Importance of Owning a House in the Consequences of Covid-19?


Following the Covid-19 pandemic situation, owning a house is considered much better than living in rented accommodation. People also understand the importance of having real estate in their investment portfolio as a more trustworthy option that offers steady returns compared to the highly volatile stock market with increased risks.

How important it is to own your home post-Covid-19 situation:

Reserve Bank of India (RBI) has cut repo rates by 0.75 basis points (bps) earlier in 2020. The move by India’s central bank has made home loans dramatically enticing, providing prospective home buyers with an unmissable opportunity. The steep cut has taken the public and private sector banks ‘ interest rates on housing loans to their lowest level in the last 10 years, ranging from 7.20 percent to 8.05 percent.

For those who are pursuing a life-ambition to own a home, it is undoubtedly wonderful news, and also for those who are considering making the decision of purchasing a home for themselves.

The reason is fairly simple. The home loans at prevailing interest rates make substantial savings possible while generating an asset for end-use or investment purposes. Also, the borrower gets to use the savings resulting from a reduced monthly equated installment (EMI) to allow the use of a top-up loan, often available at lower interest rates.

For the apartment being bought the extra funds may be used to perform work relevant to the interiors. Alternatively, lower interest rates often offer an incentive for borrowers to collect a higher loan-sum. This helps to expand the option in terms of a bigger home in a popular neighborhood with more amenities and lifestyle facilities.

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Interestingly, if one contrasts the current scenario with the house loans being offered in the last decade, the interest rates were at comparable levels pretty much floating. In reality, lower interest rates for home loans coupled with affordable prices served as catalysts back then leading to a steady rise in property prices across markets in the years that followed.

Another advantage of the new home loan interest rate (ex. PNB home loan interest rate) is that a borrower will look at the probability of going over a floating one toward a fixed one. The latter tends to become volatile and can go north based on central bank Indian monetary policy changes.

Banks, NBFCs and other financial institutions typically charge a flat-rate premium for home loans. So, when overall interest rates are at their lowest, this option is best exploited. The borrower of the home loan has the option of locking the fixed-rate at a lower level and distance himself/herself from the worry arising from the interest reset practices followed by different lending institutions. Such a practice can provide peace of mind to the borrowers.

Buying an apartment is the most dear financial commitment a person makes in his/her lifetime. Now one of the best opportunity presents itself in the form of the lowest interest rates on home loans for those who wish to live in their dream home.

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