All the big banks in India have lowered their interest rates on home loans as part of their festive offers, they are cutting interest rates by around 40 to 60 basis points for borrowers with a bad credit rating. greater than 800, for a loan greater than Rs. 75 lakh. Leading banks like SBI, Bank of Baroda, HDFC, Punjab National Bank (PNB) and Kotak Mahindra Bank have announced cuts in mortgage lending. According to Renu Sud Karnad, Managing Director of HDFC Ltd., “Record low interest rates, PMAY subsidies and tax breaks have helped.”
New interest rates on mortgage loans by banks
|Bank||Mortgage interest rate|
|Kotak Mahindra Bank||6.50%|
Samantak Das, Chief Economist and Head of Research and REIS, JLL India believes the mortgage interest rate cuts introduced by banks are “linked to credit scores and apply regardless of the amount or the job category, the market will be supported by cheaper credit. available in all categories of residential buyers.
The real estate segment in India is struggling with declining new home sales, both in the affordable and luxury housing segments. Job cuts and wage cuts prevented Indians from investing in new housing. Many of the newly constructed buildings remained inactive. In 2019, the real estate sector in India started to experience great boom, while NRIs also contributed in the luxury segment. But the pandemic stopped the boom. The builder is also doomed because the costs of raw materials have increased considerably, but the growth in real estate sales has not been satisfactory. Affordable real estate is currently under pressure, but large-scale investors are showing renewed interest.
The RBI previously reported that banks’ mortgage portfolios had already grown 8.9% year-on-year to Rs. 14.66 trillion through July. Now, this drop in interest rates could prompt more Indians to take out home loans and buy new homes. As the economy has started to slowly recover, the current reduction in home loans is the need of the moment.
A recent CII-ANAROCK consumer sentiment survey said: “Investor confidence in real estate rose to 54% in the second wave of Covid-19, up from 48% in the first wave. For the first time, affordable housing is the lowest priority, with over 34% of housing seekers surveyed focusing on properties priced between Rs. 90 lakh and Rs. 2.5 crore. 35% favor properties priced between Rs. 45-90 lakh, only 27% of respondents voted in favor of affordable housing (prices below Rs. 45 lakh). In the previous H2 FY 2020 survey, around 36% of property applicants surveyed considered budget accommodation. “Thus, the decision of banks to cut lending rates above Rs. 75 lakh, is expected to bring positive changes in the real estate segment.
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Article first published: Wednesday September 22, 2021, 9:41 PM [IST]