Is All-Time-Low Home Loan Rates An Opportunity for Homebuyers?

Over the past several months, many reputed Indian private and public banks such as SBI, Kotak Mahindra, HDFC, among others, have slashed their housing loan interest rates to record-low levels. It was reported that in March 2021, the home loan rates across multiple Indian banks were at all-time-lowest levels in over a decade.

For lenders (banks and/or financial institutions), reducing home loan rates is a nearly risk-free bet, as it involves an important collateral, i.e. the house (of the loan receiver) itself, and therefore timely repayments are assured for a majority of the cases. Historically, it has been noticed that whenever the bank loan rates decrease dramatically, one of the main reasons behind it is the deliberate attempt to incentivize the buyer(s) and to bring back consumer confidence and boost purchasing power in a certain industry -- in this case, real estate.

For the working professionals or the salaried middle-class Indian, even a minute reduction (of 1 per cent or less) vis-à-vis their home loan interest rates or EMIs can positively impact their decision of buying a new house or property. In what appears like icing on the cake, some banks are additionally offering concessions or waivers on processing fees, and several developers have been giving discounts, offers, on property deals to make the proposition further attractive for prospective homebuyers of the country. 

Given the constantly falling rates of bank interest on home loans in the recent past, one may ask – “will the rates go even lower in the upcoming months?” The answer is NO, most possibly (at least for the current FY). This is because home loan interest rates in our country have already hit rock-bottom and the RBI is unlikely to go for any further repo rate cuts amid the ‘second wave of the pandemic and beyond. 

Furthermore, the property prices (for both residential and commercial properties) across several parts of the country have been stagnant or even on the trajectory towards decline, ever since the start of the virus outbreak last year. With ‘work-from-home or ‘remote working’ increasingly becoming the ‘new norm’ in the post-pandemic scenario, many people (especially youngsters) are choosing to move back, either temporarily or permanently (if feasible), to their tier 2 or tier 3 hometowns and then invest in a residential property in their native place, where the property prices are usually lower as compared to metros or tier 1 cities. 

Given the above-mentioned developments, for some time now, industry experts in the realty sector have been advocating that “if you are an aspiring homebuyer in India, right now is the best time to realize your cherished dream of buying your own home!” While I do agree with that notion (up to an extent), at the same time, we must remember that buying a new home or property of any kind in these uncertain and tough times is indeed a big decision for anyone. So, one must take into account other important factors before buying a home and/or investing in real estate, such as the location of the property, current status (whether or not it is ready-to-move-in), RERA approval, and legal compliances, and so on.

In Conclusion

Even though home buyers are nowadays showing a bit more of skeptical attitude (as compared to pre-Covid) when it comes to property/real estate investments, at the same time, the majority of them do realize that having one’s own house is extremely important in the current era of uncertainty, as it provides unparalleled financial stability and security over the long term. 

From what we have seen in recent months, serious homebuyers are, at the moment, keen on buying homes from the secondary markets, but they are on the lookout for discounted rates and completed (or ready-to-move) projects to go ahead with the transactions. In case you want to invest in real estate but don’t want to buy a home, you should alternatively consider buying auction properties or resale properties as one of the most cost-effective and smart options for getting good deals on your property transactions.

The author is the Founder and CEO of OwnersTown

DISCLAIMER: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.