Tips To Manage Home Loan EMIs Under Financial Crisis

A home loan is nothing but a long-term financial commitment. Life is not a bed of roses. Hard times can be at the door at any moment. One needs to be prepared for combat with all such situations which can be nerve-testing such as- a sudden job loss, loss in business, temporary outflow for prolonged disease etc. Being in home loan repayment tenure, all these temporary issues can be wisely handled albeit.

Bank will instantly label you as a defaulter with a single skip in EMI repayment. Of late, the government of India fortified the laws governing non-performing assets (NPAs), by giving more power to the financial institutions, to recover the NPAs. As a result, defaulting on EMIs will be observed more rigorously from the time forth.

What happens if you default on home loan EMI?
Based on a healthy credit score banks will sanction your home loan approval. Failing EMI repayment can hit the credit score. It will get in the way of future loan application. Banks generally wait for two EMIs to be missed. Banks are more interested in recovering the fund rather than getting into legal proceedings or property auctioning. As a last resort, a legal notice will be sent to the borrower and the loan will be classified as a Non-performing Asset (NPA). If the borrower unable to pay, then, the authorized officer will ask for the physical possession of the mortgaged property, by serving a demand possession notice to the borrower.

Ways to manage home loan EMIs during financial distress
“Cheap home loans shouldn’t be the only factor for borrowing a cumbersome loan amount. Before borrowing home loan it’s wise to have an assessment of your capacity of repayment counting your monthly expenses and also securing enough savings for unforeseen happenings. A proper assessment can actually safeguard you from an extreme financial crisis,”- suggested Mr. Mahesh Somani, Chairman- National RERA Committee, National Association of Realtors India (NAR-INDIA).

Here are immediate pointers on how one can manage their EMIs under financial stiffness-

Inform the bank about your situation– When in an unfavourable situation,inform the financial institution about your issues. Considering your situation most lenders would try to help you out than to take any strict action.

Consult financial advisors or credit bureaus for help– If you find that the situation is anyhow not favourable for repayment, you can always take assistance from financial advisors or credit bureaus for further guidance. They will definitely help you in maintaining a good credit score.

Quick repayment– Quick repayment of the principal amount shortens the tenure as well as reduces the interest burden of the borrower. A double EMI repayment is permissible on annual basis.

Careful spending– Apart from credit obligations, there should be a certain upper cap on your monthly spending. Have some savings for emergency situations.

Home loan insurance– Taking an insurance against home loan reduces borrower’s obligations towards the loan repayment. It can even help you to pay up to 3 interests in case of job loss.

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Why Transferring Home Loans Appears Problematic To Homebuyers?

Transferring home loan from one bank to another for better facilities and lower interest rates is attractive option for existing home loan borrowers. However, this entire process of transferring includes several charges and suits that the applicant should be aware of. Unsatisfied loan borrowers generally opt for this switching. Usually they have a ‘plan-B’, in case they are not happy with their existing banking services, besides the dearth in services and inflexible renegotiation terms of the lender such as – changing the tenure or reworking the EMI, also influence a buyer to shift their ongoing loan repayment tenure to any other lender with better facilities.

Previously, banks wouldn’t allow home loan interest rate cuts to the existing borrowers. Passing on the same benefit will definitely benefit the customers with better loan savings during repayment tenure. If banks make it happen, then transferring home loans will be benign.

In your home loan tenure you actually end up paying greater amount in installment more than the actual purchased price of the property. In case you decide you renovate the property within this due period, in most of the cases getting a renovation loan becomes tough as most of the lenders don’t grant an increased loan amount for this purpose. Generally under these circumstances borrowers tend to transfer the loan cycle to another bank with better services and go through several complicated processes.

Tiresome process
For transferring home loan at first the borrower has to submit application to the existing lender. Then the bank will provide the consent letter or the NOC along with the details of the outstanding amount. All these documents are needed to be served before the other bank in which the borrower wants to shift the loan.

The other bank will process it as a fresh loan approval request and process the documentation accordingly. The documentation process includes submission of the employer’s letter, salary slip, photo ID proof, bank statement etc. That means one has to redo the process from the very beginning. Transferring home loan requires thorough documentation, coordination and following up. There will be problems, if the existing loan is jointly taken or the income levels have declined. Being irregular in paying EMIs can cause application rejection too. After total satisfaction of documentation the new bank will approve the application and will ask the previous bank to close the existing account.

Hanging risk involvement for the new bank
Once the transaction is completed and the property papers are handed over to the new bank, then the remaining post-dated cheques or ECS get cancelled. The new bank then runs an open-ended risk because the existing bank releases the mortgaged documents of the property only after receiving the payment. The bank takes such risk just to grab new customers. As the new bank treats this application as a fresh loan approval process, therefore it asks the borrowers to pay the processing fee, stamp duty, notarisation charges and franking charges which is equivalent to 0.5%- 1% of the loan amount.

An indefinite process
A home loan transfer process doesn’t have any property route. No actions can be taken legally against the bank, if it doesn’t allow for the transfer. Thus, mostly borrowers prefer to stick to their existing borrower to avoid further litigations.

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RBI Cuts Rate To Boost Affordable Housing To Boost Affordable Housing

Even RBI has come to the line to promote PMAY flagship project ‘Home for all by 2022’. Real estate experts consider that the apex bank of Indian economy has cut the repo rate at the onset of the Indian festive season just to boost the demand for affordable housing sector. A good monsoon in progress, low inflation numbers, favourable global environment and overall uptick in industry sentiments- bank has pointed out these facts as the catalyst of the recent rate cut.

RBI slashed the repo rate by 25 basis points to 6% at its third bimonthly policy check. The revised repo rate will go well with the two major policy reforms by the government ‘RERA’ and ‘GST’ which will eventually be favourable for the both buyer and the developer, during the investment in affordable housing. A rightly measured rate cut is the appropriate mediator to push the realty business. Affordable housing sector is not beyond that. By far the Central Bank has reduced their short-term lending rate 175 bps since 2014. With this revised rate cut the sluggishness of Indian real estate market will be recovered to a great extent.

Affordable housing in fact fed the real estate during the post demonetization season; while the entire market had fallen flat. The sector has been kept out of GST purview. The rate cut couldn’t have come more right time than this, when the affordable housing sector is expecting to be soared. Banks even relaxed the home loan percentage on purchasing affordable flats. Luring with the input tax credit by the government, market is expecting some major cash inflow from the domestic and overseas investment sector. The repo rate is beneficial at this moment as the current inflation rate is hanging at low levels less than 2%. Real estate sector has been on the way to be recovered by the means of low construction rate, supervision of RERA, lower price of ready to move apartments post GST and now with revised repo rate by RBI.

Real estate industry is hoping some positive come back as RERA is set to bring the accountability and visibility of the real estate business. RERA won’t allow any fraudulence in realty business. This move will surely able to bring back an investment boost along with the primal sentiment of home-buying. There is a temporary market slowdown observed after RERA enforcement. New project launches have been significantly shortened. This revised repo rate is a 7 year low. Nevertheless, the rate cut announcement sends out positive signals to the foreign investors and PE firms. With various progressive measures government will set affordable housing sector the big ticket of future investment. Indian real estate market is stepping towards progress with the deployment of RERA and GST rollout. Moreover rate cut comes as amen to Indian realty growth.

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Home Loan Above Rs. 75 Lac Gets Cheaper

India’s central banking institution the Reserve Bank of India has reduced the weight-age on home loans above 75 lacs from 75 per cent to 50 per cent lately. RBI has taken this initiative to support banks for disbursing more volume of home loans for home buying in the big business cities.
In its monetary policy RBI cites that residential property sale holds a central position through its forward and backward connection with country’s economy. It has been fixed on as a counter cyclical measure to cut down risk weigh on verified categories. Standard asset provisioning on such loans will also be declined accordingly.

RBI adhere the REPO rate at 6.25% and the Reverse Repo rate at 6% in its monetary policy review. The Marginal Standing Facility (MSF) – an emergency funding facility will stay in at 6.5% as also the Cash Reserve Ratio (CRR) of 4%.
An additional move that will alleviate the liquidity in banking system by close to Rs 50,000 crore, RBI has lowered the Statutory Liquidity Ratio (SLR) – the decree for least possible holding of government securities. Previously banks used to invest 20.5% of their deposits in gilts; which will now be replaced by 20% and it will be effective from June 24, 2017. This reduction decision has been made on the fact of allowing banks coadjute with the intercontinental norms on liquidity coverage that will be proclaimed January 2019 onwards.

Before this revelation it was apprehended that RBI will make delay in disclosing the rates. Industry experts expect that RBI will relax their standpoint from’ neutral’ to ‘accommodative’ to convey that easy money condition would conquer. Meanwhile petrol prices have been jumped up again across the country since the inflation numbers were made public and chances are it will ascend further. However, RBI continued to stick with the neutral stance on the ground the easing of price of commodities for short term period.

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Jharkhand Wipes Out Registration Charges On Property In Woman’s Name

A remarkable step has been taken by the Jharkhand state government supporting the women empowerment move. On Wednesday the government decided to forgo registration fee on properties registered on the names of any women.

In a press release government officials said that no registration and stamp fee would be charged for any immovable property purchased in the name of any female member of any family. Only Re. 1 token stamp money will be collected.
This decision was made public in a review meeting of Land and Revenue Department review in Ranchi. Jharkhand CM Raghubar Das was the honorable president of the meeting, who also put lights on complete digitization on the entire area map of the state.
In this meeting The Land and Revenue Department updated that at present online registry system is fully accessible across the state. To bring in women investors in the realty sector leading banks have already reduced housing interest rates across the country.
In many states of the country women pay lower stamp duty. In Delhi and Haryana stamp duty charge is 2 per cent less. Thus, it’s advantageous for a couple to buy any immovable property in name of the woman. Women are also eligible of a tax benefit of Rs 2 lac on the EMI paid on home-loans.
Coming to the affordable housing sector, PM has already announced that women should own an affordable housing asset as a co-owner or solo property owner. Under poverty alleviation scheme in west Bengal, women’s names are included in land titles of the government allocated plots to the economically weaker section of the state.

It’s expected that India is going in the right way to allure investors from the both domestic and international sides. After the complete implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) buyers will get legal protection for intellectual property rights.
Praising the move, West Bengal RERA expert Mr. Mahesh Somani said, “More people will be coming forward with realty investment soon after complete RERA implementation. As real estate sale holds a prime contribution in Indian GDP, the country is offering maximum benefits to the investors. RERA will be supporting homebuyers with a strong and transparent legal system.”
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