DHFL Cuts Home Loan Rates

DHFL, one of India’s leading housing finance companies, today announced a reduction in its Retail Prime lending rate by 20 bps. DHFL has also reduced rates for its new customers and the rate will now start from 9.65%.

 Additionally DHFL has also announced a festive season offer whereby it will be providing a promotional rate of 9.55% (further 10 bps reduction from its new rate) to its new customers for loans upto Rs. 25 lakhs. This offer is valid upto December 31, 2015.

The company largely caters to the low and middle income segment in the Tier II, Tier III towns, with an average loan ticket size of below Rs. 15 lakhs. The Low and Middle income segment customers, which comprises majority of the total home loan book size, would stand to benefit the most, with the fresh rate cut and the festive season offer.

Commenting on the interest rate,  Kapil Wadhawan, Chairman and Managing Director, DHFL said, ” Over the last three decades, DHFL has been committed towards ensuring affordable housing finance to the Low and Middle income consumers. We believe that owning a home especially in this season is a deep desire within our customer segment. Our festive season offer reflects our commitment towards enabling home ownership in tier 2 and 3 towns for each and every Indian especially in the LMI segment.”

 DHFL has emerged as a one-stop-shop for its customers’ financial needs, extending beyond home loans. The company offers a range of home loan products including home loan, home extension loan, home improvement loan, plot loans, mortgage loan, SME Loan and non-residential property loan to all customer segments across India, retaining its concerted focus on the low and middle income segment.

DHFL also offers an array of Fixed Deposit Products for public including individual and trust investors that ensure high yield, safety and liquidity. DHFL Fixed Deposit Products for individual investors also offer an accidental insurance cover of Rs. 1 Lakh free of cost to customers. DHFL Fixed Deposit Products are rated CARE AAA and BWR (FAAA) ensuring high safety. Further, DHFL offers value-added and customized insurance solutions, along with its home loan products. Additionally, DHFL also offers project loans essentially for development of low and middle income housing projects.

 The company registered strong performance in the 1st quarter of the fiscal year – the loan book portfolio increased by 26% to Rs. 538 Bn as against Rs. 428 Bn for the corresponding quarter in the previous year. Priority sector lending to the low and middle-income segments in Tier-II and Tier-III cities has been the major growth driver for DHFL. As of June 30, 2015, DHFL’s Assets Under Management stood at Rs. 600 Bn.

A few tips to manage your EMI efficiently

First thing to come in one’s mind when he or she aspires to buy a home through loan is how much the EMI would be? EMI aka Equated Monthly Installment, is an oft-repeated word by banks or lending institutions, whether it is for home loan or vehicle loan.

Simply put, EMI is an amount to be paid back to the lender on every month against the loan taken for purchasing a property or any other movable or fixed assets. This amount basically contains two parts – principal and interest, which is charged as per the agreed interest rate against the loan amount. This varies every month as the loan amount keeps decreasing months after months.

One should understand one’s pay back ability, age, cash in hand to decide the loan amount. There are other factors one should bear in mind. If a person is purchasing a home away from the city limits due to financial or other constraints, he wouldn’t get any concession as for an interest rate is concerned. He will have to pay back with the same interest, whether he buys a property within the city limit or outskirts.

So, since his chance of living in his new house is not so bright due to various factors like proximity to office, schools and market places, etc., he may think of giving the house on rent. He should calculate the possible rentals prevalent in the area and can adjust his loan amount according to that calculation.

Now, coming back to the EMI part, it is always not possible to buy a home when the interest rate is at its nadir. If a person wants to buy a home, he can see only location and budget, which are under his control. 

Interest rate fluctuates according to economic development and individuals have no say in it. So, once the project is fixed and all other elementary calculations done, one should approach bank with necessary documents.

Now-a-days, all banks advertise the prevalent interest rate in their website and provide EMI calculator to find the exact amount he has to pay for an amount one takes as loan.

One has to simply fill vital details such as amount to be financed, tenure, interest rate and floating or fixed rate of interest to get the approximate amount of EMI one has to pay to the lender month after month.

One should not assume that Equated Monthly Installment means both principal and interest amount will be in equal proportion. Though it becomes equal after certain number of years (only for a month or so, that too approximately equal), initially the principal part will be very less and interest part will be more. 

Since interest is calculated on the basis of diminishing loan amount, its part gets reduced and to balance the EMI, the principal part would go up automatically. So, at the end of the term, the principal part will be very high and interest part will be too low.

During the tenure, it can be 10, 15, 20 or 25 years, if the rate of interest goes down, borrowers have the option to readjust their EMI and tenure to reduce their burden.