Tips on how to make out of today’s market

There has been a major change in the real estate sector in India. It has aligned itself with global standards in some places. The developer community is becoming more professional, ensuring better quality and timely delivery. Moreover there has been a healthy growth in the residential sector, the commercial and retail sectors.

After all these changes and growth there is still a huge demand-supply gap in the housing sector. Therefore, the real estate market that has shown a rapid growth in the past is expected to maintain the momentum in the future.

Even the mindset of the Indian customer, has changed as far as taking a loan is concerned. Few years ago the consumer was cautious or even had a negative outlook on loans, today, the consumer has a far more positive and open outlook on taking a loan. He feels that taking a loan put into effect on him a sense of greater financial discipline, as he is bound to use a part of his salary to pay the Equated Monthly Installments (EMI), rather than spending on things on an ad-hoc basis. Now people prefer to take loan than other options such as borrowing from friends and relatives, because in his mind, taking a loan is about being self-reliant, and this gives him a greater sense of self-respect.

In home-loan sector the competition has grown and healthy. Many of the big players are offering similar basic offers. The customer is much more informed about the options available to him. Particularly in this scenario, in addition to competitive rates and best service, it is the value-added services and customized features that are likely to differentiate the leaders.

The biggest challenge for banks and Housing Finance Companies (HFCs) is to provide more sophisticated and customized products to suit customer needs, unlike a vanilla structure offered earlier. Consumer research also shows that customers are seeking more than just a loan — they want convenience in the entire process of acquiring a home as well as the finance for it.

The HFCs hope that the positive growth trend in the home-loans sector will continue. With smart thinking and a few handy tips, customers will be able to make their dream homes a reality. Enlisted below are a few interesting tips to help customers make the most out of today’s market conditions.

Select your home smartly

A buyer also need guidance for getting a good option. At times buyers do not realize that he can get a better home within the same budget because he is not aware of all options on houses available in the city, which fit his requirements. There are some banks offers these professional services.

Consider a longer tenure loan

Try to go for longer repayment tenure so that the EMI amount gets reduced - for instance, opting for a 20-year loan compared to a 15-year loan will make you eligible for a higher loan amount.

Say, if you have a monthly gross income of Rs 50,000 and the floating rate of interest applicable is 12.00% then the maximum loan amount you are eligible for will be: For a tenure of 10 years eligibility is of Rs 19.17 lakhs, for 15 years eligibility is of Rs 22.91 lakhs and for a 20-year-tenure the eligibility is of Rs 24.98 lakhs. Thus, longer tenures translate into higher loan eligibility.

Co-applicant eligibility

Taking a loan jointly with your spouse will help you increase the loan amount so that both the incomes are clubbed to determine the gross repayment capacity.

For example, if you have a gross monthly income of Rs 25,000 then your maximum eligibility for a 20-year loan at 12.00% floating rate of interest will be Rs 12.49 lakh.

In case your spouse also has a gross monthly income of Rs 25,000 and he/she is considered as a co-applicant, then your maximum loan eligibility will become Rs 24.98 lakhs.

Select a product with lower total interest outflow.

Some products help you repay your loan amount much faster with a lower interest outflow as compared to a normal home loan.

Reduce the burden of your other loans to enhance loan eligibility

In case you are currently availing high-interest loans for other purposes, you can reduce the burden by taking a “Loan Against Property” (LAP) at attractive rates of interest and repaying the high-cost loans. This loan will help you in reducing the interest burden and also lower the installments, as LAP loans are offered for higher tenures. LAP loans can be availed for upto Rs 3 crore against your existing property — residential or commercial. The loan can be used for multiple purposes like repaying high cost loans, funding your business plans, sponsoring your child’s education or for your child’s marriage. Even on transferring your loans to LAP, your EMI would come down leading to a higher disposable income available for taking a fresh home loan. Hence your eligibility automatically increases.

In case you’re gross monthly income is Rs 50,000 and you are servicing a high interest loan at an EMI of Rs 25,000, your home loan eligibility will be Rs 14.74 lakh. In case the existing high cost loans are closed and a loan against property is taken wherein the EMI becomes Rs 20,000 (indicative), then on your balance income of Rs 30,000 your home loan eligibility will become Rs 17.68 lakh, approximately.