RERA may help homebuyers seek better loan terms, easier access to finance
With the real estate sector likely to see high levels of transparency under the Real Estate (Regulation and Development) Act, homebuyers could get easier access to loans and would be able to negotiate better terms with lenders.
Financial sector experts believe that lenders would gain extra comfort in extending loans to homebuyers under the new real estate law, which came into force from May 1.“After RERA, lenders will be more comfortable in providing home loans to customers. With the new law in place, delay in delivery of the projects due to lack of fund will be reduced drastically which was a major concern among lenders. Now lender will have to deposit funds received from customers in a dedicated project account,” Amitava Mehra, CEO, India Mortgage Guarantee Corporation (IMGC).
Under RERA, 70 per cent of money collected from homebuyers will be deposited in a separate account which is to cover costs of the construction insuring that funds don’t run out due to diversion to other projects. “RERA will address some of the major concerns related to purchase of properties,” Mehra said.
Rishi Mehra, CEO of Wishfin.com, said the new law will provide more comfort to both the lender and the borrower while entering into a home finance deal. “After implementation of RERA, lenders will provide loans with more confidence as the date of completion would be pre-decided failing to which will lead to a higher rate. This Act would not only boost confidence in the loan buyers but also among the lenders as there will be clarity about the construction cost and project completion,” Mehra said.
He felt that borrowers would also now be in a better position to seek softer loan terms from the lenders. “In the present market scenario, when the home loan interest rates have come down to 8.35% per annum, the eligibility of buying a property has gone up. With RERA Act, the delayed possessions will stop which will be an add-on benefit for homebuyers. Being confident about the date of the possession, they and can negotiate with the lenders on the finance amount. Also, the buyers can claim the tax benefits after the possession within 5 years from the starting date of property construction. As a result, this is a win-win situation for home buyers,” Mehra said.
The state governments are presently in the midst of setting up their real estate regulatory bodies after notifying the respective rules under RERA. The full impact and implications of the new law will be known in the coming months.