RBI eases norms for buying affordable homes

Affordable housing is emerging as the best thing to have happened to the Indian home buyer in the last 2 decades. Depending on the location, amenities provided, and construction technologies used, these homes are affordable to a larger cross-section of the working class than what exists today.

Now, the Reserve Bank of India (RBI) has eased norms for availing a home loan on an affordable home. Typically, stamp duty, registration and documentation charges add up to another 15% of the property value. Now, RBI has allowed Banks to include these chargesrbirate in the overall property value, while disbursing a loan, as long as the property value does not exceed Rs. 10 lakhs. RBI made this announcement in March 2015.

Last July, the RBI helped ease investment or bank lending in the affordable home sector. According to the RBI communiqué, home loans to individuals up to Rs 50 lakh (for houses of value up to Rs 65 lakh) in metros, and loans up to Rs 40 lakh (home value Rs 50 lakh) in Tier-2 or Tier-3 cities will be considered as affordable housing.

Thanks to this, banks can now float infrastructure bonds up to seven years. The money raised this way will not attract the typical requirements around CRR (cash reserve ratio) and SLR (statutory liquidity ratio). All this has a cascaded effect on increasing the availability of affordable homes.

Well, how does this affect you, if you are in a much higher affordability bracket? For one, you could buy one or more affordable homes as an investment option. Secondly, if you are a business owner, you could create policies that encourage your employees to buy an affordable home. This is a valuable perk that can go a long way in attracting and retaining talent.

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Why pre-approve your home loans?

Home Loans have emerged as the most reasonable funding option for home buyers. Buyers from both the salaried class and the business class (who have filed IT Returns in the last five years) are eligible for home loans, making it easy for anyone to buy a home.

The home loan is typically availed when one has decided on their dream home or perfect property. The process can then throw up several surprises about the eligible amount, depending on the buyer’s profile, desired amount, presence of a co-applicant or not. At times, the buyer may have to reconsider his/her options and look at a lesser priced property, creating a slight emotional setback.homeloan

One way of avoiding such an eventuality is to have a pre-approved bank loan ready and then go scouting for the best property option. Pre-approval involves a pre-qualification process wherein the lending bank analyzes all the data related to your past and present debts (by looking at your bank statements and your CRISIL or credit worthiness report), your repayment track record, your credit card statements, sources of income, salary slips (or bank account statement in case of businesses) and IT returns for three or more years.

These data is run through a software that derives the loan eligibility amount. The same is mentioned in a pre-approval letter that is given to you. The letter states that you can avail the loan whenever you desire. With this in hand, you can choose your property options after factoring the down payment you must make.

The most important advantage of pre-approving your home loan is that it saves you enormous time during purchase. This gives you enough time to examine similar options without being rushed by the seller. That is why pre-approval is becoming very popular with younger buyers.