Reduction of Home Loan Interest Rates – How is it Impacting Buying Decisions?

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RBI, owing to the pandemic and sluggish growth, has cut repo rates multiple times in the last few months. Since February 2019, there have been six instances when RBI has slashed the rates resulting in the fall by 250 basis points. We were further expecting some cuts this August, but RBI decided to keep it unchanged.

The current home loan rates start from 6.7 per cent, which was hovering around 8.5 per cent last year during this time. It means that the new loans will now be cheaper, and there are several additional incentives sanctioned by the government for home buyers. Let us see its impact on the buyer’s buying decisions.

Over the last few months, the government has announced a series of incentives to ease the burden of the middle-class. The cutting down of repo rate along with the additional three-month moratorium helped people in deciding if they wanted to invest in a home during the pandemic.

Banks generally base their home loan interest rates on an external factor, and since last October, the repo has been the basis, replacing MCLR and prime lending rate. But these stringent measures are not bearing fruit in the short term. As per a survey report by Knight Frank India, the first half of 2020 saw the housing sales in top eight cities plummeting by 54 per cent to a record 10-year low of 59,538 units.

The figures are grave when we consider the second quarter alone. It suffered from an 84 percent jolt when compared year-on-year basis. The units sold were 9,632, down from 49,905 during the same period last year, which is disappointing by all means.

The foreseeable future seems dim for the real estate sector after already being in the pessimistic zone for some time. Due to the same, people industry-wide are suffering from working capital, making it more difficult to accelerate. The shortage of cash along with the reluctance to spend has overshadowed the measures taken by the government to put the real estate back on track.

Even though the government has taken several steps to boost real estate, these have come far and wide. They must bring in more constructive measures to woo people in getting a new home for themselves.

This is arguably the best time to buy a home. Why would you miss it when banks are offering the best interest rates in quite a few years? Do you want to know how you can bag a great deal with the current interest rates and live in a community that is designed for the future? Talk to our Community Connect team today. Mail us Connect@estate.one and we will get back to you.