Own house dreams now closer to reality: Down-payment reduced to 10 percent
The Reserve Bank of India has now made the dreams of owning a house all the more possible!
An apartment in the city now costs at least Rs.30 lakhs. It is impossible for the salaried class to buy such apartments on ready cash. This is why they approach the banks for home loans. But, according to the rules, banks can only extend 80 percent of the home value as loan; the remaining 20 percent has to come from the person’s pockets. In banking terms, it is called Loan-to-Value.
In the case of our example, for Rs.30 lakh apartment, we will have to pay Rs.6 lakhs as down-payment. This too, for most salaried class, is a huge amount. As a result, many wait until they have saved enough money to buy a house. But, invariably, by the time they save the money, the apartment would have become more expensive. So, they start to save again in order to make the margin payment.
The RBI announcement is a relief of sorts for those who are not in a position to make a huge down-payment. RBI has now announced that banks can give up to 90 percent of the home value as loans. So, the buyer now has to only raise about 10 percent by himself/herself. In other words, he has to have only Rs.3 lakhs to buy the Rs.30 lakh apartment. He can source the remaining Rs.27 lakhs in loans. Therefore, buying a house will not be as stressful as before.
The news will come as a relief to real estate builders. The industry is going through a very sluggish phase justify now. The RBI announcement could revive the market to some extent.
But, the buyer has to keep one thing in mind – there is something called Credit Risk Rating, which banks consider, while giving loans. The interest on the loan is decided based on the credit risk involved.
According to the new rules, those who want a loan of more than 80 percent have a 50 percent risk rating; those with less than 80 percent have 35 percent risk rating. So, if you are going to apply for 90 percent loan, your house loan interest could be higher by 0.25 percent.
Finally, the scheme is applicable only to those who are seeking loans of less than Rs.30 lakhs, or, for apartments and houses that cost Rs.33 lakhs or less.