The Reserve Bank of India joined the huge battle on March 27 with a host of steps aimed at mitigating the harm from Covid-19 a day after Modi govt started his economy rescue in right earnest with a Rs 1.70 lakh crore coronavirus counter.

Those steps come just hours after Moody’s Investors Service reduces India’s development forecast from 5.3% to 2.5% for the 2020 calendar year.

The MPC agreed by a majority of 4-2 to cut the repo rate to 4.4% by 75 basis points. The reverse repo rate was decreased to 4% by 90 bps, establishing an asymmetric corridor.

EMI Relief:

It has declared a three-month EMI moratorium on all outstanding loans. The statement says: “All corporate, federal, rural, NBFCs and small finance banks are required to enable a 3-month moratorium on payment of instalments in respect of all outstanding EMIs on March 31 term loans.” No EMI will be deducted from the account of someone who has an outstanding loan for the next three months. And all of this, without any credit score damage. EMIs are to start after the time of moratorium is finished.

This will be a huge relief for all EMI payers, especially those — like the self-employed — whose income had become uncertain in the aftermath of the lockdown.

The three-month pause applies to business loans, house loans and auto loans. This would also apply for personal loans. Yet credit card payments do not be part of this ban, as it is not a term loan.

Three-way injection of liquidity

Das also announced at the Presser:

i) Auction of planned 3-year tenor long-term repo operations for total Rs 1,00,000 crore at a floating rate.

ii) Reduction of CRR by 100 basis points for all banks. Rs 1,37,000 crore will be released across the banking sector.

iii) Accommodation to be expanded from 2% from SLR to 3% with the immediate impact until June 30 under the Marginal Standing Facility. It will have Rs 1.37 lakh crore released into the network.

Combined, these three steps would render open the country’s financial system a minimum of Rs 3,74,000 crore. The banking system is secure and sound, the governor asserted, adding that tying share prices to the fate of the banks would be fallacious.

He implored Indians that they would not fear their bank deposits.

The RBI had been on a pause since December in view of rising inflation after five times lowering policy rates in the last year. RBI’s Monetary Policy Committee (MPC) had arranged an unscheduled meeting to zero in on potential emergency steps earlier this week.

Asia’s third-largest economy has been locked down since March 25 for three weeks, putting millions of everyday wage earners and lakhs of businesses in unparalleled hardship.

Earlier the Secretary of Financial Services wrote to RBI requesting a moratorium on EMIs, interest and loan repayments for a few months.

A relaxation was also pursued in the NPA classification criteria with a view to supporting those experiencing income losses.

Any default in payments must be acknowledged within 30 days under RBI rules and such accounts must be listed as “special mention accounts.” Experts claim a reclassification is important to ensure that firms survive the coronavirus attack, even for the time being at the expense of the banks.

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Real estate developers body is looking for a 12-month deferral of housing loan instalments, a 2-year moratorium on project loans, issuance of building plans and other permits that are being supported by payment of fees, and other steps to help the real estate industry in UP and Haryana.

The National Real Estate Development Council (NAREDCO-UP) has written to Finance Minister Nirmala Sitharaman urging them to support the sector in this tough period.

“Because of the impact of Covid-19, housing sales are almost zero. There are no buyers in the sector; of course, the valuation of housing prices is zero. We have requested Finance Minister for some relief package,” said Supertech Chairman RK Arora, who also serves as Naredco-UP presidents.

To address the impact of the pandemic, NAREDCO said it is important that all project loans disbursed by the banks be given unconditional 2-year moratorium during which time, no project account should be considered as NPA and no recovery action should be taken against any developer. It has also asked for the removal of all NCLT/DRT cases against the developers.

To alleviate liquidity for retail home buyers who have taken home loans but require liquidity assistance owing to a pandemic condition, the body has demanded a 12-month deferment for EMI to pay home loan instalments. Penal interest can be permitted through this time of waiver of the additional interest.

CREDAI has stated that the industry is already facing a severe shortage of construction materials owing to import constraints and the closure of state borders leading to supply chain problems and strong rise in material prices. Because of the Covid-19 virus building sites is also locked-down.

For a year starting on February 15, the entity has sought an exemption from payment of interest on external development charges and internal development charges. It has also stated that the phase of the required approvals for the construction of a project must be conducted with urgency without the requirement of Bank Guarantee(s) and other charges.

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When it comes to buying a home, finance is one of the most important determinants and most of the other concerns revolve around it. Because purchases of property are often a once in life decision, your funds need to be properly assessed. One must now use its savings and also choose a home loan to buy a house. The process of taking a loan has also become easier, and most people have chosen to do so. Nonetheless, certain basic principles can be practiced, in order to prepare the investments this year to buy a home.

1) Set-off your Debts:

When you are debt-laden, you can never calculate your net value. Any partial debt payment is poorly reflected in your credit rating and can affect the home loan process. Complete payments of your debts will help you progress towards home purchases. In addition to alleviating your tension, it can assist you to allocate money for your basic needs and your large purchase of property properly.

2) Diversify your Investments:

There are various financial instruments available in the market that should be studied. This can assist you to make wise investments and use the returns, to fund home purchases. Financial experts always emphasize that they have a mix of different asset classes in their portfolio, as this will help them in large-ticket purchases like real estate. “It is necessary to ensure that existing asset distributions are not redirected towards risky asset groups such as equities. If so, a portion of those assets needs to be shifted to less risky assets, too. Mutual funds can be a great path to such transitional fund parking.”

3) Do small savings regularly:

Real estate is a costly investment. Nevertheless, since contemporary buyers are subject to global standards, they do not want anything but the finest. Each penny counts in this case. Experts suggest that the monthly budget of a person should be based on a 50/30/20 thumb rule in which 50 per cent of his or her spending is on basic supplies, including food, utilities, healthcare, etc., 30 per cent for indulging yourself and your family and remaining 20 per cent should be saved. This 20% will help you with the down payment, home loans and also in case of any emergency.

4) Automatic transfer of money:

Enter standing instructions for the money to be transferred to your savings account every month from your salary account. It holds you in line and you will only spend after savings. In the future, you should adopt the same approach as you take a home loan so that the annual EMIs can be managed at the start so you avoid getting into a financial mess.

5) Adjusting Rent and EMI:

Proper planning is particularly important when you plan to buy a house while you live in a rented apartment. This will entail an EMI egress and your current residence’s rent. “Once you avail a home loan, the EMI starts immediately. This could become a burden if you pay it for your current house together with the rent. You need to balance the EMI and the rent in a good way so that you will increase the amount of EMI and move to your dream home once you have the new house possession.”

One can also look for a ready-to-move apartment to avoid the hassle of maintaining EMI and rent.

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It’s not the simplest task to buy an ideal house. Some may wait for the perfect deal to come up while others may even spend a lifetime waiting to build or purchase the right home, but it may never happen. It’s certainly one of the greatest purchases in your lifetime, so you’d want it to go perfectly, whether it’s the first time or the last time.

If you are unable to save enough to buy a new apartment, it is when ‘planning’ comes in. It’s as essential to plan your financial aspects as savings. What are you supposed to think before you buy a home? Is it the area or the budget? Or will it be a preference between a large apartment and a vacation home?

Below is the complete checklist before finalising a House:

1) Budget: Choosing a budget is one of the most important home buying tips. This enables you to identify which type of property you’re going to buy. Do thorough evaluations of your finances before you begin scouting for a house to prevent a mistaken financial decision which will make the experience nightmarish. Determine what kind of expenditures, investments and additional financial obligations are there, based upon that, you have to add up all of your income. It will be simple to do a joint calculation, in the event of your wife, parents or children contributing to the purchase.  A thorough calculation will bring you a rough understanding of how much money you can spend on the house.

The primary goal after choosing on the complete budget is to split it into down-payment and the monthly EMI you can afford to let go of your income without having hard-pinched.

You can decide on the type and area of the house once you determine the affordable amount. The first payment you need to make is the down payment. Banks will finance up to 80-85% of the price of the property and the other 15-20% will have to be shelled out by you.

But don’t spend every last penny on down-payment or borrow from other sources. Beware of borrowing from sources such as family members, colleagues, or your office. Banks do not include stamp duty and registration fees in the estate price, so the customer alone has to bear the full amount.

2) Home Loan: With rising property prices, when you don’t have many options but to opt for home loans, look for a bank that will give you an easy house loan with the minimum interest rate. There are many websites that have online EMI calculators (mostly by home loan companies). You can use these simple tools.

Most banks and home loan financial firms have information about eligibility and the rate of home loans on their websites. Among others, the most popular are SBI, HDFC, ICICI Bank, and Axis Bank. You can compare which lender provides the most efficient loan after gathering the data of different lenders. Home loans are based on the location of the estate; also check for the developer’s background which can be obtained for both new property and resale property.

3) Location/Area: Decide on the location of your estate after your financial calculations have been completed. Where do you want your dream home to be exactly? Would you prefer a suburban or urban location? Would you like to live in an isolated peaceful society or near to the city’s main hustle-bustle? Can you compromise on travelling rather than staying in a crowded region? You should check your distance from public amenities, hospitals, marketplaces, shops, commercial offices, schools/colleges, police station, etc. before moving forward with the purchase.

Also, enquire if the location in the monsoon is affected and if the region is under the municipal corporation. Check if there is a regular supply of water and if there is a shortage of power in the region. Go ahead with the place only after figuring out these critical requirements. Remember that the property’s cost depends on the location and region. Some banks, in specific, do not give loans to black-listed areas, so be careful not to be cheated.

4) Type of Apartment: The task becomes simpler immediately after you decide on the budget, the amount of the loan needed and the place where you want your housing property to be. Next, you have to identify the type of house you want to own. This could vary from a flat, villa, duplex, penthouse, row house to a large bungalow. Before choosing the type of house, there are many factors you need to consider. The size and type of house rely on many parameters, depending on the size of your family to your professional requirements. Will your family grow larger whenever you’re in this house? Are you planning on getting a pet? Instead of a spacious bedroom, would you prefer a large kitchen? Consider this entire first as you are going to buy your dream house.

5) Finding the Right Agent: Most individuals are asking if they need an agent to hunt the perfect estate. Well, it depends on how well you understand the property industry and the city. Always go for a trustworthy recommended agent. If you don’t have access to such a person, double-check the credentials of the agents you trust to get the best deal for you. You can ask around about him/her before going on house-hunting. Negotiate their commission charges and do not blindly trust them when the deal is been finalized.

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It becomes difficult for a person to relocate to a new city in a rental flat. Apart from the rent price in a metropolitan city, there has been a situation where people can’t afford to pay for a rental deposit. People are getting an opportunity to make their career in their respective field; an individual can consider managing a rent amount in a city like Mumbai but could be a close call if he/she wants to live in a flat which is near to their office, as rent amount and deposit can be the hardest thing to manage.

If a person resides in a remote location, then daily commuting to the workplace could be timing consuming and also stressful. Generally, to manage a rental deposit is the only issue as a professional person can manage a rent amount from their salary.

What happens if a person gets a rental deposit loan? How helpful it will be for a professional person in their career? Let’s have a look at the concept of Rental Deposit Loan

What is a rental deposit loan?

A rental deposit loan will assist you to settle a security deposit without burdening your current liquid assets. The loan amount for rental deposit ranges from Rs.1 lakh to Rs.5 lakhs. Depending on the terms of the lease/rent contract the loan term shall vary from 11 months to 33 months. The borrower must pay only the amount of interest until the lease is terminated. At the end of the rental period or when the client vacates the property whichever is sooner, the security deposit is refunded by the landlord. In this respect, a declaration is drawn from the landlord. Loans for rental deposits are flexible and provide stronger cost management, as well as incredibly comfortable.

How to get a rental deposit loan?

All you need to do to use this loan is to fill out an online application and upload the relevant documents. All documentation is checked by the company and, after approval, the loan is usually paid out within 24 hours. A rental deposit loan is handy as there is a very small monthly interest outflow relative to a regular loan’s EMI. With the introduction of online credit systems, you can choose a loan offer according to your present requirements which will help you to maintain your economic stability.

You don’t need to cut your present savings or compromise on monthly expenses or borrow from someone. In knowing that one can move without much economic stress, following the economic discipline and selecting an appropriate customized credit alternative. With easy economic instruments accessible from new-age internet loan companies, the pressure to move to a new location can be minimized. Instead of thinking about security deposit funds, you can concentrate on other elements of change.

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In June 2019, the RBI lowered its main policy rate, and in the calendar year 2019, it did it for the third time in a row. The repo rate was reduced by approximately 0.75% by 30 June 2019. While the repo rate by the RBI has declined by 0.75% over the past 6 months, many companies have lowered their home loan interest rates by up to 0.3%, whereas some banks have maintained or even higher interest rates.

How much time does it take to imply new repo rate given by the RBI?

Banks take their own time, and no rule involves that they lower the interest rate within a given time frame. “Banks and NBFCs increase the interest rates very quickly, frequently carried out through the next EMI. But they are slow in reducing EMIs because they face liquidity problems and don’t want to damage their cash cow.”

Change in repo rate and its impact on MCLR:

In the last 18 months, despite a net drop of repo rates have been seen, some of the banks have raised the MCLR. “Since last June (2018), the repo rate has decreased by 50 basis points, but in that interval, the MCLR has increased by 20 basis points. In June 2018, the repo rate was 6.25% versus 5.75% at the moment. At that time, some of the leading banks had a one-year MCLR rate of around 8.25% compared to around 8.45% at present,” said Adhil Shetty, CEO of BankBazaar.com.

Why do banks take a lot of time in implementing cut down of new repo rate?

Experts note that the rate cut was not reacted by all banks and NBFCs. Many banks that have bad debts and arrangements for additional write-offs are very reluctant to lose their income from the home loan interest, as in the early years the biggest chunk of EMI for a home buyer is the interest share.

Shetty adds: “Banks need to maintain a cash reserve ratio (CRR) of 4% with the central bank and a statutory liquidity ratio (SLR) of 19%, by investing in approved government securities. The bank’s credit to deposit ratio is currently at or above 77%. This means that the banks lend almost all of the funds they have after adjustment for CRR and SLR. They can therefore not lower their deposit interest rates at present, because they need a fresh deposit to retain their funding, and thus cannot lower the interest rates on loans either.

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Buying a house at your earliest age has many advantages, and also it determines a person’s stability. A person life is incomplete or is not considered as a stable life until he/she own a house, car and a reputed job.

It is said when you have a secured job you should invest in property as you can pay EMI regularly. It’s obvious that at the beginning of your career savings would be not possible but in a long term basis, you will secure a house and would have a good income flow with proper savings.

Experts point out that very few youngsters take the leap into this big investment, as the procedure of buying a flat is usually challenging. But, if the procedure is executed with proper financial planning, then the benefits will surely make an individual’s life.

The benefits of buying an apartment at an early age are the cost appreciation and also the person can concentrate to plan its other financial goals.

Things to know, if you want to buy an apartment at your earliest age.

1) Budget: Before buying a house, a person should plan out the budget which is based on its regular income flow and savings. Budget can be decided by evaluating the loan eligibility, and the career growth of an individual.

2) Savings: It is important to have atleast 20-25% of Downpayment/Savings with you; the rest amount could be managed by taking up a home loan.

3) EMI: A bank can pay upto 85% of the property amount as a loan, but, an important factor is to determine the EMI cost which will incur each month. Identify how much you can pay by keeping some of your savings apart.

4) Property Location: Finalize the area of the property by researching future prospects of the location. If the location is approved for future development then you should consider that area as your property. The government plan for future development can help to gain a good amount of appreciation.

5) Connectivity: It is important to have proper connectivity to your investment which will allow you to not get frustrated while travelling to your office. Further, exposed surroundings with Restaurants, Entertainment Zone, Malls etc is also very important.

6) Proper Documentation: Getting a first house can make anybody excited which can be harmful. An individual should consult an expert to look for documentation like land titles, statutory approvals, RERA compliance, etc.

Investing in a property can help a person to learn many things like Tax saving plans, Diversifying Investment, Financial Planning etc. In many cases, a young buyer tends to buy other property as well after understanding the real estate market.

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In the first fiscal policy of FY 2019-20, the Reserve Bank of India (RBI) cut its benchmark repo rate by 25 basis points.

At Present, the repo rate remains at 6%. It kept the strategy position at nonpartisan, flagging that financing costs would stay in the stable to negative zone. In this way, more rate cuts may follow in the coming months. The RBI additionally brought down the GDP projection for FY 2019-20 to 7.2% from 7.4% prior. In another critical advancement, the RBI deferred the usage of the outside benchmark framework. With banks not passing on the advantage of decreases in the key arrangement rates to borrowers, a postponement in the reception of an outside benchmark isn’t agreeable to credit borrowers.

It is said that this is the best time to buy a house, because of the upcoming elections and also builders are sitting on a huge pile of inventory. A buyer may see to get an attractive interest rate, which might not be possible after some months and have a difference with a few basis points. As the prevalent market scenario is going builders/developers are offering a great price.

We have evaluated some data regarding different interest rate offered by various banks and their EMI and processing fees. For this evaluation, we have calculated with Rs.1 lakh and tenure of 20 years with numerous EMI range. For example, the interest rate mentioned for Central Bank is 8.6% per annum and the corresponding EMI for Rs one lakh is Rs 874. Now, if you want to calculate the EMI for Rs 30 lakhs, then, simply multiply the EMI with 30, i.e., Rs 874 x 30 = Rs 26,220 per month (approximately), which would be the EMI for 20 years tenure.

Interest rate and processing charge on home loan by banks (with indicative EMI)

Interest rates are based on the floating rate system. Rates might be liable to amendment after a predefined tenure, contingent upon the bank’s terms and conditions. The EMI go is characteristic and is determined, in view of the financing costs given in the table. In a real circumstance, it might incorporate different charges and expenses, according to the bank’s terms and conditions. The real interest rate may fluctuate, in light of the credit profile of the advance candidate. Information in the table is just for delineation reason.

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