Your dream home gets even more distant

The Reserve Bank of India's (RBI) latest verbal guidance to banks —not to include registration and stamp duty while arriving at the value of the house — will mean an additional hit of 5-10 per cent for home buyers.

Earlier, banks and housing finance companies included these two components while calculating the amount. This helped buyers in several ways: Their requirement to raise the cash — between Rs 2 and 5 lakh in case of a Rs 50-lakh property —was reduced. Also, the interest rate payable on this loan was much less, compared to a personal loan. In case of a personal loan, the equated monthly instalment (EMI) would be much higher because of the shorter duration. The new warning, therefore, comes as a serious setback for the potential home buyer.

Experts believe home buyers will have to take the personal loan route to fund this cost, in case of inadequate funds. This could lead to defaults. "We fear there will be a spike in borrowers taking personal loans to fund this cost, as it means a lot of money for the larger section of borrowers," said a regional general manager of a public sector bank.

Your dream home gets even more distant