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Is This a Good Time to Purchase a Home Loan? What Home Seekers in 2022 Must Know

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Purchasing a home space is an abuzz activity despite the economic uncertainty or lull created due to the COVID 19 pandemic. With an increasing number of Indians joining the spree to avail the benefit of a low housing loan rate of interest and various discounts given by the developers, which brings to the question, is it a good time to avail a home loan now?

Over the past few years, various financial institutions like NBFCs and banks have announced several cuts in their home loan rates. HDFC Home Loan Interest Rates, along with other lenders’ interest rates, have drastically fallen. Though this reflects high-end liquidity and a lower rate of interest in the economy, the cut even means there is an evolving demand for the new home loans, and there is no lender who wants to miss on this. Many industry professionals feel that a prospective home seeker might find this time highly suitable, owing to the discounts offered by the builder as well as the availability of a low rate of interest on home loans in the economy.

Why has the demand been increasing?

Demand for the home rose sharply in 2 quarters, from October 2020 to March 2021, following the 1st wave of the pandemic. It was assisted by factors like a cut in the stamp duty by different state governments, discounts provided by developers and availability of low rates of interest. The pace slowed in the quarter of June 2021, owing to the 2nd COVID-19 pandemic but has slowly picked up again over the past few months, owing to the broader economic open, vaccination pace improvement and enhancement in economic activity.

One of the senior officials of a top leading HFC revealed that the pandemic had been a massive driver for enhancing the demand for home purchase as individuals realized they require more space in the home for WFH (Work from Home), education and quarantine. While most who were staying on rent comfortably now feel that the requirement for their own house follows the COVID 19. Out of this, there are numerous households who now are looking for bigger homes following the space needs of wards attending their online classes at home, working from home. In the urban regions, a huge number of individuals felt the requirement for bigger homes, and the ones who can afford them are opting for a home with more space. Thus, the industry experts reveal that with WFH becoming the new norm across various IT and other sectors, many are now looking out to purchase bigger homes even if they are further away from the central district region or workspace.

This uptick in demand over the past 1 year has given rise to price hikes in specific cities. Residex, a home price index stated every quarter by National Housing Bank – the need for own home in Delhi has raise from 91 in the month of December 2020 to about 95 in the month of March 2021, in Bangalore it is from 116 to about 118, in Navi Mumbai from 107, there is a rise to 118. This margin is going to further rise in 2022.

Will the home prices rise?

Both the industry and experts feel that the home prices are unlikely to rise instantly as developers are on the lookout to push the sales to ameliorate their cash flow, availability of fresh supply and rise in inventory level etc. Though the all-India average inventory towards March 2021 end had gone down to 42 months low, it now has increased up to 48 months.

Do you look forward to purchasing a home now in 2022?

If you are one of those saving to purchase a home, it is the right time. Now is the buyers’ market because there is adequate supply, and the developer is increasing the sales to boost the cash flows. At the same time, the interest rates offered by lenders are attractive. The HDFC home loan interest rate currently starts from 6.75 percent p.a. and goes up to 8.20 percent p.a. The interest rate for you is set as per your credit score, past repayment behaviour, employer, salary etc. In case you share an existing relationship with HDFC, then you may call up the HDFC Home Loan Customer Care directly to discuss offers and negotiate on the interest rate. Set this negotiated rate as the benchmark to compare amongst other lenders to choose a suitable home loan lender as per your preference. Note that the present availability of lower EMI due to a low rate of interest on home loans serves a bigger benefit for the applicants to avail of bigger loan proceeds. For instance, if you are eligible to avail of a home loan for which the loan EMI is up to Rs 50,000 at a rate of 8 percent p.a., then you can avail of loan proceeds of Rs 60 lakh. However, if the rate of interest is available at 6.7 percent p.a., your eligible loan proceeds can go as high as Rs 66 lakh.

Industry experts reveal that developers are under great stress as construction ventures dropped by nearly forty percent owing to COVID 19. It is a great time to purchase, but home seekers must seek a ready project. In case the builders are under huge pressure, they get bound to avail discounts to enhance volumes, and thus it is a market for the buyers. However, note that it makes complete sense to purchase a home just for your own use & not from an investment point of view.

Should you even look at investing in real estate stocks?

Amidst the equity market boom, there is a sharp increase in real estate stocks also. There are strong sales by the blue-chip real estate organizations in urban that has resulted in the NIFTY Realty Index to treble to 525 in the month of September 2021 from 160 in the month of May 2020. Analysts point that but the bull market in real estate is highly supported by a low rate of interest, economic recovery, and current reforms that have increased investor and first-time buyers’ confidence. It is highly impossible without the collective confidence of market participants. Also, it indicates that the sector is bound to return to the huge growth cycle viewed during the real estate bull market before 2008. The investors can simply participate in a staggered way based upon their holding period and risk appetite.

Besides using the route of mutual funds to invest in real estate stocks, you can even purchase the REITs units or opt for SIP in top real estate company’s stock to avail exposure in this market. Dissimilar to a one-time investment in land or flat, real estate investment can be performed little by little without hassles for managing properties. Such investments are liquid and offer the benefit to average costs in the event of falling market prices.

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