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Home Loans Becoming Dearer
By property vertical
Indian Real Estate: Property Market In A Slow Down ModeAn already stagnated and confused Indian property market is in for jolt that will further slow it down, all due to the fact that interest rates on home loans have been raised. A week after Reserve Bank of India increased key short-term rates, home loan major HDFC hiked lending rates by 50-basis points, followed by a host of PSU banks also hiking rates, such as, State Bank of India by 25-basis points. And, CNBC-TV18 reports that by the end of today, PSU banks still have a 0.5% rate advantage.As dream homes get more expensive, home loan major HDFC raised interest rates by half a percent, and State Bank of India by a quarter percent. A third increase in the year for HDFC, the company does not see rates going up too much from here on.Executive Director, HDFC, Renu Karnad says: “Essentially, I don’t think they should increase it, maybe a small increase somewhere. But, I don’t think, we should see an increase, at least in the very near and medium term future.”Whereas, market leader ICICI may not hike rates this time around, having already hiked rates, earlier in June. Deputy MD, ICICI Bank, Chanda Kochhar says: “If, we see the cost of funds going up, then our costs go up, and then we hike lending rates. As of now, we are watching and we haven’t taken any decision so far.”Even though, ICICI Bank and HDFC command a big market share in the home loan space, PSU banks have an interest rate edge, with the competition set to only get hotter. While, HDFC and ICICI Bank offer floating rate home loans at 9.5%, banks like SBI and Bank of Baroda offer rates between 8.75 to 9%. For the first time in the past five years, PSU
bank interest rates are nearly 0.5% cheaper than their private counterparts. And, bankers are not willing to rule out any more price hikes, which may mean higher EMIs.As a result, the present property market has stagnated, primarily, due to rising interest rates that have left more supply than demand, which is a complete mismatch. At present, the real estate market seems to be stabilizing, but demand has dropped, as rampant price increases by builders has affected real estate prices dramatically, with constant price increases scaring-off the cost conscious Indian buyer.It is important to watch the markets in the next few months as the auspicious days preceding the festivals of Dussehra and Diwali may cause the property market to pick up a little.While, the media abounds in rumours that have given birth to numerous articles about crashing property markets, it is not completely true. Developers and builders are standing firm, though definitely clever strategies will be employed to market their options at a later stage, probably at discounted rates. At the present moment, the time is not right or ripe for an average investor looking to invest in the Indian real estate market. Investment returns on property that were available till early this year, seem to have dried up, even as things in the next 3-months look a bit low key.That is not to say, once the buyers get over the shock of rising home loan interest rates, they won’t the market looking for a home of their own!Acquire information on Real Estate at http://www.propertyvertical.com For information on Real Estate Property in Delhi, Gurgaon and surrounding areas Visit http://www.propertyvertical.com/delhi
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