Top 5 Tips for Home Loan seekers in the Post COVID world

COVID-19 pandemic, the real estate sector is showing clear signs of rehabilitation. Economy recovery is visible in the regeneration of uptown sales across the top metro cities due to the repressed demand since the lockdown was announced in March 2020. The pick-up in residential sales is backed by various policy incentives arranged to the real estate area and this season picked up to the overall belief. The Govt also focussed on providing capable property to the real estate industry, it is one of the core sectors of the economy, to ensure its bounce-back after the pandemic. 

With borrowing rates at historic lows and greater liquidity within the system, both buyers and developers stand to profit within the post-COVID period. However, homebuyers got to weigh their options well before taking advantage of the present benefits and sops that are being apportioned.

Here are a few things that home loan seekers may expect and even prepare for in the immediate years after the pandemic. 

1 Expect higher interest rates 

Reserve Bank of India (RBI) Monetary Policy Committee in its review meeting again left the repo rate and reverse repo rate unchanged at 4 percent and 3.35 percent. Now, the home loan rates in India are at almost 15 years low. However, the report predicts that the rates are not likely to be lowered further, at least till the first quarter of the next financial year.

The interest rates, instead, could start rising to fuel the economy’s growth within the post-COVID years.

2 Sort cash flow situation as moratorium ends

The RBI had allowed a six-month moratorium for borrowers, thanks to job losses and cash flow disruptions due to the impact of the COVID-19 pandemic on the economy’s health. The moratorium period has just ended, and lots of borrowers have started repaying their accumulated dues during the moratorium period. However, for those borrowers who are still facing cash flow disruptions and perceive any difficulty or disruption in paying their EMIs in the future, they need to work on an answer to make sure they continue paying the EMIs. 

3 Credit downgrades on loan restructuring 

The RBI in its Monetary Policy Committee (MPC) review meeting in August 2020 had allowed a one-time loan restructuring scheme insight of the COVID-19 related stress. Under this scheme, the lenders were allowed to restructure loans of borrowers if the loan amount was ₹25 crore or less as of March 1, 2020, provided they were regular in their repayments.

It will be best for borrowers to choose this one-time credit restructuring facility if there’s even a little possibility of EMI defaults thanks to cashable issues because once a loan account is assessed as an NPA, the borrower a defaulter, then it’ll have even a graver impact on the credit history of the borrower, making it impossible for him to avail for any longer loans in future.

4 Ensure zero default after credit restructuring 

The RBI is allowing this one-time credit restructuring facility to borrowers as long as they didn't have quite 30 days of repayment overdue as of March 1, 2020, and were classified as ‘standard’. Those choosing this facility must make sure that following the loan restructuring, there should be no further default in EMI repayment to avoid the prospect of the account getting classified as a non-performing asset.

5 Getting a home loan may become tougher 

The Government has announced several measures to encourage banks and housing finance companies for improving liquidity for the important estate sector. Besides lower interest rates, the government has also announced measures, like the recent decision to rationalize risk weightage of home loans and link all new housing loan risks only to loans to the worth.

The banks are, however, likely to tighten their scrutiny to avoid bad loans and hence may even stress on providing guarantees against high-value loans, which currently have lower margin requirements. Hence, all loans won’t be easily approved by banks as they seek to hide any risk possibilities.