EVERYONE harbours the dream of buying a home, but there are many hurdles along the way – availability of funds, home loan interest rate, recession, job stability, location, right property. However, now, a few of these hurdles have been eased, especially home loan interest rates.
Interest rates
It's a war out there. Banks are cutting home loan interest rates aggressively. First State Bank of India (SBI) extended it's special 8% home loan scheme to March 2010. Then, HDFC introduced a special home loan scheme at 8.25 per cent fixed up to March 2012.
Now, Kotak Mahindra Bank has announced its new home loan scheme at 8.49 per cent fixed rate on home loans for 30 months from the date of the payout of the loan.
ICICI Bank also came out with a home-loan scheme under which 8.25 per cent interest rate will be fixed for the first two years. The floating rates will apply after 2 years. These rates will be applicable to loans sanctioned between December 2009 and January 2010. Borrowers will have to make sure that the first disbursement takes place before the end of March 2010.
Basically, all banks are competing with each other to lower the interest rate in order to lure more customers into taking a home loan.
Should you wait for more cuts?
If you are planning to wait in the hope of interest rates dropping further, it’s unlikely to happen. ApnaLoan.com CEO Harsh Roongta says, “If the RBI doesn’t introduce schemes to increase the liquidity into the system, there won’t be any further fall in the interest rates.”
And then there is the dual concern of inflation versus growth. Most economists are expecting the RBI to tighten interest rates early next calendar year. Abheek Baruah, Chief Economist, HDFC Bank expects a 50 basis points CRR hike in January 2010. In an interview to CNBC-TV18, he said, "I think it will be a slow but steady exit from the super-accommodative monetary policy that we have in place. If the signs of recovery sustain and we see some reasonably good prints for industry and the non-government service numbers going forward, then this will possibly be followed by a rate hike. The two policy rates will possibly be increased by about 25 basis points in the April policy."
Also read: A real estate crash is good for you
Property rates
Anurag Mathur, MD - India, Cushman & Wakefield, said in an interview to CNBC-TV18 recently, "Prices are expected to go up by December. Not sharply, but it will still go up. I anticipate that happening at least in prime projects."
Buying a house to live in?
Roongta believes that now is a great time to buy a house. He says, “It is never a good idea to time the market at any point of time except when the property rates are overpriced, which is not the case now. But if you want buy a home to reside, anytime is a good time to buy but now is a great time.”
Property as investment?
Well, that depends on your portfolio, asset allocation, and the time you can devote to finding the right property. Roongta says, “Commercial properties are still priced low. If your portfolio allows investing in real estate, it makes a fair amount of sense to invest in it, and lease it out. However, remember liquidity is poor in this type of asset.”
DLF Group executive director Rajeev Talwar confirms Roongta’s view point, “If the economy is firmly in the saddle and running, in early 2010/11 you will see a huge revival in commercial real estate. Maybe in the third quarter of the next financial year, you will see a huge revival in retail.”
Read more: First home buyer's guide
Photograph: Vipurva Parekh
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