Who Can Be Your Co-Applicant In A Home Loan?

If you plan to become the co-applicant or co-signor of a home loan, give this deep thought because it comes with huge responsibility. When you co-sign a home loan agreement, it is a serious step toward financial commitment. If anything goes wrong, or if the main home loan applicant defaults on repayment, you will be legally liable to repay the home loan.

Do not let your emotions get in the way of reasoning. Co-sign a home loan agreement only if you think you are financially capable of assuming such a huge responsibility.

MakaaniQ tells you who can be the co-applicant of a home loan, and all that you must consider before being one.

Who is a co-applicant?

A co-applicant is a person who applies for a home loan along with the main applicant. There are two types of co-applicants, one whose income is included while calculating home loan eligibility and the one whose income is not included while calculating home loan eligibility.

All co-owners of the property must mandatorily join as the co-applicants, but all co-applicants may not necessarily be co-owners.

If you are a partner in a partnership firm, your income will be considered for a home loan without the consent of other partners, based on your share in the firm.

If you are the director of a company, home loan eligibility and repayment assessment must be done for all directors with more than 3/4th shares of the company (the fraction may vary from bank to bank), regardless of whether the co-applicant is the co-owner in the property or not.

Co-applicants are unavoidable in the case of home loans to Non-Resident Indians (NRIs).

If the income of both applicants (main and co-borrower) are included in home loan eligibility, then obligations (monthly instalments of all running loans) of both the applicants will also be excluded while calculating home loan eligibility.

Income of spouses, parents and children can be clubbed together while applying for a home loan. Income of brothers and sisters can be clubbed together if they are the co-owners in the property. But if they are not the co-owners, many lenders do not permit clubbing together incomes to be eligible for a home loan.

Let us understand the possible relationship matrix while applying for the home loan.

Spouses:

A husband and wife can be co-applicants even if they are not co-owners of the property. The home loan tenure is decided based on the retirement age of the older partner. The income of both/either of the partners will be considered for determining home loan eligibility. Applicants mostly include the spouse’s income to raise the home loan amount they are eligible to.

Siblings (2 brothers/ 2 sisters):

Two brothers can be co-applicants of a home loan only if they live together in the same property. They must be co-owners in the property for which they are taking a home loan. However, a brother and sister cannot be the co-applicants of a home loan. Similarly, two sisters cannot be co-applicants.

Son and father:

A father and his son (if there is only one) can be co-applicants in a home loan if they are joint owners in the property. If the income of a father is considered for home loan eligibility, his age will be considered to ascertain the home loan tenure. However, if a father has more than one son, it is presumed that the property belongs to his sons, for the obvious legal reasons.

Unmarried daughter and father:

An unmarried daughter can apply for a home loan with her father. But the property must be solely in her name, to avoid disputes after her surname changes.

Unmarried daughter and mother:

 An unmarried daughter can apply for a home loan with mother as a co-applicant. But the property should be in the name of the daughter while the mother’s income is not considered. 

Son and mother:

A son and mother are, at times, co-applicants in the property when the father is no more. The son and mother also join as applicants when the mother is working and a joint owner of the property (even when the father is alive or when he has retired). This is done in order to enjoy higher home loan tenure (if the mother is younger to the father, and will retire years later when compared to her husband).

Friend and relatives:

Banks and financial institutions do not permit friends and relatives who are not blood relatives to join as co-applicants.

What should you keep in mind while applying for home loan as a co-applicant?

  • You must understand why you should join as a co-applicant. Is this because you are the joint owner in the property, or is this to increase the home loan amount for a property in which you are not a co-owner?
  • Understand that you are taking responsibility as the main borrower of the loan when you sign the home loan agreement as a co-applicant.
  • You will be equally responsible as the main home loan applicant, if anything goes wrong or if the main home loan applicant defaults.
  • Your credit score will be affected if the main home loan applicant does anything wrong or if he defaults on monthly payments.
  • Read the terms and conditions pertaining to the co-applicant in the home loan agreement. Raise questions if you have any doubt.
  • Do not sign the home loan agreement if you are not sure whether you should be part of a debt, especially when you are not a co-owner in the property.

Is It Just The Papers Banks Check Before Granting You A Loan?

Suresh Mehta, 33, knows the importance of planning. This is why he started working towards building a strong creditworthiness to acquire a home loan in future, apart from saving money to make the down-payment. Even if job satisfaction was a distant dream, he did not look for a new employment. He is aware that banks do not take it kindly if you frequently switch jobs. He is also making sure that each of his bills are paid on time and there are no defaults taking place. The software engineer knows that this will help him maintain a good CIBIL score. He is also working towards pre-paying his auto loan and a personal loan before he applies for a loan for buying property. By the look of it, Mehta is on the right track. But, what are the chances of banks still denying Mehta a home loan?

Also read: Don’t Do These 5 Things Before You Buy A Home

We would say do not be mistaken by the advertisements of banks promising you an easy delivery of home loan. Getting a home loan might not be as easy as it seems. Even in cases such as Mehta’s, banks might reject the home loan application.

If you seem like a drifter

On paper, you not switching jobs works as a proof of you being consistent and loyal. However, the same impression has to made when you meet bank employees while they are in process of issuing you a home loan. If you happen to be a drifter by any chances, bank employees are sure to find that out. In such a scenario, they might reject your home loan application.

If you seem aggressive

Nobody would like to deal with an unduly aggressive person. If you get hyper because the loan application is taking too much time to process and start arguing with the bank staff, this is certainly going to work against you. Fine, you will have the option to complain against the bank. However, this will delay your home-buying plans even further.

Also read: 5 Things Prospective Home Buyers Must Do

If you take things too lightly

Things that show your non-serious approach towards things may also not be taken kindly by the bank. If they ask you to be present in bank premises with a certain number of documents on a specified date, it is imperative that you do so. In case there is a problem and you cannot comply with the same, do inform your points person about it. Recurring incidents of such sorts are bound to result in the banks rejecting your home loan application.

These Expensive Features Might Not Add Value To Your Property

Talking about prerequisites of selling a property, many suggest a well-constructed and well-staged home. But, there are some who go beyond the limits and add expensive features to the property, expecting to fetch a better return on investment when compared to its ordinary counterparts.

Many real estate experts suggest that every new feature you add to your saleable property is viable only when it fetches you thrice of what you have invested in. MakaaniQ lists expensive features that sellers add to their property, but, rarely get the value of the same when selling.

Swimming pool

Adding a swimming pool to the property is considered to be a luxury. For a seller who plans to fetch a high price on the property he owns, swimming pool is not the feature to add. An addition which costs you somewhere between Rs 5-10 lakh, depending on the size, may not be well-taken by the buyers. You would raise the price of the property for this feature while a homebuyer would see it as expensive to maintain. Moreover, they would prefer a less priced counterpart in the locality to a home with a feature that they might not need and comes as an additional burden when buying and also, after the purchase.

Technologically advanced fixtures and fittings

A kitchen with new-age appliances and bathrooms equipped with an in-built sauna might sound enticing, but, it is not the choice of many homebuyers. Fancy additions to the kitchen including high-end modular equipment and appliances that make your property expensive can also be a turn off for many homebuyers who are not well-versed with such advanced equipment. On the other hand, adding expensive bathing equipment to the bathroom can also be a bad idea. Many of these fancy additions, not used on a day-to-day basis, become a liability that needs to be maintained rather than becoming useful for the homebuyers.

Landscaping

A well-maintained garden and a highly-landscaped garden are two different things. While the latter has a cost involved, it might turn off the homebuyers, thinking the maintenance that they will have to do on a day-to-day basis. A basic makeover that makes the outdoors look neat and clean is a better prospect. Avoid going overboard by adding fountains, claddings, seating area or fancy pavements to the garden. Also, avoid adding a kitchen garden. Not everyone would want to maintain an addition like that. 

Also read: Why You Must Try Virtual Staging Right Now

Buying Property Online? Take Note

Who would be foolish enough not to make the most of the opportunity that the information technology revolution has presented in front of us? Buying your household items is just a click away, and so is buying a home. In fact, data prove that prospective homebuyers are more inclined to use the online platforms to complete the process. Gone are the days when everything had to be done physically. Why should you take a day off from work just to pay site visits? There are virtual tours. Why should you sit with an advisor when you can compare properties and their prices using online tools?  To cut a long story short, more and more buyers across India’s major cities are finalising their property purchases using the internet. Great as the medium is, due care must be employed while you are trying to book a property online.

Here are some areas that need your special attention:

  • The asset you are trying to purchase, mind you, is one of the costliest assets you are going to purchase in your lifetime. May we suggest that only reputed platforms be trusted to carry out the business. After you zero in on a couple of properties, we also suggest that you go for a physical inspection of the property. This would leave no scope for you facing any disappointment in future. This is especially true in case of investments by non-residents.
  • Do not get carried away if an online advisor or an online portal is offering grand discounts on property purchases. There are two things that have to be considered before you start clicking to bag a grand deal? Can you trust the brand that is offering this discount? And, does the deal on offer actually meet your personal requirements? Only if the answers to both your questions are affirmative, go ahead with the deal. Also, it must be considered that offering heavy discounts is a marketing strategy to sell off projects faster. Do not forget to make sure that everything is alright with the project.
  • The online medium can be a great tool to complete the purchase, but you also need to have the physical possession of property-related papers. Homebuyers cannot afford any carelessness in this regard. Complete this process with utmost diligence. This rule also applies when you are trying to find out the details of the project. Do ask your developer to present the physical papers related to the property sale.

 Also Read: 10 Things You Should Know About Stamp Duty On Property Purchase

Statements Sellers Should Avoid Making

Highly mistaken are those sellers who firmly believe that it would be a piece of cake to offload a property that is in a good condition, is situated in a good locality and is rightly prices. Your firm belief will soon take a beating when you would not see buyers falling over one other to buy this nice piece of immovable asset. Sooner or later, a good property will get a buyer willing to give you your asset’s real worth, but, a conscious effort must be made to make sure that happens sooner than later. To make that happen, you may have to make certain changes in your communication process. We may have been told in childhood to think before we speak; applying this at this juncture is quite crucial.

Do mentally edit these sentences out each time you are tempted to use them.

“I cannot wait for long”

Home-selling is a difficult work and you would like to get done with it as soon as possible. The seller knows it as well as you do. It would be wise not to pronounce it in those many words. Let the seller take his time to check out the property, make his decision, prepare for the purchase and get done with it peacefully. Even if you are beginning to get irked, saying so would be of little help. In fact, it could simply put off the buyer, who may decide to quickly leave the site to look for other properties he has zeroed in on. It is relevant to note here that it is not only the spoken words where you have to exercise caution. Showing non-verbal cues of your restlessness will have an even worse impact.

“I am in a hurry”

Well, we all are, are we not? Now, the moment a seller makes this statement, the buyer would quickly latch on to it. This would seem like a good opportunity to haggle and bring down the price, the buyer would think. Naturally, a man in a hurry would be willing lower the price to finish the job quickly. Some other buyers might even smell a rat. Why is this seller in such a hurry? May be things are not alright. You are selling a high-value asset and being in a hurry will be a bad idea.

“This offer is final”

When you are dealing with a buyer who would just not stop talking about lowering the price a “little more”, this message must be conveyed. However, putting this mental state in words and expressing in in front of prospective buyers in the initial stage may be unwisely. You so far do not know how things turn up as talks progress. My offer is final is a statement that must be saved for a stage where you would not like to negotiate at all.

“This is the best you get in this budget”

We all have to say great things about what we have but this must not be done in a negative way. If you want to daggle the buyer, focus on pointing out the merits of your property, but, refrain from bad-mouthing other properties. Statements such as “you will not find a better property in the market in this price range” and “this is the best in your budget” are exaggerations. They are also insulting to the buyer (for the obvious dig you are taking at their financial standing).

“We will see about that later”

Those who buy the property have a thousand questions to ask; those who sell them must answer all of that to the former’s great satisfaction. By doing so, you will be doing yourself a favour and not the buyer. In their great excitement, they might ask questions that might look premature and childish to you. However, there is no need to lose your cool and say things that may prove to be a deal breaker. Snobbish-sounding statements such as “we will see about that later” may put prospective buyers off. Try not to use them.

Frequently Asked Questions On Property Registration

Among the many tasks that a homebuyer has to perform is the responsibility to register the property with the government, after paying stamp duty and registration charges. Registration of the property transaction and related documents is done under the various provisions of the Registration Act, 1908.

Here are the answers to certain frequently asked questions involving the topic.

 

Is it a must to register property purchase documents?

Under the provisions of the Act, the registration of these property documents is a must:

  • Documents pertaining to gift of immovable property.
  • Documents that are created to ‘create, declare, assign, limit or extinguish’ any right, title or interest of the value of Rs 100 and upwards in an immovable property.
  • Leases of immovable property that are created for a period of one year or more.
  • Documents that are created after a court order transferring any right, title or interest of the value of Rs 100 and upwards in an immovable property.

Also read: Property Registrations Get Easier, Faster and Affordable

 

Is there a time limit, to apply for registration of a document?

The document should be presented for registration within four months from the date of signing. A will on the other hand can be registered at any time.

 

What if one fails to register the property transaction?

Property transactions that are not registered do not have legal validity. Unless a property is registered in your name, you are not its legal owner, even if you are occupying the space. 

 

Registration of what documents is optional?

In certain cases, registration of documents is optional. These include:

  • Documents, other than instruments of gift and wills, which purport or operate to create, declare, assign, limit or extinguish any right, title or interest of a value less than Rs 100 in an immovable property.
  • Leases of immovable property for any term not exceeding one year. Registration for leases that are exempted under Section 17 is also optional.
  • Documents that are created after a court order transferring any right, title or interest of value of less than Rs 100 in an immovable property.
  • Wills.

Also read: Make Sure Your Property Registration Application Is Not Rejected

 

What property documents need not be registered?

Certain property-related documents, as specified under the Act, need not be registered. These include:

  • A grant of immovable property by the government.
  • Any order made under the Charitable Endowments Act, 1890, vesting any property in a treasurer of charitable endowments or divesting any such treasurer of any property.
  • Property purchased at a public auction where a civil or a revenue officer is the seller.

 

Can the sub-registrar reject my registration application?

The sub-registrar can refuse to register your property if:

The language is not comprehensible: If a document is written in a language which the registering officer does not understand, he may refuse to register the document. Such a document must be accompanied by a translation into a language commonly used in that area.

Documents contain interlineations, blanks, erasures or alterations: The registering officer may refuse to register documents that have interlineation, blank spaces, erasures or alterations.

If details of property maps or plans are not provided: Documents relating to immovable property are not accepted for registration unless these contain a description of such property sufficient to identify the same.

 

What if there are false statements made in documents?

Section 82 of the Act says that an imprisonment for up to seven years or a fine (no specific amount is mentioned in this regard) or both could be imposed, in case a buyer ‘intentionally makes any false statements, presents a false copy or translation of a document or a map or plan’. Attempts to ‘falsely personate’ other people is also a punishable offence.

 

Is there a time limit within which one has to collect the registration papers?

Except in case of wills, all other registration-related documents must be claimed within a period of two years of registration, failing which the papers might be discarded by the office. The maker of a will can register his will during his entire lifetime.

 

Can a will be registered after the death of the will-maker?

The will of a person can be registered even after his demise. To do that, the claiming party will have to produce the document and other records relating to the death of the will-maker, the witnesses and the scribe before the sub-registrar. In case the registrar finds no objections in the matter, he will register the will.  However, after the will is registered, a procedure known as will enquiry will be carried out by the sub-registrar’s office, to further check the authenticity of the claims.

 

What are the stamp duty and registration charges for registration of wills?

Unlike property, there is no stamp duty that has to be paid for registering of a will. For registration of a will during the lifetime of the testator, a registration fee of Rs 100 and nominal user charges are to be paid. To register the will after the death of the testator, an inquiry fee has to be submitted, apart from the above-mentioned charges.

 

Who is responsible for fixing property registration charges?

State governments fix stamp duty while registration charge is a central levy. While stamp duty charges vary from state to state (within a range of 2-10 per cent of the transaction value), a buyer generally has to pay one per cent of the deal value as registration charges. In some states, buyers also pay a flat fee on properties of a certain value. 

States also fix charges for searching of the registers (in case you need to find out something from the records), for making or granting copies of reasons, entries or documents, before, on or after registration. They also decide the additional fees payable for the issue of commissions, for filing translations, for attending at private residences and for the safe custody and return of documents.

RBI Hikes Repo Rate To 5.40%

 

The Reserve Bank of India (RBI) on August 5, 2022, increased the repo rate by 50 basis points. The move by the apex bank, which has now brought RBI’s benchmark lending rate at 5.40%, will make home purchases costlier for prospective homebuyers. The decision will also result in housing EMIs increasing for existing home loan borrowers.

“The RBI move might have an immediate impact on home buying for a short-term as the recent consecutive repo rate hikes have already added to buyers’ overall acquisition cost. Rising interest rates, along with elevated property construction cost and product price pressures, could adversely impact the real estate sentiment when buyers are likely to invest in their dream homes foreseeing the festive season,” says Ramani Sastri, chairman & MD, Sterling Developers. 

“The impact of rate hike will be predominantly on the affordable housing side, which is primarily driven by sentiments and especially first-time home buyers, who are heavily reliant on home loans,” says Lincoln Bennet Rodrigues, Chairman & Founder, The Bennet and Bernard Company.

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RBI Hikes Repo Rate To 4.90%

As it tries to tackle an eight-year-high inflation, the RBI on June 8, 2022, increased the repo rate by 50 basis points. The hike on Wednesday brings RBI’s short-term lending rate to 4.90%. The six-member monetary policy committee unanimously voted in favour of the repo rate hike.  

In an off cycle announcement on May 4, 2022, the apex bank had effectuated a 40 basis point increase in the repo rate, bringing it to 4.40%.

Further repo rate hikes are also not ruled out since inflations remains outside the comfort zone of the RBI — FY23 CPI inflation seen at 6.7% as upside risks persist. 
The next meeting of the MPC is scheduled between August 2 and 4, 2022.   

Announcing the third monetary policy for the current fiscal virtually, the RBI governor said the Indian economy was resilient, and the central bank would continue to support growth. 

Home loans to go costlier; EMIs to increase 

The move will prompt banks in India to start a rate hike cycle, bringing an end to a record low home loan interest regime. So far, home loan interest rates continue to hover at sub-7%. 

As it is, several banks, including HDFC Bank, ICICI Bank and Punjab National Bank, have increased their marginal cost of funds-based lending rates following the May 4 hike in the repo rate.  

“From a real estate perspective, this hike in the policy rate comes as a hurdle as home loan rates will increase, putting a dent on the homebuyer’s sentiments. Any increase in the interest rate will further impact the costs of doing business and hence, the move will hurt business sentiment too as the economy is still recovering from the pandemic,” said Ramani Sastri, Chairman and MD, Sterling Developers.  

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RBI hikes repo rate to 4.40%

May 4, 2022: With a view to tame stubborn inflation levels, the RBI, on May 4, 2022, hiked the repo rate by 40 basis points, to bring it to 4.40%. In a surprise virtual briefing, RBI governor Shaktikanta Das also announced an increase of 50 basis points in cash reserve ratio, to bring it to 4.50%.  

The move is likely to usher in the end of a record low interest rate regime, consequently pushing home loan interest rates.   

“The Central Bank, in response to elevated inflation levels due to geopolitical tensions and its impact on the Indian economy, has decided to raise the repo rate by 40 bps, and this has been announced before the scheduled MPC meeting. This dynamic response has been to ensure that inflation is brought under control, and does not impact the broad-based recovery of the Indian economy that has been witnessed recently. This step has also come in response to the near likely significant hike in Fed rates as inflation has been affecting the US economy,” said Samantak Das, chief economist, and head-research and REIS, India, JLL.

“From a real estate point of view, this hike in policy rate is not welcome, and will have a negative impact as home loan rates will increase immediately. This repo rate hike coupled with cost-push inflation in construction is likely to slow down the growth trajectory of the residential sector, which does not augur well for the Indian real estate sector,” he added.

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RBI Leaves Repo Rate Unchanged At 4%; Home Loans To Stay At Record Low Level

April 8, 2022: The RBI, on April 8, 2022, decided to maintain a status quo on key policy rates while retaining its accommodative stance, as India’s apex bank tries to fuel economic growth after a prolonged slowdown caused by the Covid pandemic. As a result of this, the repo rate and the reverse repo rate remain unchanged at 4% and 3.35%, respectively. 

 

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RBI leaves repo rate unchanged 

February 10, 2022: The RBI (Reserve Bank of India), on February 10, 2022, decided to leave the repo rate unchanged at 4%. This is the 10th consecutive time that the banking regulator has maintained a status quo on the repo rate, at which it lends money to scheduled banks in India.  The governor Shaktikanta Das-led apex bank left the reverse repo rate unchanged at 3.35%, too, while maintaining its accommodative stance. 

While repo rate is the interest the RBI charges from banks to lend funds, the reverse repo rate at which it borrowers funds from financial institutions in India. 

These decisions, broadly meant to support India’s coronavirus-affected economy come out of a slump, were taken at the bi-monthly monetary policy review meeting that was conducted between February 8 and 10, 2022.  

“Overall, taking into consideration the outlook for inflation and growth, in particular the comfort provided by improving inflation outlook, the uncertainties related to Omicron and global spillovers, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery,” RBI governor Shaktikanta Das said in his address.

The move by the RBI augurs well for India’s real estate sector that has been reeling under the impact of the pandemic. Since the cost of borrowing funds is going to be low for banks, they would continue to pass on the benefits of this low interest rate regime to home loan borrower. Currently, most banks in India are offering housing loans at sub-7% interest rate.

“We welcome the RBI’s decision to continue with their accommodative stance keeping in mind the economic concerns in near future. The measures announced for liquidity amplification in the economy are indeed a progressive step and were much needed. Real estate has been severely hit during the pandemic and the recent Budget announcements and the RBI’s decision today will boost the sector to cope with markets’ uncertainties,” said Jitesh Lalwani, president, Home Sync Real Estate Advisory Services.

“The RBI’s decision to maintain its accommodative stance was on the expected lines, considering the outlook for inflation and growth. The government has always taken affirmative measures to revive the economy and alleviate the Covid-19 impact with sustained fiscal and monetary support. The prevailing low home loan rates are already enticing for homebuyers which have immensely benefited the real estate sector. This decision will create further demand and sustain the growth momentum in upcoming months,” said Bhushan Nemlekar, director, Sumit Woods Limited.

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RBI Leaves Repo Rate Unchanged At 4% Amid Omicron Concerns

December 8, 2021:  The six-member monetary policy committee of the Reserve Bank of India (RBI), on December 8, 2021, decided to leave the repo rate unchanged at 4 per cent.  The move by the apex bank was on the expected lines, amid rising fears of spread of the Omicron variant of the Coronavirus.

“We hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy – COIVD-19. The domestic economic outlook is somewhat clouded by the Omicron variant,” said RBI Governor Shaktikanta Das, while announcing the decision of the MPC.

“The decision of the RBI MPC, to keep key policy rates unchanged, is along expected lines. The ongoing growth-inflation trade-off also requires the banking regulator to tread a careful path. Even though economic indicators are reflecting a positive trend, interest rates needed to be kept at the current level, in order to continue to drive growth and boost demand in the real estate sector, which is a key contributor to economic growth in India. If home sales have shown consistent improvement over the past couple of quarters, much of this can be attributed to the record low interest rate regime. Upsetting the current momentum would have been highly detrimental to overall economic recovery,” said Dhruv Agarwala, group CEO, Housing.com, Makaan.com and Proptiger.com.

“Given the current eminent Omicron threat, a status quo on repo rates comes as no surprise. These low rates will help maintain the pace of the economic revival. This is also good news for the real estate sector, as low home loan rates, coupled with attractive offers from builders, will keep home buying bullish. Going forward, the focus will be on how long these rates can be sustained and keeping inflation in check,” added Atul Monga, CEO and co-founder, BASIC Home Loan.

 

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At 4%, RBI Leaves Repo Rate Unchanged For 8th Straight Time

October 8, 2021: The six-member rate setting panel of the Reserve Bank of India (RBI) on October 8, 2021, decided to leave the repo rate unchanged at four per cent for the eight straight time. The RBI’s monetary policy committee (MPC), headed by governor Shaktikant Das, also decided to leave the reverse repo rate at 3.35 per cent while also maintaining an accommodative stance after a three day meet that started on October 6, 2021.

The move by the RBI is on the widely expected lines. In polls conducted ahead of the policy meeting, all economists in Reuters and Bloomberg polls said the central bank will continue to hold rates steady to support economic growth.

For the uninitiated, the repo rate is the short-term benchmark interest the RBI charged from scheduled banks in India to lend money. The reverse repo rate on the other hand is the short-term benchmark rate at which the central bank borrows funds from banks.

The RBI has cut the repo rate by a total of 115 basis points (bps) since March 2020, following a 135 bps rate reduction since the beginning of 2019.

The move by the RBI comes at a time when nearly all leading banks in the country have reduced home interest rates in order to boost demand for residential property during the ongoing festive season. Real estate developers, who have planned extensive discount deals to attract homebuyers, have welcomed the RBI decision.

“The RBI decision to leave the rate unchanged will boost demand during the ongoing festive season. The current scenario offers excellent investment opportunities in the residential segment as affordability is at an all-time high. As banks and financial institutions further slash interest rates, it will provide a much-needed fillip to the real estate sales in the festive season,” said Himanshu Jain, VP – sales, marketing and CRM, Satellite Developers.

At present home loans are available to homebuyers at an annual interest of as low as 6.50 per cent. Among the leading banks that have recently reduced interest rates to boost the festive spirit are Kotak Mahindra Bank, Bank of Baroda, State Bank of India, Punjab National Bank, YES Bank, ICICI Bank, HDFC Bank, LIC Housing Finance, etc.

”The RBI maintaining a status quo on key policy rates was expected. The all-time low interest rates have already given a boost to the real estate sector and enhanced homebuyer confidence. It has also helped the sector to regain its strength as well as stay afloat during these unprecedented times. The government’s favourable policy measures along with festive deals will help sustain the demand during the festive season,” said Shraddha Kedia-Agarwal, director, Transcon Developers.

 

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RBI Leaves Repo Rate Unchanged At 4%; Homebuyers to Benefit

August 6, 2021: The Reserve Bank of India (RBI), on August 6, 2021, decided to leave key policy rates unchanged as it attempts to support the Coronavirus-hit economy and help it to come out of the woods. With the RBI’s six-member monetary policy committee deciding to leave the key lending rates unchanged, the repo rate continues to remain at 4%, while the reverse repo rate is at 3.35%. The RBI has also maintained its accommodative policy stance.

Recall here that this is the seventh time that the RBI has decided maintain a status quo on key policy rates. The repo rate, at which the banking regulator lends money to scheduled banks in India, is currently at the same level it was in April 2001.

While stating that the RBI cannot drop its guard and must remain vigilant against the third wave of the Coronavirus pandemic, RBI governor Shaktikanta Das said the MPC voted with 5:1 majority to continue with the accommodative stance for as long as necessary, to support economic growth.

Even though the RBI leaving the repo rate unchanged means home buyers would continue to reap the benefits of a record low interest rate regime, real estate developers are of the opinion that a slight downward tweak in rates would have been highly commendable.

“Keeping in mind the current scenario, a slight reduction in the key rates would have been widely celebrated as low interest rates have been a crucial factor in the revival of demand in the real estate sector. We have already seen early signs of improvement in economic activity, following the easing of some restrictions, post the peaking of the second wave,” said Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group.

Recall here that home loan interest rates currently stand at as low as 6.65 per cent, the lowest they have been in the past 15 years.

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RBI Keeps Repo Rate Unchanged at 4%

June 4, 2021: The Reserve Bank of India (RBI), on June 4, 2021, decided to leave the repo rate unchanged for the sixth consecutive time, while maintaining an accommodative stance, a decision that is on the lines expected by rating agencies and policy analysts.

This means the repo rate, at which the RBI lends money to banks, stands unchanged at 4 per cent while the reverse repo rate, at which it borrows money from banks stands at 3.35 per cent.

The decision by the six-member monetary policy committee, comes at a time when GDP growth in India contracted by 7.3% in FY21, even as the second wave of the Coronavirus pandemic continues to make deeper dents into an economy which is still reeling under the impact of the first wave in early 2020.

While stating that the central bank will continue its proactive and pre-emptive approach of transmission to return the economy to growth, RBI governor Shaktikanta Das said the MPC voted unanimously to keep repo rate unchanged and maintain an accommodative stance.

The RBI has also lowered India’s GDP growth forecast for FY22 to 9.5%.
Even though the monetary policy committee’s decision to maintain a status quo was widely expected, developers, who were expecting a reduction in rates, have voiced their disappointment over the RBI move.

“A rate cut would have been beneficial for the consumers and would have given a boost to the current demand uptick that we have seen recently. Residential demand is reviving in the pandemic context and this needs to be fostered. However, the prevailing home loan rates, which are at a record low, are already enticing for homebuyers,” said Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group.

“It also goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market,” said Ramani Sastri, CMD, Sterling Developers.

 

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RBI Leaves Repo Rate Unchanged On Virus Concerns

April 7, 2021: The Reserve Bank of India (RBI) on April 7, 2021, left key rates, including the repo rate, unchanged amid lingering fears that India might have to announce another nation-wide lockdown because of a dramatic spike in coronavirus cases.

With this, the repo rate remains unchanged at 4% while the reverse repo rate sticks at 3.35%. This is the fifth time in a row that the apex bank has decided to leave the rates unchanged as it attempts to spearhead an economic recovery for Asia’s third-largest economy in the aftermath of the coronavirus spread.

Last time, the six-member monetary policy committee (MPC) of the RBI tweaked rates in May 2020.  The banking regulator also continues to maintain an accommodative stance in order to support growth.  

The move to leave the repo rate, at which it lends money to banks in the country, is likely to prompt banks in India to continue offering record low home loan interest to buyers in order to continue the growth momentum going in the country’s second-largest employment generating sector, real estate.  

However, the developer community is of the view that a slight reduction would have been more appropriate, considering demand in the housing sector has been improving on government support measures.

“Keeping in mind the resurgence of Covid infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

The decision would however prompt banks to continue offering record low home loan interests.

“The RBI move to hold key rates unchanged, including holding the repo rate at 4%, is along expected lines, amid a sharp increase in COVID-19 cases in India that has forced many states to announce partial curfews and lockdowns. Even though public lender SBI recently announced a hike in its home loan rates, triggering expectations that other banks might follow suit, we hope that lenders in India would take a cue from the RBI move to leave rates unchanged and continue to offer homebuyers the benefit of a historically low interest rate regime. This is the first review of the monetary policy in the new fiscal year and it is likely that RBI will carefully monitor how the COVID-19 situation evolves and change its stance later in the financial year as the need arises,”  Dhruv Agarwala, Group CEO,  Housing.com, Makaan.com and Proptiger.com.

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RBI Leaves Repo Rate Unchanged

February 5, 2021: On widely expected lines, the Reserve Bank of India (RBI), decided to leave the repo rate unchanged at four per cent. The RBI has also maintained its accommodative stance and a status quo the reverse repo rate, at 3.35 per cent.

As India moves to attain normalcy after the Coronavirus pandemic-induced economic mayhem, the apex bank is expected to maintain the rates at this level at least through 2023, a Reuters poll had earlier indicated.

Recall here that this is the first meet of the RBI’s six-member monetary policy committee, after the centre announced its Budget for FY22, on February 1, 2021. The RBI has maintained rates since May 22, 2020. However, since March 2020, it has lowered the repo rate by 115 basis points.

While stating that the economy is poised to improve, with signs of recovery indicated by an expansion in the list of normalising sectors, RBI governor Shaktikanta Das said that signs of revival were also visible in India’s housing sector, with supply and demand, both showing improvement amid an improvement in consumer sentiment. Data available with PropTiger.com show new supply and sales improved in the October-December period (fourth quarter of Q4) of 2020, in India’s eight prime residential markets.

“The Union Budget 2021-22 has introduced several measures to provide an impetus to growth. The projected increase in capital expenditure augurs well for capacity creation thereby improving the prospects for growth and building credibility around the quality of expenditure. The recovery, however, is still to gather firm traction and hence continued policy support is crucial,” Das said.

Commenting on the policy move, Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com, said: “The decision of RBI to keep the repo rate unchanged along with accommodative stance is understandable at this juncture, although a further cut in the key rates would have given a boost to current demand uptick that we have seen recently. The measures announced by the RBI governor today for liquidity enhancement in the economy is indeed a good step, and was much required.”

While the RBI move is on the expected lines, real estate developers have aired disappointment over the decision.

“After a budget that had limited announcements for real estate, the sector was hoping against hope for a further reduction in the repo rates. The reduction would have spurred growth in demand for real estate assets that have been severely hit as a result of the pandemic and subsequent lockdowns,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

The next meeting of the MPC is scheduled during April 5 to 7, 2021.

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RBI Maintains Status Quo On Repo Rate

December 4, 2020: In a widely anticipated move, the Reserve Bank of India (RBI), on December 4, 2020, decided to leave the repo rate unchanged at 4% amid high inflation and slowing economic contraction. The six-member monetary policy committee (MPC), headed by governor Shaktikanta Das, also decided to continue with an ‘accommodative’ stance, to boost growth through consumptions, as signs of recovery become visible in the aftermath of the Coronavirus pandemic.

“The MPC decided to continue with an accommodative stance of the monetary policy, as long as necessary, at least till the current financial year and into next year, to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within target,” Das said, at the virtual announcement of the policy move.

In a Reuters poll conducted in November 2020, all 53 analyst-participants had said they did not expect any change in rates, with the next rate cut now seen in the April-June quarter.

Impact on housing demand

Since home loan interest rates are already at a record low with most banks in India offering home loans at below 7% currently, the chances of further correction are slim. However, the demand for homes will continue to be robust, because of various factors.

“The RBI’s decision of keeping the repo rate unchanged was on expected lines, owing to the rise in inflation in recent months. In the wake of COVID-19, Q2 of FY21 witnessed a strong improvement in consumption and therefore, the RBI maintaining the status quo for the third time in a row is a positive step in keeping inflation under control,” said Anshuman Magazine, chairman and CEO, CBRE India, South-East Asia, Middle East and Africa.

“The strengthening of recovery in rural demand and the momentum gain across the urban sector, will also support the real estate sector. Additionally, the policy support being provided by the government will continue to boost residential uptake and support construction activity in the upcoming months,” he added.

While lauding the RBI’s move, Ambience Group’s Ankush Kaul, however, cautioned that disruptions might upset the recovery. “There is a need to put a check on the spread of the virus and disruptions like the farmers’ protest, etc. These may collectively dampen the festive spirit and the upswing in home buying that we witnessed a few months back,” said Kaul, who is the president of sales and marketing at Ambience Group.

“The real estate industry stands to benefit due to several measures taken by the government so far. However, there is a lot that needs to be done for the sector to improve the pace of growth. We are looking forward to a bigger rate cut and sector-specific lending provisions to improve both the liquidity scenario and consumer spending ability,” said Surendra Hiranandani, CMD, House of Hiranandani.

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RBI Leaves Repo Rate Unchanged Over Inflation Concerns

October 9, 2020: Banking regulator RBI (Reserve Bank of India) left its key lending rates unchanged as supply-side disruptions stoked high inflation, while economic uncertainty loomed large over the country amid spiking Coronavirus infections.

In its penultimate policy review for 2020 on October 7-8, the six members MPC (monetary policy committee) decided to tightly hold on to the repo rate at 4%, the reverse repo rate at 3.35% and the  marginal standing facility (MSF) rate and the bank rate’ at 4.2%.

The reverse repo rate is the rate at which the RBI borrows money from banks. Cash reserve ratio is the percentage of total deposits that banks must keep in their reserves, on which they earn no interest. Depending on the situation, this money is infused into the system to improve liquidity.

After its inception in India in 2000, the repo rate was previously lowered to its lowest level of 4.74% in April 2009, in the wake of the global slowdown.

Future reduction in rates is, however, a possibility as the apex bank continues to maintain an ‘accommodative’ stance to help the Coronavirus-hit economy spring back to its feet. “It also decided to continue with the accommodative stance of monetary policy as long as necessary — at least during the current financial year and into the next year — to revive growth on a durable basis and mitigate the impact of Covid-19, while ensuring that inflation remains within the target going forward,” RBI Governor Shaktikanta Das said.

As the RBI move was broadly expected, with retail inflation remaining at a level above the RBI comfortable zone, real estate developers in India have shown no surprise over the move. They are, however, of the opinion that financial institutions must continue with rate reduction to encourage homebuyers to invest in property.

“Even though the apex bank has kept the rates unchanged, we still believe that there is room for financial institutions to cut down on their lending rates for their customers. During the lockdown, the RBI reduced the repo rate which is yet to be fully passed on to the customers,” said Amit Modi, director, ABA Corp, and president-elect, CREDAI, western UP.

According to Abhishek Bansal, executive director, Pacific Group, it was an expected move as the repo rate was already low. “The real estate market has started picking up as people are enjoying the low-interest rates and subdued pricing,” he said.

Recall here that banks have brought down home loan interest to sub-7% annual interest level after the RBI, though consecutive cuts brought the repo rate, at which it lends money to scheduled commercial banks, to 4%. Most public lenders including Union Bank, Canara Bank, Punjab National Bank, etc., are currently offering home loans at over 6% interest.

To cash in on the festive spirit, lenders like SBI are also offering waivers on associated charges such as the processing fee on home loan approval.

“The sector is already reaping rewards of the multiple steps taken by the government and low home loan interest rates extended by banks. The RBI should have made some announcement to improve liquidity in the real estate sector, as many developers are facing the heat after COVID-19 led to a complete shutdown of operations,” said Deepak Kapoor, director, Gulshan Homz.

According to Achal Raina, COO, Raheja Developers, the extension of lending limit for retail exposure from Rs 5 crores to Rs 7.5 crores and reduction of risk weightage on home loans and linking it with LTV ratio. augurs well for the real estate sector.

 

RBI Increases Repo Rate by 50 Basis Points to 5.40%

A stubbornly high inflation  level and a consistently weakening rupee has forced the Reserve bank of India (RBI) to hike the repo rate by another 50 basis points on August 5, 2022. The hike in the policy rate, announced after a three-day meet of the RBI’s Monetary Policy Committee,  has brought the repo rate to 5.40%.

This is the third consecutive hike in RBI’s benchmark lending rate after a 40 basis point hike in May and a 50 basis point boost in June this year. 

 

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RBI Increases Repo Rate by 50 Basis Points

The RBI, on June 8, 2022, increased the repo rate, at which it lends funds to scheduled banks in India by 50 basis points. The RBI move, which is on a widely expected lines, has brought the repo rate to 4.90% now.

In a media interview in May 2022, RBI governor Shaktikant Das had stated that further increase in repo rate was a ‘no-brainer’ as the banking regulator fights stubbornly high levels of  inflation. 

Wednesday’s announcement will prompt the banking industry to announce interest rate hikes of its own, ultimately bringing up the cost of property purchases.

 

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RBI Increases Repo Rate by 40 Basis Points, CRR By 50 Basis Points

May 4, 2022: The RBI on May 4, 2022, announced an increase in the repo rate by 40 basis points. With this, the repo rate, at which the central banks lends funds to banks in India, stands at 4.40%. In a surprise virtual briefing, RBI governor Shaktikanta Das announced a hike of 50 basis points in cash reserve ratio, bringing it to 4.50%.  

Real estate experts are of the opinion the move will start the end of the record low interest rate regime, increasing the cost of borrowing home loans. 

“An increase in repo rate has been expected on the back of very high inflation. Rising interest rates along with rising prices of homes on account of high inflation will have a significant negative impact on the real estate sector as both impact affordability significantly,” said Rohit Gera, managing director, Gera Developments.

 

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RBI Leaves Repo Rate Unchanged At 4% For 11th Straight Time

April 8, 2022: The Reserve Bank of India, on April 8, 2022, decided to leave the repo rate unchanged in its bi-monthly policy review. This was the 11th time in a row that the RBI’s six-member MPC has decided to leave the repo rate unchanged at 4%. Consequently, the reverse repo rate remains unchanged at 3.35%. RBI Governor Shaktikanta Das also announced that the central bank would continue with its accommodative stance

 

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RBI leaves rates unchanged

February 10, 2022: The Reserve Bank of India’s six-member monetary policy panel decided to leave the repo rate unchanged in its bi-monthly policy review on February 10, 2022. This was the 10th time in a row that the RBI Governor Shaktikanta Das-led MPC has decided to leave the repo rate unchanged.

While the central bank’s decision to hold the repo rate, at which it lends money to banks in India, was on the expected lines, the RBI surprised markets by also maintaining a status quo on the reverse repo rate, the rate at which it borrows money from banks. 

Consequently, the repo rate and reverse repo rate remain unchanged at 4% and 3.35%, respectively.  RBI’s six-member Monetary Policy Committee (MPC), headed by Governor Shaktikanta Das, started deliberations on the bi-monthly policy review on February 8, 2022.

The banking regulator has also decided to continue with its accommodative policy stance, as it attempts to help recovery amid the economic disruption caused by the various waves of the Coronavirus pandemic.

“Overall, taking into consideration the outlook for inflation and growth, in particular the comfort provided by improving inflation outlook, the uncertainties related to Omicron and global spillovers, the MPC was of the view that continued policy support is warranted for a durable and broad-based recovery,” RBI governor Shaktikanta Das said, in his address.

The move by the central bank comes as a pleasant news for those planning to invest in property since banks will continue to keep home loan interest rates at record low.  Currently, one can get home loans at an annual interest rate as low as 6.40%. Recall here that during the housing boom that lasted between 2008 and 2013, banks charged nearly 10% interest on home loans.

The low-interest rates have been a crucial factor in the revival of the demand in the real estate sector. In the past few months, the buyers have made the most of the rock-bottom interest rates on home loans along with offers from good developers. This might also be the last opportunity for the homebuyers to purchase property with low-interest rates before RBI decides to hike it in any of their future bi-monthly policies,” said Pritam Chivukula, co-founder & director, Tridhaatu Realty, and treasurer-CREDAI MCHI. 

“Also, to keep the prices down on the account of rise in raw materials prices will be a huge challenge in front of the developers,” he added.

Shraddha Kedia-Agarwal, director at Transcon Developers shared similar views. 
 

“The RBI maintaining status quo on key policy rates was expected, given the inflationary concerns in recent months. The decision will help to sustain liquidity for some more time which will augur well for the real estate sector and the overall economy. The low-interest rates for the last few months have already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will therefore help to keep up the momentum going forward as well,” she said.

 

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RBI Leaves Repo Rate Unchanged At 4%

December 8, 2021: The six-member RBI monetary policy committee (MPC), on December 8, 2021, decided to leave the repo rate unchanged at 4 per cent. The move by the apex bank is  on the expected lines, amid rising fears of the spread of the Omicron variant of the Coronavirus.

“We hold strong buffer to manage global spillovers and inflation is broadly aligned with target. We are better prepared to deal with the invisible enemy – COIVD-19. The domestic economic outlook is somewhat clouded by the Omicron variant,” said RBI Governor Shaktikanta Das, while announcing the decision of the MPC.

“The decision of the RBI MPC, to keep key policy rates unchanged, is along expected lines. The ongoing growth-inflation trade-off also requires the banking regulator to tread a careful path. Even though economic indicators are reflecting a positive trend, interest rates needed to be kept at the current level, in order to continue to drive growth and boost demand in the real estate sector, which is a key contributor to economic growth in India. If home sales have shown consistent improvement over the past couple of quarters, much of this can be attributed to the record low interest rate regime. Upsetting the current momentum would have been highly detrimental to overall economic recovery,” said Dhruv Agarwala, group CEO, Housing.com, Makaan.com and Proptiger.com.

“Given the current eminent Omicron threat, a status quo on repo rates comes as no surprise. These low rates will help maintain the pace of the economic revival. This is also good news for the real estate sector, as low home loan rates, coupled with attractive offers from builders, will keep home buying bullish. Going forward, the focus will be on how long these rates can be sustained and keeping inflation in check,” added Atul Monga, CEO and co-founder, BASIC Home Loan.

 

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RBI Leaves Repo Rate Unchanged At 4%; Move To Boost Festive Spirit

October 8, 2021: On widely expected lines, the six-member rate setting panel of India’s Reserve Bank on October 8, 2021, decided to leave the repo rate unchanged at four per cent. Even though some economists had indicated that the central bank might go for a token hike in the reverse repo rate ahead of the three-day meeting of RBI’s Monetary Policy Committee (MPC), it also decided to maintain a status quo on this lending benchmark as well, by holding it at 3.35 per cent.

The Governor Shaktikant Das-headed RBI has also decided to maintain its ‘accommodative’ stance as it keenly watches developments from across the world at a time when economic growth in Asia’s third-largest economy is in early stages of correction post the coronavirus pandemic mayhem.

While the repo rate is the interest the RBI charges from banks to lend funds, the reverse repo rate is the interest the central bank gives to bank on their deposits with the RBI.

The move by the RBI, which is a signal for banks and housing finance companies in India to continue with a 10-year low home loan interest rate regime, has been widely welcomed by the real estate industry. For sector stakeholders who are anticipating a course correction in activity due to the ongoing festive season, nothing less was expected from the apex bank even though the RBI has cut the repo rate by a total of 115 basis points since March 2020. The lowering of the repo rate in 2020 was a follow-up of the 135-bps cut since the beginning of 2019.

“The RBI maintaining a status quo on key policy rates was expected. Residential demand is reviving in the pandemic context and this needs to be fostered,” said Lincoln Bennet Rodrigues, chairman & founder, The Bennet and Bernard Company.

Recall here that all leading banks in India have recently cut home loan interest rates to cash-in on the ongoing festive season, and the developer community is expecting significant gains from this.   

“Given the upcoming festive season, which is considered auspicious by a large number of Indians to make big-ticket purchases, the interest rate cut by many banks will lead to a substantial increase in sales. The low interest rate regime is going to be a game-changer for the whole real estate sector especially at a time when the economy is on a recovery trail,” Rodrigues adds.

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RBI Maintains Status Quo on Repo Rate, Holds It At 4%

August 6, 2021: As economic recovery in the country gains momentum after the containment of the second wave of the Coronavirus pandemic, the Reserve Bank of India (RBI), on August 6, 2021, left the repo rate unchanged at 4% to support the recovery.

While leaving the repo rate at 4% and the reverse repo rate at 3.35%, the six-member monetary policy committee of the RBI also maintained its accommodative policy stance. The MPC has also retained its GDP growth projection of 9.5% for FY22.

This is the seventh time that the RBI has decided maintain a status quo on key policy rates. This also means that home buyers will continue to reap the benefits of a record-low interest rate regime that has brought the rate of housing finance to as low as 6.65 per cent.

The RBI move has been on the expected lines, since most policy experts predicted that the MPC would continue to maintain rates at the current level as it braces to bear the impact of an impending third wave of the Coronavirus pandemic.

“The low interest rates have been a crucial factor in the revival of demand in the real estate sector. The buyers are already coming back to the market and we feel that the upcoming festive season will be a lot better than the previous years,” said Pritam Chivukula, co-founder and director, Tridhaatu Realty.

“The reduction in stamp duty charges in some parts of the country, along with the all-time low housing loan rates, have given the much-required fillip to sales activity in the last few quarters. The expectation amongst stakeholders of the industry, is that banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

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RBI Keeps Repo Rate Unchanged, Maintains Accommodative Stance

June 4, 2021: Announcing a decision that was widely on the expected lines, the Reserve Bank of India (RBI), on June 4, 2021, left key policy rates unchanged while also maintaining an accommodative stance. All 51 economists in a recent Reuters poll, had voted that the six-member monetary policy committee would maintain a status quo on rates in its June 4 policy meeting statement, while most of the analysts polled by Bloomberg also predicted that the RBI would leave key rates unchanged.

With no change in place, the repo rate, at which the RBI lends money to financial institutions in India, stands at 4 per cent. Similarly, the reverse repo rate, at which the RBI borrows money from banks, stands unchanged at 3.35 per cent.

Recall here that this is the sixth time in a row that the RBI Governor Shaktikanta Das-led MPC has decided to leave the repo rate unchanged. The apex bank had reduced the repo rate by 115 basis points (bps) in 2020 and by 135 bps in 2019 to bring interest rates to record lows.

Quoting Greek philosopher Epictetus, the RBI Governor said the greater the difficulty the more glory in surmounting it, adding that the apex bank would continue to support the economy, which is currently reeling under the impact of the second wave of the Coronavirus pandemic. The Indian economy recorded a negative growth of 7.3% for 2020-21 (FY21), showed data released by the National Statistical Office (NSO) on May 31, 2021.

Based on the adverse impact of the fragmented lockdowns imposed by states to contain the second wave, the RBI has lowered the growth forecast for FY22 to 9.5% from the earlier 10.5%.

 

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RBI Leaves Repo Rate Unchanged At 4%

April 7, 2021: The Reserve Bank of India (RBI) on April 7, 2021, decided to leave the repo rate, at which it lends funds to scheduled banks in India, unchanged at 4%. The unanimous decision of the six-member monetary policy committee, headed by governor Shaktikanta Das, is on widely expected lines as the numbers of coronavirus cases in India see a sharp spike and high inflation levels.

While also keeping the reverse repo rate unchanged at 3.35%, the MPC has also decided to maintain its accommodative monetary stance to help economic recovery.  This is for the fifth straight time the apex bank has decided to maintain a status quo on key policy rates. The last change in rates was made in May 2020.

The policy announcement, the first for the fiscal, will prompt lenders in India to continue offering record low home loan interest even though the country’s largest bank SBI increased its home loan rates by 25 basis points to 6.95%  

However, the builder community feels some reduction in rates would have been a more positive move as for real estate, the second-biggest employment generating sector in India after agriculture.

“Keeping in mind the resurgence of Covid infections across the country, a slight reduction in the key rates would have been widely celebrated. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

 According to Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group, residential demand is reviving and this needs to be fostered. 

 “A further cut in the key rates would have given a boost to current demand uptick that we have seen recently… The International Monetary Fund has projected an impressive 12.5% growth rate for India in 2021, stronger than that of China which augurs well for the real estate sector, too. As the economy is gradually opening up and getting back on track to restore the lost momentum, we feel that special attention should be paid to the sector which contributes significantly to the country’s economic growth,” he says.

 

 

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Home Loan Rates To Remain Low As RBI Maintains Status Quo On Repo Rate

February 5, 2021: The current low home loan interest rate regime in India is set to continue, with the RBI deciding to keep the repo rate, at which it lends funds to scheduled banks in the country, unchanged at four per cent. The move by the central bank comes days after finance minister Nirmala Sitharaman presented the Union Budget for 2021-22, announcing several measures to support growth in Asia’s third-largest economy.

In a virtual address to the media, Reserve Bank of India (RBI) Governor Shaktikanta Das said the six-member monetary policy committee had taken a unanimous decision, to maintain status quo on the key lending rate while also continuing with the banking regulator’s accommodative stance. Das, however, indicated that the RBI might go for further reductions in the future, to support the economy, which is currently reeling under the effects of the Coronavirus pandemic.

After lowering the repo rate by a cumulative 115 basis points since March 2020, to counter the pandemic, India’s apex bank has continued to maintain a status quo on its benchmark lending rate since May 22, 2020 – the last time it lowered the repo rate.

“The RBI decision to keep policy rates unchanged is welcome, and signals the government’s focus on fuelling consumption. Given that the economy is well on its path to recovery, the entire focus would now be on how the government plans to boost demand and a lot needs to be done for the sector to improve the pace of growth,” says Surendra Hiranandani, chairman and managing director, House of Hiranandani

While the RBI’s move is on the expected lines, real estate developers, who were largely left disappointed in the Union Budget, said they expected a reduction in rates. “After a budget that had limited announcements for real estate, the sector was hoping against hope for a further reduction in the repo rates. A reduction would have helped to spur demand for real estate assets that have been severely hit, as a result of the pandemic and the subsequent lockdowns,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.

According to a Reuters poll, the RBI may continue to keep rates unchanged till 2023, in order to support the economy.  The next meeting of the MPC is scheduled during April 5 to 7, 2021.

 

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RBI Leaves Repo Rate Unchanged Over Inflation Concerns

December 4, 2020: Banking regulator RBI, on December 4, 2020, left the key policy rates unchanged, while also maintaining an accommodative stance, in the backdrop of a slowing economic contraction and rising inflation.

The decision after a three-day meet by the six-member monetary policy committee (MPC), was on widely anticipated lines amid the consumer price-based inflation rate in India jumping to 7.61 per cent in October, much above the RBI’s comfort zone of 4 per cent, while GDP contracted by 7.5 per cent in the July-September quarter, lower than the central bank’s prediction of 8.6 per cent.

With the decision on November 4, the repo rate and the reverse repo rate remain unchanged at 4 per cent and 3.35 per cent, respectively. This is the third time in a row that the central bank has decided to maintain status quo on policy rates. It last changed the policy rate on May 22, 2020.

“The MPC decided to continue with accommodative stance of the monetary policy as long as necessary, at least till the current financial year and into next year, to revive growth on a durable basis and mitigate the impact of COVID-19, while ensuring that inflation remains within target,” RBI governor Shaktikanta Das said, at the virtual announcement of the policy move.

“The recovery in rural demand is expected to strengthen further, while urban demand is also gaining momentum as unlocking spurs activity and employment, especially of labour displaced by COVID-19. These positive impulses are, however, clouded by a possible rise in infections in some parts of the country, prompting some local containment measures. At the same time, the recovery rate has crossed 94 per cent and there is considerable optimism on successes in vaccine trials,” the RBI said in its policy statement.

Even though the RBI may lower the rate only during the April-June quarter now, sector experts are of the opinion that the demand for housing in India will continue to be robust, because of the record low interest rates and various other support measures announced by the banking regulator earlier, to support the country’s second-biggest employment-generating sector.

“The RBI move to maintain status quo on policy rates was expected, in the face of persistently high retail inflation and an already record low repo rate of 4%. Even as signs of recovery appear in Asia’s third-largest economy, the RBI has said that it would be open to cutting rates, if the economy needs support, which is a very positive signal for the future. The earlier measures announced by the RBI, including the rationalisation of risk-weightage norms for home loans, linking it to LTV and restructuring of loans to developers on a project basis, will continue to help the housing sector,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.

“Interest rates on home loans are already at sub-7% level, with banks offering further sweeteners, such as processing fee waivers among many others. We hope banks will continue to lend vigorously to the real estate sector, the second-largest employment generating sector in India,” he added.

“If the economy recovers, which is likely after the RBI said it would maintain liquidity in the market and the job market remains vibrant, the affordable housing segment buyer will expedite the process of owning a property. We hope that growth projections improve, leading to a demand boost in the real estate sector,” said Pradeep Aggarwal, founder & chairman, Signature Global Group, and chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development.

“While the apex bank has kept the repo rates unchanged this time, the year in general has witnessed significant measures adopted by the RBI such as rationalization of risk-weightage norms, restructuring of loans based on the projects, linking home loans to LTV which have encouraged buyers to fulfill their dream of engaging in a high-end investment like real estate. At the same time, though a lot of retail banks have now also paced up, passing the benefits to the borrowers, we hope the remaining banks are also as swift in passing on the benefits to customers and continue to adopt a quick disbursal process of funds and loans, keeping real estate as a priority in their lending list, says Amit Modi, president-elect, CREDAI Western UP, and director, ABA CORP.

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RBI Maintains Status Quo On Repo Rate

October 9, 2020: The Reserve Bank of India (RBI), on October 9, 2020, decided to leave its key policy rates unchanged as the central bank struggles to create a perfect balance between containing high inflation levels and fuelling economic growth, at a time when it has slipped into its deepest level of recession.

Announcing the decision of the six-member monetary policy committee (MPC), RBI Governor Shaktikanta Das said the repo rate and reverse repo rate remain intact at 4% and 3.35%, respectively. The apex bank has also decided to maintain an accommodative stance.

While the move augurs well for fixed deposit holders, it is an indication that home loan interest rates might not fall any further from this level.

After the RBI, through consecutive cuts, brought the repo rate to its record low level to support growth amid economic uncertainty caused by the Coronavirus spread, almost all leading banks in India have reduced home loan interest rates to sub-7% annual interest. Financial institutions like SBI and ICICI Bank are also offering waivers of processing fee and other associated expenses, to lower the cost of borrowing for homebuyers.

However, these rates are typically for new borrowers. Customers who are already servicing a home loan, are likely to have varying impacts on their EMI payments, depending on the benchmark with which their home loan is linked.

You may like to read: Banks Told To Link Home Loans With External Benchmarks From Oct 1

 

Repo-rate linked home loans

In case of a borrower whose home loan is linked with the repo rate, the same EMI outgo will continue, as the RBI has hit the pause button on the repo rate reduction. However, in case your lender decided to increase the risk premium, depending on your current monetary condition, the EMI might see a slight increase from its existing level.

 

MCLR-rate linked home loans

In the same way, no change is likely in your EMI outgo, in case your loan is linked with the previous MCLR (marginal cost of fund-based lending rate) regime. This is because lenders typically have a one-year reset clause in the loan agreement. Under this arrangement, the EMI of a borrower for the year to come are calculated at set intervals, and changes made in the repo rate by the RBI are reflected in your EMI outgo only after that.

 

Base rate or BPLR-linked home loans

It is highly recommended that those borrowers whose home loans are still linked with the base rate regime or the BPLR regime, should make a switch to the repo rate-linked benchmark. This is because these used to be internal benchmarks, allowing banks greater flexibility to tweak rates as and when it suited them. Under these benchmarks, which were replaced by the MCLR regime in 2016 and then by the repo rate regime in 2019, home loans are still priced at over 10% annual interest.

Also read: Govt Wants To Make Home Loan EMIs Cheaper Than Rent. Should You Buy, Then?

Current Key Rates

Date Repo Rate Reverse Repo Rate CRR SLR
May 2020 4% 4% 3% 18%
Mar 2020 4.4% 4.4% 3% 18.25%
Feb 2020 5.15% 4.9% 4% 18.25%
Oct 2019 5.15% 4.9% 4% 19.5%
Aug 2019 5.4% 5.15% 4% 19.5%
June 2019 5.75% 5.5% 4% 19.5%
Apr 2019 6% 5.75% 4% 19.5%
Feb 2019 6.25% 6% 4% 19.5%
Dec 2018 6.5% 6.25% 4% 19.5%
Oct 2018 6.5% 6.25% 4% 19.5%
Aug 2018 6.5% 6.25% 4% 19.5%
Jun 2018 6.25% 6% 4% 19.5%
Apr 2018 6% 5.75% 4% 19.5%
Feb 2018 6% 5.75% 4% 19.5%
Oct 2017 6% 5.75% 4% 19.5%
Aug 2017 6% 5.75% 4% 20%
June 2017 6.25% 6% 4% 20%
Apr 2017 6.25% 6% 4% 20.5%
Jan 2017 6.25% 5.75% 4% 20.5%
Oct 2016 6.25% 5.75% 4% 20.75%
Apr 2016 6.5% 6% 4% 21.25%
Sep 2015 6.75% 5.75% No Change No Change
Jun 2015 7.25% 6.25% No Change No Change
Mar 2015 7.5% 6.5% 4% 21.5%
Jan 2015 7.75% 6.75% 4% 22%

Source: RBI website

Also read: How Much Time Do Banks Take To Sanction Your Home Loan?

Why Is Debt Service Coverage Ratio Important For Banks?

While a careful analysis of its financial condition can improve a company’s overall performance, it is especially crucial for financial institutions. One of the most significant ratios that they focus on and study to estimate an enterprise’s real worth is the debt service coverage ratio (DSCR), which helps banks calculate the company’s repayment capacity.

MakaaniQ takes a look at why DSCR is so important for banks:

Who uses it?

DSCR is important for both creditors and investors, but creditors analyse it most often. Bankers are interested in this ratio because it measures a company’s ability to repay its current debt obligations.

Why is it used?

DSCR is used as a benchmark to measure the cash-producing ability of a business entity to cover its debt payments. Lenders not only wish to know the cash position and cash flow of a company but also how much debt it currently has and its available cash to pay the current and future debt.

What does the ratio consider?

DSCR takes into consideration all expenses related to debt, including interest expense and other obligations like pension and sinking fund obligation. (a sinking fund is made up of sums of money set aside at intervals, usually invested at interest, to meet a certain future obligation.) In this way, the DSCR is more indicative of a company’s ability to pay its debt than just the debt ratio.

How is it calculated?

DSCR is calculated by dividing a company’s net operating income by its total debt service costs. Net operating income is the income or cash flows left after all operating expenses have been paid. This is called earnings before interest and taxes (Ebit). On the other hand, total debt service cost refers to all costs involved in servicing the company’s debt. This includes interest payments, principal payments, and other obligations.

For instance, suppose Nishant Shah, a local bicycle dealer, is looking to remodel his showroom and has been negotiating with several banks for a loan. Shah is apprehensive about getting the loan, as he has several running loans under his name. His books show that his dealership’s net operating profit is Rs 150,000. While his interest expense is Rs 55,000, his principal payment amounts to Rs 35,000. And his sinking fund obligation is Rs 25,000.

Now, the bank will calculate Shah’s DSCR by dividing Rs 1,50,000 by Rs 1,15,000 (that is, 55,000 + 35,000 + 25,000), and arrive at a DSCR of 1.3. This means that Nishant makes enough in operating profits to pay his current debt service costs and still be left with 30 per cent of his profits.

What is a bad DSCR?

A DSCR below one indicates a negative cash flow. In such a case, lenders refrain from offering a loan, unless the borrower has a sound income. A high DSCR, on the other hand, makes it easy for one to avail of a loan.

What Happens To A Joint Property After Divorce?

People buy homes for different reasons. However, almost always, the need to buy one’s own home is felt as soon as one ties the knot or decides to go in the family way ─ before that, rented accommodation works just fine. Husband and wife join forces to make it happen, to have a house they would call home. Separate savings are quickly accumulated. Loans are fast applied for (banks are only too eager to assist them materialise their dream). An “ideal” property is diligently picked, loan application from are smoothly filled, the date of registration soon approaches. In no time at all, the family is ready for the griha pravesh ceremony, a ritual where higher powers are invoked to safeguard the house for the lifetime. Much to their dismay and disappointment, not all couples will have a happy thereafter in their new home; some would find their differences “irreconcilable” and head towards separation, known as divorce in legal terms. Caught in the crosshairs of this family discord would be the dream house that was bought in happy times. What happens to this house now? Who gets what? Let us find out what the law says about this.

Before we proceed further it would be crucial to note here that that law acknowledges a property to belong to the person on whose name it is registered. Any contributions made during the purchase by any other party, cash or kind, are not recognised, legally speaking, unless you have enough proof to prove otherwise. 

Breaking it, piece by piece

If the property is registered as the joint property of a soon-to-be-former married couple, the wife would be able to stake a claim at the time of divorce. Based on her contribution to the property, the court will grant her her share. In case the property is registered solely in the name of the woman, she will be able to claim it entirely unless the man can prove he contributed to the purchase.  His account statement, for instance, could show he has been paying the monthly installments towards the loan repayment. His account details would also reveal he paid the upfront amount at the time of purchase. The wife could also use these details as a proof of her contribution in case the property is not registered in her name.

To encourage property ownership among women, the government provides them certain incentives. In almost all states, they pay less stamp duty on property registration. In Delhi, for example, women buyers pay only four per cent of the transaction value as stamp duty, while men have to pay six per cent of the house cost as stamp duty. Properties are, hence, often registered in the name of the woman of the house, to save money. Similarly, many banks offer cheaper home loans to women, as compared to their male counterparts. If the loan is taken in the name of the woman of the house, it could help the household to save a great deal of money in the end. At SBI, for example, a woman borrower can currently avail of home loans at 6.95 per cent per annum. The rate of interest for men is seven per cent per annum. While these sops may prove beneficial during happy times, the scenario may change, if the relationship turns sour.

In the eyes of the law, the property belongs to the person in whose name it is registered; in the eyes of the bank, the person in whose name the loan is granted would be responsible to repay the loan. In case a property is registered solely in the same of the wife and she is also the sole applicant of home loan, the law grants her ownership of the said asset. However, this ownership of assets and liabilities cuts both ways. In a happy household, one partner might be able to pay the EMI because the other has been taking care of the remaining expenses. Upon divorce, you are on your own.

In a scenario where the property is registered in the joint names of a married couple and both are also co-borrowers, the court will decide the contribution made by each party and divide the asset accordingly. Both parties would be responsible to pay the loan, though. Do note here that the bank is only concerned about getting its money back. How a divorcing couple manages to do it is not really their concern.

Then there can be a scenario in which the property is registered in the name of the man of the house, and he is also the sole borrower. In such cases, the woman cannot stake any claim at the time of divorce under the existing Hindu law, the Hindu Marriage Act, 1955. The fact that the property was bought after the marriage would not have any bearing on the subject. Simply put, a wife can stake no claim on her husband’s self-acquired property if they decide to divorce.  The Marriage Laws (Amendment) Bill that talks about woman getting a share in her former husband’s property is gathering dust in Parliament since 2010, and is set to be junked in all likelihood. The man’s ancestral property he is expected to inherit also remains out of bounds for the woman seeking divorce.