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No hopes on softer interest rates
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Rising inflation is likely to play spoilsport for home loans borrowers, says SRIKALA BHASHYAM
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It’s common knowledge that the much feared correction in property market is finally here and from a buyer’s point of view it is good news as prices have got more realistic. The same can’t be said on the loans front. Banks are either sticking to old interest rates or are offering discounts only on loans with respect to certain properties.
Going forward, there is not much hope for softer interest rates at least in the short term, due to inflation.
As you are aware, there hasn’t been much good news from this segment in the last couple of weeks and in fact, the inflation has surged towards 6 per cent mark.
In reality, this percentage is well above the comfort level.
There has been growing consensus among economists that the (average) benchmark rate is unlikely to move below 5 per cent in 2008.
Already, EMIs which were in the range of Rs.1,000 per lakh (for 15 year loans) have moved to over Rs.1,100.
Hence, home loan seekers will have to strike a balance between their EMIs and cash flows. One of the simplest options is to keep the EMI low so that it does not strain your monthly income. A smaller loan amount means higher margin money and one can look at various options for funding the same.
Besides traditional sources such as bank deposits and other liquid investments, one can also look at other options such as provident fund and insurance policies. Besides increasing the margin money, home loan borrowers will also have to increase their efforts in identifying the right lender .
After a couple of years from the date of borrowing, pre-closure penalty becomes an important factor. If you are saddled with penalty, it can be a huge deterrent.
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Property Plus
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Thiruvananthapuram
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