The COVID-19 lockdown had an adverse impact on almost all facets of life: work, education, and travel. One such area which has taken a considerable hit is the home loan market. Given the travel restrictions and financially-crippling nature of the lockdown, people didn't find many situations where they could think of getting themselves a new home.
Opportunities seldom come knocking on the door, but be ready to capitalise on it to the fullest when they do. In the aftermath of the lockdown, people have realised how stressful rental living can be and are increasingly looking to own their own apartment. This realisation comes at the most opportune of times, as REPO rates are at an all-time low, which means that housing finance is affordable now more than ever.
If you're looking to purchase your own house, here are some changes you must be aware of.
Extension of CLSS scheme in PMAY (U)
The last date to apply for the much-coveted CLSS (Credit Linked Subsidy Scheme) under Pradhan Mantri Awas Yojana (PMAY) has been extended for one year up to March 31, 2021. This extension was announced to allow first-time homeowners, who couldn't complete their purchase due to the pandemic, a second chance to buy their dream home.
Under this scheme, people belonging to the middle or low-income groups can save up to Rs. 2.35 lakhs in interest payments, made possible by the home loan interest rate subsidies, which range from 2% - 6.5% depending upon which group you belong to. If you're a first-time homeowner and haven't yet applied, now might be a good time to do so.
No changes in Repo Rate for 2021
The RBI is yet to make changes to the REPO rate, which remains at an all-time low of 4%. This steep cut to the pre-pandemic repo rate has presented potential homebuyers an opportunity that is not worth missing.
The lower repo rate has brought in its wake the lowest interest rates witnessed in this decade. That's why it's an excellent opportunity to borrow a house loan, especially on a fixed-rate house loan. However, the lender must recognise the repo rate as an external factor. Lenders have the provision of linking their interest rates to the following:
- RBI's repo rate
- Govt of India 6-month Treasury bill yield issued by Financial Benchmarks India Pvt. Ltd
- Govt of India 3-month Treasury bill yield issued by Financial Benchmarks India Pvt. Ltd
- Other benchmark market interest rate issued by Financial Benchmarks India Pvt. Ltd
So make sure to choose a lender who recognises RBI's repo rate as an external factor since the interest rate they offer is dictated by the repo rate specified by RBI. However, make sure to check your home loan eligibility before applying.
Given the subsidy schemes and low-interest rates, the housing finance industry is set to return to its pre-COVID glory in 2021. The increased influx of house loan applicants is bound to hike the low-interest rates.
So, if you're looking to buy a house as an investment or are a potential first-time homeowner, applying for home loan now will save you a lot of money in the long run. But before applying, make sure to plan your financials thoroughly. There are many home loan EMI calculators and eligibility calculators available online that let you map out your repayment schedule.