Loan rates are at a historical low and from all expert views, they can only go up. The best time to take a home loan might be now. The real estate markets have also been moving up in the past few months and the growth and appreciation in property values is likely to continue over the next 2-3 years. You might just have a double-edged advantage - low costs and higher returns. The home loan might be a good option.


It has never been better for the home loan segment. With rates at an all time low around 7.5-8% per year, this just might be the best time to take that home loan and get yourself a home or a second one.

The home loan industry has been active since over three decades. Until the past ten years, all home loans were dominated by the leader Housing Development Finance Corporation Ltd (HDFC) and interest rates ranged from 12-16% in an era of high interest rates all over the country. Dewan Housing, Canbank Housing and a few others followed. There was not much innovation in the home loan segment and loan tenures were usually 5, 10 or 15 years. Eligibility criteria was strict and the amounts that one got for a loan was low.

Then liberalization and opening up of the financial sector took place and since then it has never been the same. Today you can get a home loan for upto 60 times your monthly salary and at rates that one would have never thought of. Tenures also have now become par at 15 years and 20 year tenures are also available. This means that the monthly amount that you pay towards interest and principal repayment called EMI or Equal Monthly Instalment gets lower and lower. From around Rs 1200-1500 per month per lac of loan principal the EMIs are now down to less than Rs 800 per month per lac in many cases.

It is accepted by industry experts that interest rates are at a historical low and will only go north from here onwards. Inflation was at lows of 2-3% about two years ago and this prompted the Reserve Bank of India to reduce interest rates. Now inflation has been inching up and is now at close to 6%. Interest rates cannot stay where they are. They hardly beat inflation. Also global interest rates are also moving up and therefore India cannot but move up.

This might be therefore the best time to take that loan you have wanted to. It can be reasonably assumed that your salaries and monthly income is higher than it used to be a few years ago. Couple this with the multiplier of 60, the aggression of the home loan marketing companies and the real estate developers, add to it the low interest rates and you have an explosive mix. Even if you have a home, you could take on a second one for your children or as an investment.

A few other pointers. The real estate industry has been given industry status and special favour by the government since it is considered as a key growth driver for India. Real estate rates are once again on the upward curve and should continue to be since there is a strong demand in urban areas and more professionals are buying homes with their higher income levels. Urban areas are seeing a severe shortage of good quality land and this shortage with the higher demands should see rates go up. Better areas that are also driven by the new retailing and mall bug should appreciate faster than others.

So there you have it. Investing in real estate should enable you to reap some rewards from appreciation over the next few years. Low interest rates will keep your acquistion costs low. Higher eligibility limits and better incomes from your side should enable you to buy a better and larger apartment or office.

You might consider doing all this in the next six months while the going is good.

A final word on the option of fixed and floating interest rates. While it made sense to consider a float in interest rates since the interest rates were on the decline, the future might not be the same. With interest rates almost certain to rise steadily over the next few years, a fixed rate of interest might be something you would want to consider.

Money Earns Money has a special service for real estate and home loans. We are in touch with a number of builders and developers and also work closely with ICICI Home Loans. We might therefore be able to get you a good deal and help you select a good property. Call or email us and we will set out to find you some nice projects and top this out with a nice low cost loan.