Here's breakdown of how interest rate cut will help you to buy property
SBI and other banks have slashed their interest rates on home loans to boost affordable housing, find out how an interest rate cut will help you to buy property.
Highlights:1. SBI has slashed interest rates by 25 basis points on home loans up to Rs 30 lakh with effect from May 9
2. An eligible home loan buyer can also avail of an interest subsidy of Rs 2.67 lakh under the PMAY scheme
With an objective to achieve the government's vision of 'Housing for All' by 2020 and to boost the affordable housing segment, State Bank of India (SBI) recently announced interest rate cut on its home loans by 25 basis points to 8.35% per annum.
The bank's new home loan rate will be effective from May 9 this year.
"The effective interest rate for all eligible salaried customers will be 8.35% per annum for loans upto Rs 30 lakh. Over and above, an eligible home loan customer can also avail of an interest subsidy of Rs 2.67 lakh under the Pradhan Mantri Awas Yojana (PMAY) scheme," cited SBI in a press release on Monday.
Commenting on the home loan rate cut, SBI's managing director-National Banking Group, Rajnish Kumar said,"We have seen a steep hike in the home loan enquiries recently and reduction in rates will further help millions of home buyers fulfill their dream of owning a home."
ALSO READ: With RERA coming into effect, SBI slashes low-cost home loan rates
Therefore, to understand how a home loan on floating interest rate will cost a salaried class for properties at Rs 30 lakh and Rs 60 lakh, we managed to speak to Krishna Rawlo chief executive officer (CEO) of Mumbai-based financial advising company ACE Consultancy.
The ACE Consultancy offers advising services on home loans, SME loans, personal loans, business loans, mortgage loans, debt consolidation, among others.
Here's a break down of indicative prices of the total cost of under-construction properties of Rs 30 lakh and Rs 60 lakh:
According to Rawlo, for a salaried individual having net monthly income of Rs 45,000 and applying for Rs 30 lakh property home loan, he is eligible for Rs 27 lakh loan at floating interest rate of 8.40% for loan tenure of 20 years.
The individual's loan to market value will be 90% of the property market value or eligibility whichever is less.
The individual has to pay equated monthly installment (EMI) of Rs 23,261 for the home loan of Rs 27 lakh whereas the annual EMI on the home loan will be Rs 2,79,132.
If you have any queries related to housing finance loans, you can check website of ACE Consultancy here-
The individual has to pay to Rs 3,00,000 from his pocket to the developer excluding other charges.
Other charges like service tax (3.09%), value added tax at (1.00%), stamp duty (5.00%), registration (1.00%) add up to Rs 3,02,700. The total amount the individual will pay from his pocket including other charges to the developer for home loan of Rs 27 laklh will be Rs 6,02,700.
Therefore, the total cost of Rs 30 lakh property to the individual which includes parking charges, maintenance, among others will be Rs 33,02,700.
For Rs 30 lakh property, home loan calculation:
| Home Loan | Rs 27 lakh |
| Floating Rate of Interest | 8.40% |
| Loan Tenure | 20 years |
| EMI | Rs 23,261 |
| Annual EMI | Rs 2,79,132 |
| Service Tax at 3.09% | Rs 92,700.00 |
| VAT at 1.00% | Rs 30,000.00 |
| Stamp Duty at 5.00% | Rs 1,50,000.00 |
| Registration at 1.00% | Rs 30,000.00 |
| Total of Other Charges | Rs 3,02,700.00 |
| Individual's Own Contribution Excluding Other Charges | Rs 3,00,000 |
| Total Individual's Own Contribution Including Other Charges | Rs 6,02,700.00 |
| Total Cost of Property | Rs 33,02,700.00 |
Similarly, for the salaried individual having net monthly income of Rs 70,000 and applying for Rs 60 lakh property, he is eligible for home loan of Rs 44.20 lakh at floating interest rate of 8.55% for loan tenure of 20 years, Rawlo said.
ALSO READ: Interest Rate Cut: Real estate companies expect more to boost demand for housing
The individual's loan to market value (LMV) will be 80% of property market value or eligibility 'whichever is less'.
The individual has to pay equated monthly installment (EMI) of Rs 38,498 on home loan of Rs 44.20 lakh whereas the annual EMI will be Rs 4,61,976.
The individual has to pay Rs 15.80 lakh from his pocket for home loan of Rs 44.20 lakh to the developer excluding other charges. Other charges like service tax (3.09%), VAT (1.00%), stamp duty (5.00%), registration (1.00%), add up to Rs 5,75,400.
The total amount the individual will pay from his pocket including other charges to the developer for home loan of Rs 44.20 lakh will be Rs 21,55,400.
Therefore, the total cost of property of Rs 60 lakh which includes parking charges, maintenance, among others will be Rs 65,75,400.
For Rs 60 lakh property, home loan calculation:
| Home Loan | Rs 44.20 lakh |
| Floating Rate of Interest | 8.55% |
| Loan Tenure | 20 years |
| EMI | Rs 38,498.00 |
| Annual EMI | Rs 4,61,976.00 |
| Service Tax at 3.09% | Rs 1,85,400.00 |
| VAT at 1.00% | Rs 60,000.00 |
| Stamp Duty at 5.00% | Rs 3,00,000.00 |
| Registration at 1.00% | Rs 30,000.00 |
| Total of Other Charges | Rs 5,75,400.00 |
| Individual's Own Contribution Excluding Other Charges | Rs 15,80,000 .00 |
| Total Individual's Own Contribution Including Other Charges | Rs 21,55,400.00 |
| Total Cost of Property | Rs 65,75,400.00 |
ALSO READ: Affordable housing safer bet for lenders with under 1% NPA: Cibil
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