It seems that times are changing for better and a good news is waiting to greet the buyers of apartments in India! Recently many Indian banks have lowered their rates of lending. Before taking a final call, some vital questions need to be answered like, what is its impact on the segment of home loan? What is the vital information the borrowers must know? According to Mr. Ajay Jain an expert of the real estate industry, “Even though the Reserve Bank of India (RBI) did not cut the repo rate, in its recent monetary policy review, home loan interest rates may still fall. Banks can now lend more to home buyers, as the RBI reduced the amount of money that banks have to set aside as security on home loans, from 0.4% to 0.25%. The statutory liquidity ratio has also been reduced by 50 basis points, which means that banks now have more capital to lend. This can lead to lower home loan rates. Banks have already been aggressively cutting home loan rates. In the next 12 months, the interest rate may reduce by 25-50 bps.”.

Usually, most of the home buyers opt for floating rate of the home plan. Thus, the buyer must wait for a year after the reduction of interest rate because the banks offer home loans on the basis of 1-year MCLR rate. Normally, home loans span for 20 years. During this long period, a minor rise or fall in the interest rate could severely impact the entire cost of the real estate property.

Industry experts are witnessing a surge in the real estate property markets of Tier-I and Tier-II cities like New Delhi, Kolkata, Mumbai, Pune, and Ahmedabad. With the increase of employment opportunities and the rising Indian economy, more buyers are investing in the real estate properties in Kolkata and rest of the aforementioned cities.

An added interesting trend being the rise in the number of young buyers (30 to 38 years), the builders and financiers are both keeping their fingers crossed. Further reduction of home loan rates will open up more avenues for the buyers. Even a small variation like 0.25% in the rate of interest for 20 years spanning home loan plan could impact the total amount of interest to be paid by Rs 1.14 lakhs. Thus, it is to be seen whether RBI would bring a good news for the buyers in near future. Everyone is hoping that given the outstanding performance of equity market in the last couple of months, people have more liquidity in their hands and are better equipped to invest them in the real estate market. Only time will tell us the reality.