Get ready to pay less for home loans

RBI move will lead to in­creased liq­uid­ity. Re­duc­tion of 1% in home loans will bring EMIs down by 8-10%

HT Estates - - FRONT PAGE - Van­dana Ram­nani

The Re­serve Bank of In­dia’s move to grant in­fra­struc­ture sta­tus and pri­or­ity sec­tor lend­ing to af­ford­able hous­ing this week will al­low the real es­tate sec­tor to fi­nally ac­cess cheaper fund­ing and ease norms for banks to raise long- ter m funds for fi­nanc­ing af­ford­able hous­ing projects. This is likely to im­prove liq­uid­ity and make houses af­ford­able, since a 1% re­duc­tion in hous­ing loan in­ter­est rates could re­duce EMI of a home loan bor­rower by 8% to 10%.

This step, cou­pled with re­cent in­come tax in­cen­tives pro­vided in Budget 2014- 15 would help boost an in­di­vid­ual’s sav­ings by about ₹ 1 lakh, says Neeraj Bansal, part­ner and head of real es­tate and con­struc­tion, KPMG in In­dia.

Cur­rently, hous­ing loans be­low ₹ 20 lakh have lower in­ter­est rates as they fall into pri­or­ity sec­tor lend­ing. With the RBI step, loans of up to ₹ 50 lakh in six met­ro­pol­i­tan cities ( hous­ing cost­ing up to ₹ 65 lakh) and ₹ 40 lakh in other cities (hous­ing cost­ing up to ₹ 50 lakh) — a ma­jor chunk of hous­ing de­mand — are set to get cheaper, he adds.

Ac­cord­ing to San­jay Dutt, ex­ec­u­tive man­ag­ing di­rec­tor, South Asia, Cush­man and Wake­field, al­low­ing banks to raise long-term funds at cheaper rates, in­clud­ing through ex­ter­nal commercial bor­row­ing (ECB), will help de­vel­op­ers and govern­ment agencies in­volved in af­ford­able hous­ing projects to in­crease the sup­ply of hous­ing.

“We may also see more de­vel­op­ers launch smaller units to keep the over­all ticket price within the pa­ram­e­ters set by the RBI, in­clud­ing redesign­ing and re­siz­ing of projects that have still not been launched,” he adds.

The cri­te­ria defin­ing af­ford­able hous­ing aptly cov­ers a cross-sec­tion of low­in­come and mid­dle-in­come house­holds, and re­flects the in­tent of the govern­ment to deliver upon its com­mit­ment of ‘hous­ing for all by 2022,’ says Brotin Ban­er­jee, MD, Tata Hous­ing.

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