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Despite the devastation and gloom that the infection has perpetrated on society and economy, this is also the time to make real estate purchase decisions if possible. The reasons are two-fold — prices are down and loans are a historic low.

For home loans the customer has a wide array of choices since major NBFCs are offering attractive rates of interest as competitive as banks.

Best rates

Amongst the leading NBFCs, HDFC Home Loans and Bajaj Housing Finance are offering some of the best rates starting at 6.75%.

HDFC is offering 6.75% interest rates for women and for other customers it is 6.80% for loans up to Rs 30 lakh.

Tata Capital offers interest rates starting at 6.90%. This offer remains valid till June 30, 2021.

LIC Housing Finance, a subsidiary of Life Insurance Corporation of India, is offering interest rates starting at 6.90%.

A few companies such as Sundaram Home Finance also offers loans to buy plots to build a house.

Banks vs NBFCs

Like banks, NBFCs are a category of financial institutions in the country. Some of their functions such as sanction of retail loans is similar to that of banks.

However, there are crucial differences too. NBFCs cannot accept demand deposits and cannot issue cheques. NBFCs do not form part of the payment and settlement system which is a core banking area.

NBFCs are also not covered by the deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation (DICGC).

Usually the time that an NBFC takes to process loan applications is lower than that of banks though banks, too, have expedited the process over the past few years due to pressures of competition.

NBFCs tend to ask for fewer documents from applicants than banks.

Home loan market

According to official data, as much as 47.5% of the home loan applications are below Rs 25 lakh, whereas 24.6% of the loan applications are for amounts between Rs 50 and Rs 75 lakh.

Applications seeking loans between Rs 75 lakh and Rs 1.1 crore comprise 14.6% of the applications.

Home loans for the amount between Rs 25-50 lakh showed a 22.65% between FY19 and FY20.

Bigger picture

Policymakers are relying on the real estate sector to pull a part of the industry such as steel, cement and paint out of the rut. Purchase of homes create multiplier effect in the economy since it creates demands for many other products.

So, various governments such as Maharashtra government are trying to trigger demand in real estate by reducing stamp duty on real estate transactions.

Since real estate is also a labour-intensive sector, it also creates substantial employment at the bottom of the financial pyramid.

Therefore, a rise in real estate purchases can lead to economic benefits for a large number of people apart from landing the customers in their dream home.