Some realty developers are offering low-interest housing loans, but before availing of one, you need to watch out for its advantages and disadvantages. Of late, some realty developers, such as Lodha group and Tata Housing, are offering low-interest housing loan schemes. While Lodha group has locked interest rates at 6.99 per cent till 2024, Tata Housing offers to cap housing loan rates at 3.5 per cent for a year (offer valid until September 15). According to property experts, a lot of other developers and builders are also planning to come up with similar offers for buyers. Such deals are applicable for specific properties. When contacted, Tata Capital declined to comment on the story.
“While this offer is nothing but a discount being given, but there’s an issue here. In most cases, it is actually a reimbursement to the client. So, these are mainly marketing ploys by builders to push up their sales,” says Harsh Roongta, founder of Investment Advisers LLP, a fee-only advisory firm.
Caveats Of Low-Interest Housing Loan Schemes
Hidden charges: There are hidden charges involved in such schemes other than the interest rate that one should be aware of. “There are processing charges, which keep changing, and one should negotiate with the bank to get the best deal. Some charges are incidental or administration charges, while some can put more on documentation charges. There are some developers who charge higher late fees, while some would put preclosing loan penalty,” says AK Narayan, CEO and founder of AK Narayan Associates, a Sebi-registered financial advisor.
There could also be some other hidden charges, such as an additional amount for change of tenure and cheque bouncing. “There could also be floating rate charges, which would make you pay more interest when rates keep going up. If you decide to convert this rate to fixed rates, then charges have to be paid. Also, interest offered will be for a fixed tenure. Thereafter, applicable rate has to be paid which may be higher,” adds Narayan.
And then there’s credit score too. “Some banks might say that the credit score is low, and hence the interest rate would be higher. While no one can offer very low rates, it can vary. Some will be stringent when rates are lower,” says Narayan.
Project Getting Delayed: In such schemes, the problem happens when the project gets delayed. In such cases, the buyer has to start paying the EMI (equated monthly instalment) even before he gets possession of the apartment. And he often ends up paying both the rent and the EMI simultaneously. According to industry experts, it would be wise to not opt for a deferred payment plan, as this often reflects the developer’s desperate financial situation. Also, a builder’s late payment or non-payment of EMI can spoil the credit score of the homebuyer as the loan is in his name.
Things To Keep In Mind When Opting For Such Loans
Three things you have to keep in mind. Firstly, decide that you actually need that place and you are not buying it purely based on anchoring bias. Secondly, you have to ensure that you don’t make sacrifices with the property, documentation, and legality part. “At times I see that investors don’t do proper bargaining with the prices or amenities because they already have an illusion that it is a cheap deal because of interest benefit, don’t fall in this trap. Finally, don’t make a hasty decision, take your time and then make an informed decision,” says Anant Ladha, founder, Invest Aaj For Kal, a financial planning firm.