According to the International Labour Organization (ILO), 25 million people worldwide could suffer job loss due to the Coronavirus spread. Mentioned below are steps a home buyer can take, if his income sources have been adversely impacted because of this crisis
Home buyers in India largely depend on housing finance to make a home purchase. RBI data show over Rs 13 lakh crores of housing loans outstanding as on January 31, 2020. This means a large number of buyers are under tremendous pressure due to the human and economic calamity caused by the COVID-19 pandemic. In some cases, the monetary blow is already evident. Companies across the world, especially in the aviation sector, have laid-off employees, as the pandemic devastates their businesses.
According to the International Labour Organization (ILO), nearly 25 million people could suffer job loss worldwide, on account of the extraordinary shock to the economy in the aftermath of the Coronavirus spread. In its report, titled ‘COVID-19 and World of work: Impacts and responses’, the ILO estimated that the effects of the contagion, which has infected over 56 lakh people around the world as on May 26, will be far-reaching, ‘pushing millions of people into unemployment, underemployment and working poverty’.
On the other hand, numbers available with the Centre for Monitoring Indian Economy said 12.2 crore youth in the age group of 20-30 years lost their jobs in April 2020, following the nationwide lockdown.
So, what should a home buyer in India do, if his income sources have been adversely impacted by the Coronavirus crisis?
“Ideally, a home loan borrower should include his home loan EMI of at least six months in his emergency fund. Including this would allow the borrower to continue with his EMI payments even during financial emergencies like job loss,” says Ratan Chaudhary, head of home loans, Paisabazaar.com.
Apply for EMI holiday
Take advantage of the moratorium period: Announcing major relief to home loan borrowers in the aftermath of the Covid-19, the RBI on March 27, 2020, deferred EMI payments under a three-month moratorium period apart from bringing down the repo rate to an all time low of 4%. In May, the RBI extended by the loan moratorium by another three months, till August 31, 2020. The RBI has advised banks not to categorise late payment of long–term loans as non-performing for the period between March and August 2020.
Money from severance package
Use the money from your severance package: From June such a borrower will have to arrange the money to pay his home loan EMIs or face the usual consequences- the default would find a mention in your credit and the bank would charge a penalty on each default, apart from the interest.
Use Fixed Deposit (FD), Recurring Deposit (RD) money
Use your savings: You could also depend on your FD and RD to make the EMI payment for the simple reason that the interest you currently get on these (SBI FD interest is 5-6%) would be much less than the interest you would pay on home loans (SBI home loan interest rate is 8%), more so in case of a default.
Withdraw from Provident Fund (PF)
Use your provident fund money: Through a notification in the wake of a 21-day lockdown, the labour ministry on March 29, 2020, allowed the 60 million subscribers of the Employees’ Provident Fund Organization (EPFO) to withdraw a portion of their retirement savings.
Liquidate assets
Sell gold, liquidate debt instruments: Investment in various debt instruments should be liquidated at this juncture to pay the home loan even in a scenario when you have to take a haircut. You could also pledge gold and jewellery to arrange funds for home loan EMI payment. Amid gold prices touching new lows each day in the aftermath of the pandemic, you might not get what you expected from the yellow metal—gold prices fell to Rs 42,693 per gram on April 1, 2020.
Borrow from family, friends
Look for family support: Borrowing from family members and friends who are in a position to lend you money for the time being could be another option.
Leave A Reply