Falling Home Loan Interest Rate and Its Impact on Real Estate Investors

With more NBFC banks jumping on the low home loan bandwagon, real estate companies forecast a new booming holiday season, while some are concerned about lower rates. HDFC had announced the latest sub-7 percent house loans applicable to all new disbursement applications up to the end of October, regardless of the applicant’s credit level or work category.

Also read: RBI announces record low- Interest rates for the 7th time!

Reduced interest rate and its impact on the real estate sector

It follows (SBI), Kotak Mahindra, Bank of Baroda, Maharashtra Bank, and other state-owned, private-owned banks and other large cooperative banks which have used adequate market liquidity, driven by low-interest rates maintained by RBI. The active policy of banks, following a spate of risky corporate loans, shifts their focus towards retail loans, also works for the benefit of customers.

However, certain banks and NBFCs, like HDFC, are associating individual credit ratings with the special seasonal rate, expressing unhappiness, particularly with the epidemic affecting payback plans of many immobile participants.

In the next months, the drop in domestic lending rates such as 6.6% or 6.7% is certainly a major booster for the market. However, the availability of these rates is practically blocked by certain people seeking a customer credit score of 800 or higher, since the pandemic resulted in many defaults. Credai’s recent research has shown strong growth in property sales in Pune this year.

Since the outbreak of the Ebola pandemic in West Africa, many people have returned to their hometowns in tier-2 or tier-3 and then invest in a residential property. The price of properties (both residential and trade properties) has been unchanged or declining in several parts of the country. When ‘work from home is increasingly becoming ‘new standard.

In these uncertain and difficult times, it is a great decision for anyone to buy a new home or property of any sort. Other significant criteria, such as location, location, present conditions (whether or not ready to move), and RERA approval, need to be taken into account when you buy a house and/or invest in real estate.

How are home loan rates helpful for investors?

The lowering of home loan rates is a near-risk free bet for loans (banks and/or financial institutions), as it includes significant collusion with the recipient’s house. Historically, one of the principal reasons for this is to encourage the buyer and to re-engineer consumer trust. Even a minute’s reduction (of 1% or less) in their home loan rate and the EMIs may affect the decision to purchase a new house or property. Some banks also give concessions or waivers to processing fees, and other developers offer discounts and real estate deals.

Most likely, the rates on house loans will continue to be low at least for the current financial year. This is because house loan rates are already low and it is unlikely that the RBI will further decrease repo rates in the midst and beyond the ‘second wave of the epidemic’.

It’s been one dream for most people in their whole life cycle to buy or build a house. People take their housing loans interest rate carefully because it affects the home’s final expense and the EMI outgoing. They prefer high-value lending for lengthy tenures, which might lead even to large savings or undesired costs if the interest rate is small. With the ongoing pandemic, the RBI has taken efforts of reducing home loan interest rates to improve investment rates in the real estate sector. As a result of this, Credai’s recent research has reported strong growth in property sales in Pune this year. Assetmonk is India’s fast-growing internet platform for investing in cities like Hyderabad, Chennai, and Bangalore. We provide 14-21 percent IRR properties.