‘Housing for All’ really is possible! With FM SItharaman laying emphasis on ‘reforms, perform and transform’ agenda in Budget 2019 for the Indian economy, some good news also came in for home buyers, especially the ones staying in small cities looking to buy their dream house. Finance Minister Nirmala Sitharaman in order to boost affordable housing, increased the tax exemption limit on interest paid on home loans. Generally, when a borrower opts for a home loan, they are liable to pay interest to banks or any other financial institution. That interest rate is a marginal amount levied by lenders on the principal amount. By increasing the deduction limit in housing loans, the NDA government has made home loans attractive and EMIs cheaper for common man. Not only them, but even banks and real estate developers will reap benefit from such a move.
The Budget of affordable housing!
Sitharaman in her Budget speech said, “For realisation of the goal of ‘Housing for All’ and affordable housing, a tax holiday has already been provided on the profits earned by developers of affordable housing.”
Further, Sitharaman proposed that to allow an additional deduction of up to Rs 1.50 lakh for interest paid on loans borrowed upto March 31, 2020 for purchase of an affordable housing valued up to Rs 45 lakh. With that, a person purchasing an affordable housing will now get an enhanced interest deduction of up to Rs 3.5 lakh. Earlier, a home loan borrower would only get Rs 2 lakh deduction benefit from the interest rates paid.
The FM points out that, such will translate into a benefit of around Rs 7 lakh to the middle class home-buyers over their loan period of 15 years.
How does it help you?
SBI in its research note said, “The model tenancy regulation is likely to enhance housing supply in metros through schemes for rental housing projects that have remained a non-starter so far, and is also likely to promote a structured rental housing market.”
Also, George Alexander Muthoot, MD, Muthoot Finance said, “We welcome the government’s focus on Affordable Housing. The interest deduction on home loans raised by Rs 1.5 lakh to Rs 3.5 lakh and also the housing cost being fixed at Rs. 45 Lakh and below. With RBI now being the regulatory authority for Housing Finance as well, it will lead to easy regulation as all financing sectors would fall under one authority.
In order to accelerate the goal of ‘Housing for All’, the tax holiday provided to developers will boost affordable housing sector.”
Gaurav Gupta, Director Omkar Realtors & Developers added, “This will encourage more and more fence sitters and first-time home buyers to take quick decisions regarding property purchase. It’s a welcome move and we are hopeful that the customers and investors will show interest in the affordable housing sector. This move is expected to result in some momentum in the beleaguered real estate sector.”
How much home loan interest rate major banks charge? Find out!
State Bank of India (SBI):
This largest PSB is currently the real winner when it comes to offering cheapest home loan interest rates to both women and men either be salaried or non-salaried. The 1-year MCLR at SBI is set at 8.45%. For home loan upto Rs 30 lakh, interest rate imposed on salaried men and women ranges from 8.60% – 8.70% and 8.55% – 8.65% respectively. Similarly, for non-salaried men and women home loan interest rate up to Rs 30 lakh is between 8.75% – 8.85% and 8.70% – 8.80% respectively.
While for home loan between Rs 30 lakhs to Rs 75 lakhs, a salaried men and women have to pay interest rate between 8.85% – 8.95% and 8.80% – 8.95%. As for non-salaried ones, the rates vary from 8.95% to 9.10%. In case if home loan is taken above Rs 75 lakh, then salaried men and women’s interest rate is between 8.90% to 9.05%, while for non-salaried ones 9.05% to 9.25%.
It can be said that, SBI’s home loans are much cheaper for female borrowers. Also, it needs to be noted that, SBI has linked its home loan product with policy repo rate, and further if the latter goes down the former will also witness similar reduction.
In private lenders, HDFC Bank does have a charm of giving attractive home loans. Up to Rs 30 lakh, a salaried women and men pay rate of 8.60% to 9.10% and 8.65% to 9.15%, while non-salaried ones pay 8.75% to 9.25% and 8.80% to 9.30%. Between Rs 30 lakh to Rs 75 lakh home loans, interest rates vary from 8.85% to 9.35% on salaried women and 9% to 9.50% on non-salaried females, whereas the salaried men pays rate of 8.90% to 9.15% and that of non-salaried males see rate of 9.05% to 9.55%. Above Rs 75 lakh, the rate is 8.90% to 9.40% on salaried women, 9.05% to 9.55% on non-salaried women, 8.95% to 9.45% on salaried men and finally 9.10% to 9.60% on non-salaried men.
Unlike SBI and HDFC Bank, private lender ICICI Bank has a different pattern of lending. The home loan product is divided between salaried borrowers and self-employed. Interest rate for a salaried borrower is at 9.05% up to Rs 35 lakh loans, 9.15% between Rs 35 lakh to Rs 75 lakh and 9.20% above Rs 75 lakh.
In case of self-employed, interest rate is 9.10% up to Rs 35 lakh, 9.20% between Rs 35 lakh to Rs 75 lakh and 9.30% above Rs 75 lakh.
Bank of Baroda (BoB):
Here, home loan products are divided in a host of categories along with interest rates. These are:
Baroda Home Loan & Baroda Home Improvement Loan – Interest rate is set on one year MCLR to One year MCLR +1.00%.
Baroda Home Loan Advantage – Upto Rs 75 Lakhs the rates are normal, but above Rs 75 lakhs then 0.25% over Normal Home Loan Rate is levied.
Baroda CRE Home Loan – 0.25% over Normal Home Loan Rate.
BoB’s 1-year MCLR is set at 8.60% currently.
Notably, new proposals are only meant for home loan size up to Rs 45 lakhs. Hence, here the ones who borrower such amount for tenure 15 years will avail benefit of Rs 3.5 lakh on interest paid. That said, larger ticket size will not be added in this benefit.