If you are planning to buy a home with the help of a home loan, you need to keep track of the current trends and their relevant impact on the home loan sector. Outlined below are a few recent developments in the sector:

  • With the new year (2019) ringing-in, interest rates on home loans have been hiked slightly by almost all the lending institutions. In contrast to this move by the lending institutions came the news that the RBI Governor has nudged the country’s top bankers to reduce the financing cost to encourage investment
  •  With the election fever setting in, one may think a favourable climate will be setup for investment by lowered lending rates. Home loans being a major contributor to the financing sector, it is natural to expect an interest rate cut in that segment. For home buyers this could have been a silver lining on the ongoing trend. As for now, this may be taken only as ‘wishful thinking’ because despite RBI lowering the benchmark repo rate by 25 basis points, most of the lenders have not lowered housing loan interest rates
  • However there is a positive change in the tax norms for home loan. Currently if you own more than one property for self-occupation, only one of them would be considered as self-occupied for taxation purposes. The other property / properties would be considered as deemed to be let-out and the notional rent attracts tax if it is lying vacant. Now there is an amendment in the recent interim budget. The new proposal in the budget from FY 2019 states that both the houses would be considered as self-occupied and notional income would not surface in this case. The total interest on both the home loans i.e. for self-occupied properties can be used as deduction up to a limit of Rs. 2 lakh
  • Floating interest rates will keep swaying depending on multiple market factors from time to time. If you dream of buying a home with the help of a home loan, you can’t be waiting for that ‘right time’ to come. The earlier you act, the better it is, because your housing loan eligibility will be higher for a longer repayment tenure

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.