Best Time to Buy Your First Home is NOW!

Is your annual salary up to Rs 18 lakh per annum? If yes, then we must tell you that this is the best time for you to buy your first home, if you haven’t already bought it! Read on to know more.

In order to achieve the ambitious ‘Housing for All by 2022’, government is trying all possible means to motivate fence-sitters to take the plunge. After the Budgetary reforms, it announced two new subsidy slabs to spur the real estate market. However, these slabs will only apply to loan with a tenure of up to 20 years as against the current 15 years limit.

Buying a home is an exciting chapter in one’s life that has several factors at play. And budget, undoubtedly, is one of the most crucial aspects. Since a good number of people take the home loan route, reduced interest rates or subsidies like these are expected to encourage more prospective buyers.

After the reduction of long term capital gains (LTCP) to two years from earlier three years and the lowering of the base tax rate to 5 per cent from the earlier 10 per cent on income between Rs 2.5-5 lakh, this has come across as another measure that is likely to encourage more and more youngsters to enter property market.

Subsidies are based on the following income brackets.

  • So, if you earn up to Rs 18 lakh per annum, your first home will cost about Rs 2.4 lakh less as the government will give you a subsidy of 3 percentage points on a principal component of Rs 12 lakh.
  • For people earning up to Rs 6 lakh per annum, a subsidy of 6.5 percentage points on a principal component of Rs 6 lakh, regardless of their total loan amount will be given.
  • For those in the bracket of up to Rs 12 lakh per annum will get subsidy of 4 percentage points on a principal component of Rs 9 lakh.

Since 2015, the RBI slashed repo rates by 150 bps. Now, a general feeling that prevailed in the market was that the banks never passed on the complete benefits to the customers. To be precise, banks just slashed rates by 26 bps in home loans.

However, the recent demonetization made banks flush with funds. While the long queues in the banks and ATMs did trouble the ‘aam aadmi’ for a certain period, the move seems to be working well in favour of prospective home buyers. Banks received about Rs 14.9 lakh crore deposits following the ban of higher denomination notes, which prompted several banks to reduce their term-deposit rates.

In January 2017, the State Bank of India (SBI) announced its decision to reduce one-year marginal cost of lending rate (MCLR) to 8 per cent from previous 8.9 per cent. This meant that a home loan of Rs 75 lakh that was earlier available at 9.1 per cent will now be available at 8.6 per cent. Other banks also followed the suit and slashed their interest rates. In the last decade, the interest rates have never been this low.

So, does your 2017 wish-list includes buying your first home? Well, this could be the ideal time for it then!


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