PNB Housing Finance Executive Offers Key Advice for First-Time Homebuyers on Affordability

Jatul Anand, Executive Director at PNB Housing Finance, has provided essential guidance for individuals looking to purchase their first home in India. He recommends adhering to an 'affordability guardrail,' specifically the 'five-times annual income' rule, suggesting that a property's value should ideally not surpass five times the household's yearly income. Exceeding this limit can lead to repayment stress, particularly when interest rates rise.

Anand also pointed out that the listed property price is only part of the overall cost. Additional expenses such as registration charges, stamp duty, GST on under-construction properties, basic interiors, maintenance deposits, and insurance typically increase the total outlay by 8-10%. These costs must be accounted for from the outset to prevent post-loan financial strain.

A common pitfall for first-time buyers is over-leverage. Anand advises that monthly EMIs should not exceed 40-45% of the total monthly income to ensure financial flexibility. He also mentioned structured repayment options like step-up EMIs and part-prepayments as helpful cash flow management tools.

Government initiatives, including PMAY-U 2.0 and tax deductions under Sections 80C, 24(b), and 80EEA, make homeownership more accessible, especially for those with limited credit history. Lending practices have also become more inclusive.

The rent versus buy decision remains complex. While renting offers flexibility, buying builds long-term assets if affordability is sound and the buyer plans to stay in the city. In many areas, EMIs are now comparable to rents.

Furthermore, Anand noted a trend of self-construction in Tier 2 and Tier 3 cities due to more affordable land and improving infrastructure.

Regarding the festive season, while offers exist, Anand stressed that maintaining a healthy credit score and stable income are crucial for securing favorable loan rates. PNB Housing Finance has digitally integrated its loan process, from application to disbursement, to expedite decisions. Transparency, regular updates, and customer support are key to their service.

Impact: This advice can significantly help potential homebuyers make informed, financially sound decisions, reducing the risk of default and long-term financial stress. For housing finance companies, it promotes responsible lending and customer-centric digital services. Rating: 7/10.

Difficult Terms: *Affordability guardrail*: A financial limit or guideline to ensure a purchase remains within a person's financial means. *Five-times annual income rule*: A guideline suggesting that the total value of a property purchased should not exceed five times the buyer's annual income. *Rising rate environment*: A period when central banks or financial markets are increasing interest rates. *GST (Goods and Services Tax)*: A consumption tax levied on the supply of goods and services in India. *Disbursal*: The act of providing loan funds to the borrower. *Over-leverage*: Taking on a level of debt that is too high relative to one's income or assets, increasing financial risk. *EMI (Equated Monthly Installment)*: A fixed amount paid by a borrower to a lender at a specified date each calendar month. *PMAY-U 2.0 (Pradhan Mantri Awas Yojana - Urban 2.0)*: A government scheme aimed at providing affordable housing for urban poor in India. *Sections 80C, 24(b) and 80EEA*: Sections of the Indian Income Tax Act that offer tax deductions on home loan principal (80C) and interest (24(b), 80EEA). *Credit history*: A record of an individual's past borrowing and repayment behavior. *Rental yields*: The annual income generated from a rental property as a percentage of its market value. *Self-construction*: Building a house on a plot of land owned by the individual, rather than buying a ready-made property. *Credit score*: A numerical representation of an individual's creditworthiness and ability to repay debt. *Disbursement*: The act of giving out money, typically a loan, after approval. *E-verification*: The process of electronically verifying identity or documents. *Automated credit assessments*: Using technology and algorithms to evaluate a borrower's credit risk. *Decentralised underwriting*: The process of approving loans at local branch levels rather than solely from a central headquarters.