The real estate sector has seen major shifts due to the pandemic. The loss of primary income for many households, combined with physical distancing norms, resulted in falling prices. Both the government and developers gave buyers concessions, and the RBI injected liquidity in the market. Now, with vaccination efforts in full swing, the market is bouncing bank. Naturally, this has implications on home loan interest rates. How do they look presently? Let’s see.
Why opt for a home loan?
Buying a house with a home loan is a wise move.Currently,lenders are offering even more competitive interest rates than earlier to attract borrowers. Getting a loan also means your savings and emergency funds remain intact, should you require liquidity in the future.
What’s more, you also enjoy tax benefits on your loan. You can claim tax exemption on amounts up to Rs. 1.5 lakhs on principal repayments under the Income Tax Act. For interest repayments, you can claim exemption up to Rs. 2 lakhs. Additionally, under special circumstances, tax benefits on interest repayments can be claimed up to Rs. 2 lakhs under Section 80EE and 80EEA of the IT Act, and on stamp duties up to Rs. 1.5 lakhs under Section 80C.
Additional Read: Changes in Home Loan Interest Rates After Coronavirus
What is the effective rate of interest?
The interest rate is made up of two components – the base and the markup rate.
The base rate is the standard lending rate that applies to all retail loans. This rate isn’t static and is subject to change. The markup is added to the base rate to arrive at the effective rate. In 2016, the RBI mandated a new system to replace the base rate one – marginal cost of funds based lending rate (MCLR). This takes into several factors such as the repo rate and the bank’s deposits.
What are current interest rates?
Typically, home loan interest rates fall under 2 categories:
- A fixed interest rate remains the same throughout the loan tenure. This is a good option if you don’t want to take a risk and want to pay a pre-determine rate of interest.
- A flexible interest rate changes with market conditions over time. This works well if you are willing to take more risk since the rate will fluctuate over time. If you are confident that the interest rates are showing a long-term downward trend, choose this option.
Ultimately, the interest rate your lender offers you will depend on your profile, income, and CIBIL score. In fact, the condition and location of the property and the lending benchmark rate (repo rate) will also affect the final rate.
Additional Read: Some Factors That Impact Home Loan Interest Rates
Calculating interest rates and EMIs can be hard work. So, use a home loan EMI calculator to plan your repayments. If you have been meaning to buy property, now is the time! Come to Tata Capital for competitive interest rates and flexible EMI plans. Start your online application today and enjoy quick funds disbursal.