positives in the bill that will help in setting up a better environment for real estate sector. At the same time, the bill has made it amply clear that regulatory authorities have to promote Single Window Clearances for Real estate projects and thus it can be said that it is now up to the States to set up single window clearance mechanism”.
Mr. Manoj Gaur – Gaursons


 

©Property For Sale Magazine | Published 2015