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New speed of change

The discretionary powers of home loan givers have been curbed. Reserve Bank of India’s diktat that banks need to revise their lending rates in line with their Marginal Cost of Lending Rate (MCLR) — a rate computed based on a prescribed formula — has put an end to the discretion of banks to decide on how their floating rates move for loans. The lending rate of a bank will now (from April 1, 2016) need to move in tandem with a bank’s MCLR, which gets revised every month.

Therefore, if banks see a sharp drop in their cost of funds, it is likely this will immediately translate into lower lending rates. That’s good news for home buyers. Every rate cut henceforth, should spell cheaper loans, faster. The reverse is also true. Home buyers, will therefore, need to be far more agile and aware of interest rate changes. For now, a softer rate regime can help provide some fillip to a struggling realty market. There are enough and more homes on offer for sale in the new projects and secondary markets. With greater safeguards set to kick in for all realty transactions, things are likely to get better for buyers.

Caution, however, remains the watchword in the short term as most sectors, from consumer goods to automobiles to information technology are not really having a great year, and with low confidence in near term improvement prospects, job and income creation might not be very strong, and this is cause enough to wait and watch.

The one strong investment area, that looks attractive even now, from a longer-term perspective, is land. If you can get a good piece of earth that you can build on, now or later, at an affordable price, buy it. Land is the only sure winner in the home sector, when inventories are high, currencies weak and central banks are rooting for gold.

Go get your piece of earth!

Former Editor, Outlook Business and Executive Editor, NDTV Profit, the writer is a personal finance expert. Mail him at propertyplus@

thehindu.co.in



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Printable version | Apr 20, 2021 2:32:02 AM | https://www.thehindu.com/features/homes-and-gardens/new-speed-of-change/article8451356.ece

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