REAL ESTATE: December 2009

First Time Home Buyer

Tips to make your home buying process simple:

While owning a house of one’s own is a cherished dream for most individuals, it is also a major decision involving a large investment. Though the availability of easy financing, innovative products and other value-added services by home loan companies have made the home buying process relatively easy, for a customer it is still a challenge to decide which home loan works best for him. This is especially true in the face of various options from home loan companies where each organisation tries to package it differently.
There are two aspects of home buying – Property Search and Home Loans:
Some of the primary concerns of homebuyers as far as the property is concerned includes matters pertaining to the property's title, , its pricing, the developer’s track record, etc. Whereas on the home loan front a customer’s main issues besides the rate of interest offered, would be related to the company’s loan procedure, the product range, quality of services offered and safe retrieval of the title deed of the property deposited as a security for the housing loan, on completion of the loan tenure.
Most families spend a large amount of time in researching for their dream home, which includes scanning through several projects, taking expert assistance, checking on the builder’s credibility, etc. However, most often selection of a home loan company and the loan product is a hasty decision.
Customers going in for a home loan may well benefit from some basic research on the home loan company before deciding to take a loan from it. They would need to find out whether the home loan company can simplify the complexities of home buying and help them tackle every aspect of the process right from the selection of the property to documentation and loan processing. An interest rate per se may appeal at first but when you consider that home loan tenures are for fifteen to twenty years, what becomes equally important is the quality of service and the company’s level of commitment and transparency right through.
If the customer is yet to decide on the property to be bought, he could well do to seek assistance of a home loan company, which would help him locate the right property. Since home loan companies deal regularly with developers they are aware of the upcoming projects in different localities and can recommend the same to the customer based on their requirements. Many of these companies also regularly organize property exhibitions where homebuyers can interact freely with the builders and select a property from a plethora of options available at one stop.
Also in the case of resale property, the company should be able to clarify the entire steps in buying a resale property and also the precautions to be taken. This usually saves customers a lot of time and hassle once they are aware of the process and ensures that they do not face any problems in future.
Customers should also look out for facilities whereby the home loan company approves the loan even before the property is selected or finalized. This helps a customer in planning the purchase of the property since he is aware of the funds available to him and can buy a property matching his budget. Companies like HDFC also assist customers locate properties through ‘HDFC Realty’, which provides an entire range of real estate services. The objective is to simplify the tedious and opaque process of acquiring or selling a property. The company also has tie-ups with various leading developers for different projects wherein a customer acquiring a property in their project may get a special offer.
In case the customer has already short listed the property, it makes sense to go to a home loan company, which has the knowledge in evaluating the property in terms of its documentation, the track record of the developer in completing the project, etc. The customer could also check with the company if a particular project where they plan to buy a property is pre-approved by them, as this would save time in getting the property evaluated and the buyer has the satisfaction that an expert has appraised the property. At HDFC we follow a single-window concept whereby we have qualified legal and technical in-house staff to scrutinize the property, the title and other documents, thereby reassuring the customer that the property he is buying, is in order.
When it comes to the home loan, the points to consider is whether the company counsels customers on different aspects of the loan and the flexibility offered in customizing the loan to suit individual requirements, besides a wide range of products to choose from. For instance, in the current scenario given the volatility of the interest rate, customers may be wondering what makes more sense from their perspective, a fixed rate or floating rate home loan?
When a customer is indecisive about whether to go in for a fixed rate or floating, the home loan company should guide and educate the customer and lay out the options before him and leave the final decision to the customer, which is based on his needs & requirements and ability to take risks. For example at HDFC, customers who are confused between the fixed rate and floating rate, can opt for a combination loan that combines the benefits of both, the floating rate and the fixed rate. Under this option, the loan is broken up into two parts, one on which interest is charged at a fixed rate and the other on which interest is charged at a floating rate. The fixed rate portion of the loan helps them hedge their interest rate risk against rising interest rates as the rate of interest is not subject to change at all. And when interest rates fall, the floating rate reduces with it and the customer benefits from it. Besides, the floating rate is generally priced lower than the fixed rate, so from day one the customer starts paying a lower interest rate on the floating part of the loan.
Customers should also be aware of how they can enhance their loan eligibility without the burden of a higher EMI. Home loans companies allow customers to include a co-applicant in order to club incomes. The home loan company should be able to structure the loan in such a way that it offers flexibility to customers, enhances their loan eligibility, helps them optimize tax benefits and customise EMIs according to their repayment capacity, so the customer is able to repay the loan comfortably..
Then again, when a customer takes a home loan they enter into a long-term financial commitment, as home loans are long-term loans where the commitment is for a period of 15 to 20 years. In case of any unforeseen event during this period, it is better to make sure that the family is not burdened with the loan liability. Hence, to take care of uncertainties during such a long period, it is better to take a home loan insurance. HDFC with the help of its group company HDFC Standard Life Insurance offers, a Home Loan Protection Plan, specially developed to suit home loan customers.
And finally, it is best to go with companies that have established themselves over the years, as they are flexible and will be able to offer customized service to customers. The other advantage is this will also help the customer to en cash on the vast pool of knowledge that comes with their experience.
For example, HDFC is a single product company with its core business being home loans. Unlike some of the other companies that offer multiple products, it specializes in home loans and thus understands the market dynamics thoroughly. Having been in this business for the last 30 years, it has gained in-depth knowledge of the real estate market and has constantly endeavored to empower the customer in making the right decision while buying a home.
SOURCE: HDFC LTD. http://www.hdfcindia.com/#

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