While much is being reported in the media about the significant dip in property prices, in actual practice most large developers are still holding on to their prices.

Though off course, they are trying to boost sales by throwing in freebies such as free stamp duty and registration, free parking, no charge for floor rise, etc.

Coming to home loan rates, banks are decreasing their interest rates on home loans and property prices are reportedly softening.

But will it be effective in raising consumer demand?

Does that mean that it will be easier to get loans?

Will banks give loans willingly?

Will consumers come forward to take more home loans?

The questions remain…

The fact remains that to a large extent, the lending and borrowing scenario has not brightened in spite of banks reducing the loan rates and some news of dipping real estate prices. Of course existing home loan consumers are happy that their inflated EMI burden will reduce somewhat.

However it seems these boosters are not sufficient to lift the spirits of Indian consumers who are grappling with financial insecurities. The overall economic slowdown, global news reported by the media, job loss, job insecurity, uncertain future of businesses/enterprises, volatility in the stock markets are a few reasons that may keep potential borrowers from investing in residential property (and therefore taking any home loans). Moreover additional taxes on real estate such as the 5 per cent value added tax (VAT) and 4.5 per cent service tax are obstacles in the way of boosting demand, be it for property or property loans. These costs have to be borne by the buyer.

To add to the number of speed-breakers in the way of these two inter-dependent sectors, there are the tightening eligibility norms. Lenders have made their norms more stringent. They have raised the margin required for a home loan because property prices could go down further.

The real up tick in demand will come when the consumer feels confident about taking on long term liabilities. We should watch for the Consumer Confidence Index (CCI) figures, which have been slipping downwards almost every quarter of late.

Predictions in a volatile scenario such as the current times are difficult. Interest rates need to see a further revision southward to be able to boost the demand for home loans. Similarly, property prices should see a visible correction to encourage the demand for realty and thus home loans. But most importantly, consumer confidence needs to be boosted.

Maybe wait and watch should be the buzzword for now.

If you have decided to buy your dream home, here is what you can do to take advantage of the current economic environment.

• The realty market is fiercely competitive. With a large number of builders competing with each other to get your attention (and your money), there is a wide range of choices available; not only in terms of property but also price, thus making it a buyer’s market. As a smart buyer you should negotiate and negotiate and then negotiate some more till you get the best deal.

• It is advisable that you choose ready-to-move-in property as it means lower risk for you. Or else you can go in for those builders who have tie-ups with banks. With many builders the tie-up entails 25% down payment and 75% loan from the bank. So, when you make 25% down payment you enter into an agreement with the builder and the bank, and your interest starts only when the flat is ready. In case such tie-ups are not available then only trust those developers who have proven track records of completing and delivering projects in time.

• Given in the current global financial scenario, be prepared to make down payments in the range of 20-25% and not 15-20% (which was the case till recently). In a way higher down payments make banks happy and it also puts you in a better position to negotiate with the lenders. You get better interest rates and therefore pay lower EMIs.

• Go window shopping for lenders, shortlist four or five, and get into negotiation mode. Now the big question is whether to go in for fixed or floating rate. Remember loan interest rate is not a one-time decision; it has to be reviewed periodically say every 6 months. As a new borrower you are advised to opt for a floating interest rate loan because those loans are linked to the bank’s Benchmark Prime Lending Rate (BPLR) and go down when downward revision happens. In the current scenario, floating rates make the best sense as rates are expected to go down in the immediate future.

• Rope in your spouse to get the maximum loan possible. Opt for the longest tenure possible, leaving enough wiggle room in your income to accommodate a hike in the loan rates. This is not likely in the near future but it is always better to be prepared.

• Man knows little of what fate has in store for him. When you take a home loan, it is on the basis and assumption of continuing income. We run into all kinds of risks in our daily life. Accidents and health issues like heart attacks, stroke, paralysis, kidney failure, and other physically crippling ailments can cause loss of income or, in some cases, even your life. Housing loans are a long-term liability. This is why when you take a home loan; it is advisable to take a life insurance and critical illness policy. Life insurance policies provide monetary benefit in case of an unfortunate incident like death and ensure that your family members inherit your home not your home loan. Critical illness policy will take care of the home loan liability if your income gets interrupted due to unforeseen, unavoidable circumstances which such conditions may create. That will be one less thing for you to worry about while you are under severe stress. Best of all, most banks will be happy to finance the one-time premium payable for both policies, enabling you to get this protection at a small addition to your regular EMI.

Protect yourself, protect your home. Insure your home along with the belongings. Every penny is worth spent here; therefore make these expenses part of the cost of buying your home.

I am looking for investment and own home in Pune. I would like to know my best loan option. Should I go for a personal loan of AED 2 lakh with a 6-year tenure or a home loan in India with 10-20 years tenure? What are the taxes levied on NRIs and what will be applicable for me while purchasing property in India? I am planning to stay in Dubai not more than 5-6 years. I am married and my wife is a housewife. We have a 6-month old daughter. Education and cost of living in Dubai is very high and will be inflationary for the next 5-6 years. I am staying with my family in Dubai in rented premises.

I have taken a loan of Rs 20 lakh from ICICI home finance. I want to insure my property and my life. Kindly suggest me which insurance company shall I look at for property and life insurance. Currently ICICI Prudential is offering me Life insurance which they claim is especially for the home loan applicant. Should I go for it?

I had taken a home loan from ICICI Bank in December 2007 at the rate of 9.25%, for 228 months. In April 2008, interest rate changed to 10.75% which again changed to 11.75% in May 2008. Earlier when the bank sent repayment schedule it showed - for Rs. 7463 paid as EMI - Rs. 1296 paid towards the principal component of the loan and Rs. 6167 paid towards interest. Now the bank repayment schedule shows a principal payment of Rs. 539 and Rs. 7780 as interest. I don’t understand how principal can be less than interest. For financial year 08-09, the total interest paid comes as Rs. 92,468 and principal is only Rs. 6504.

Is this correct or is the bank fooling me? If it is correct, then please explain me how.

Do not be surprised if your loan application is rejected even after you have paid off your much due credit card outstanding balance. The bank might have called you and given you an option where you could just pay a specified sum, in return for a settlement letter. Once you do that and get the settlement letter, it doesn’t for a moment mean that the slate has been wiped clean. You apply for a personal loan or a home loan and the lender will simply let you know that it isn’t interested in lending to you because your name comes up in the Defaulters list on the Satyam or CIBIL list.

When you go in for a settlement, banks can and will legally report you as a defaulter - to the extent of the dues foregone by them - at the credit bureau. All details concerning your default stay at the credit bureau for 7 years. You must understand that you CANNOT remove your name from this defaulters’ list. It will be removed from the list only after seven years, provided you do not default on any subsequent loans (if you manage to get it, that is). What you COULD do is to try applying for a secured credit card - a card that is offered against your term deposits at the bank. This type of card is available at many banks. Build a good credit record with it. This will not remove your name from CIBIL defaulter list but it will improve your credibility in your credit report. This would also increase your chances of getting credit facility from various banks at decent terms in future.

If a house is still under construction, only a partial disbursement of the loan is made by the lender. This is done periodically and the final disbursement is made on completion of construction.

However, in some cases, the home loan company may be willing to make the entire payment even if the construction is not complete.

This is known as the Advance Disbursement Facility.

An advance disbursement is generally made if the buyer requests the home loan company to do so and if the home loan company is fairly convinced the builder will complete the construction on time.

No tax benefits are available in respect of repayment of a home loan in the year in which the construction of the property is not completed.

The process to find the best home lender to get the best home loan deal seems to be complicated for most of us. The reason is unsystematic approach towards it. Home loan seekers always dream to get the best deal. It’s commonly said - when you can dream it you can actual do it. In this article we will throw light on certain guidelines, which may help you to make your dream come true.

1) Finalize your property

Who wants to lose business? The answer is no one. Lenders very well know at the back of their mind that one who has finalized the property is genuinely looking for home loan and if they do not provide the best deal he/she may look for some other lender for the loan. So finalizing property strengthens negotiation power of the borrower, which is an added advantage. One more trick you can play if your property is bought from a reputed builder is to negotiate for the interest rate till 23rd or 24th of the month. As many banks have monthly targets for its staff and as the month end nears, the banks may offer slightly better rate to enable the staff to fulfill the targets.

2) Eligibility

Banks differ slightly in calculating the home loan eligibility. If getting higher loan amount is an issue, than check for the following:

• Check whether the bank will allow the clubbing of income of relative other than the spouse, such as income of parents, brother, son/daughter.
• Look for banks that give better eligibility of loan based on your disclosed income.
• Check whether the entire income is being considered including annual component of income.
• If you are self employed and income are spread over many entities look for bank that will consider all these entities.

3) Interest rate

Banks offer home loans on fixed or floating rates. Before opting for fixed or floating it is essential to understand the term correctly. Fixed interest rate is commonly understood as fixed interest rate for the entire tenure, which is not true. Fixed interest rate only remains fixed for certain period of time and not for the entire tenure. It always has a reset clause. The reset clause varies from banks to banks. It may be 3, 4 or even 5 years. So the lender has full authority the change the interest rate further. A floating interest rate, as the name suggests, “floats” upwards or downwards, subject to market conditions. Hence, these rates are revised whenever required by the bank. So if you are looking for floating interest rate check whether the rate of interest has gone down for a couple of years or not.

4) Check other charges

A good deal largely depends upon how one negotiates. It can save your cost on loan. Before lending lender’s primarily take into account the income and personal profile. While choosing the best home loan lender what you also have to take into consideration along with the interest charges are processing fees, prepayment charges, valuation fees, legal charges, and hidden cost.

5) To win something you have to lose something

To get a home loan the first step is to fill the home loan application form. A fee is charged which would be around 0.5 to 1% of the loan amount. The fee is known as the processing fee. One has to understand that paying the processing fee along with the application form does not mean approval of the loan. It only guarantees that the application would be seen. So you should be ready to bear the cost of processing fee.

I have availed a home loan from an MNC bank at an interest rate of 9%. They have revised rates of interest several time and current rate stands at 12.50%, since 1/8/08 ( previously it was 11.75%). Last year in August, they raised rates by 2% in one go and after lot of arguments and conversation, the rate was agreed at 10.25%. The requisite changes have still not been made. On asking the bank, I got to know that the executive who had made this commitment had no authority. I have written several times to several heads without receiving any response till date. All my EMI payments have been regular in spite of an increased interest rate. I have once again received yet another letter regarding revision of the interest rate, now to 12.50%-which is very high.

Axis Bank is charging 11.5% for my home loan but your site shows it as 10.5%. Also, I got a salary hike recently, can this help my home loan application?