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A home for everyone

Getty Images/iStockphoto

Getty Images/iStockphoto

Several banks and housing finance companies have announced house loan rate reductions this year. While the cut reflects the economy’s abundant liquidity and low interest rates (upto 6.65%), it also indicates a growing demand for new house loans, which neither bank nor Housing Finance Company (HFC) wants to lose out on. Borrowing becomes more accessible when interest rates fall, making large purchases on credit, such as home mortgages or credit card debt, more feasible. On the other hand, as interest rates rise, borrowing becomes more expensive, putting a damper on consumption. Higher rates, on the other hand, benefit savers who benefit from higher interest rates on deposit accounts.

Making a comeback

Following the initial wave of COVID-19, housing demand soared in the two quarters between October 2020 and March 2021. It was aided by factors like stamp duty reductions by various state governments, developer discounts, and low financing rates. Following the second wave of COVID, the pace slowed in the quarter ended June 2021, but has picked up again in recent months, thanks to broader economic opening, improved vaccination coverage, and more economic activity.

Residential rental payments are similar to the EMIs that will be necessary to pay for their own homes, according to the salaried/ business class. As a result, more people are purchasing homes rather than renting them. People are also encouraged to buy homes because ready-to-move-in inventory is accessible in each asset class, allowing them to pick a property that meets their budget and needs. Despite the unpredictability of the general economic situation, the fear factor resulting from job losses or pay cuts is motivating people to invest in their own homes rather than renting property in order to find stability. Interest rates have been lowered as a result of rising ambitions of the millennial with attractive pay packages and digitisation.

The RBI has taken a number of initiatives to protect the economy from the COVID-19 problem and to mitigate the repercussions of the economic slowdown. To keep the market afloat, repo and reverse repo rates have been cut to their lowest levels in history, and loan moratoriums was extended by three months.

Builders’ and developers’ lucrative incentives, such as late EMI payment and construction-linked plans, are also encouraging individuals to take up home loans. Despite negative sentiments caused by the COVID -19 scenario, a reduction in stamp duty and easy instalments adapted to the needs of the consumer have helped the market recover. Many organisations are providing additional incentives to end-users, such as the option of a refund of the booking money, waivers of statutory fees, cash-back programmes, easy payment structure, and other freebies.

While the availability of low cost home loans may not be the primary element driving the real estate market, it is certainly a component that home purchasers evaluate before making a purchase. The affordable housing market is already seeing increased demand, and the fact that home loan interest rates have bottomed out and are near a decade low, is boosting this need even more. Home purchasers in the affordable and mid-segment divisions are likely to speed up the process of becoming residents.

The writer is Managing Director, Poddar Housing & Development Ltd.


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Printable version | May 28, 2022 2:41:21 am | https://www.thehindu.com/real-estate/a-home-for-everyone/article38302631.ece