Banks’ housing loan portfolio has grown by double digits even in the first five months of the current fiscal year, even though the central bank raised the policy rate three times during this period by a whopping 140 basis points (bps), which boosted housing. loan rate.
In September, the repo rate increased by 50 bps.
According to RBI data, the mortgage loan portfolio of banks was 8,60,086 billion at the end of the financial year 2016-2017 and 16,84,424 billion at the end of the financial year 2021-22 2022. year.
Although the interest rates are significant, according to experts in the banking and real estate industry, they do not prevent the home buyer from making a purchase, because the choice is made based on current income and future prospects.
In addition, people are increasingly aware that interest rates vary over the life of the loan, which is usually 15 years.
Bank of Baroda Head of Home Loans and Other Retail Assets HT Solanki commented on the banks’ growing loan portfolio, stating that affordability is an important consideration as buying a home often requires a loan.
– However, a mortgage is also a long-term product and customers expect interest rate changes during the loan period. In addition, the country’s average wage increases of 8-12 percent will help mitigate the impact of the interest rate hike to some extent, he said.
According to RBI data, banks’ home loan portfolio increased by 13.7-16.4% annually in each of the first five months of the current fiscal year.
At the end of August 2022, there was still a debt of 17.85 million rupiah.
Commenting on the increased interest rates, HDFC CEO Renu Sud Karnad said, “I don’t think the rate hike will have a significant impact on home loan demand.”
A senior banker pointed out that unlike other acquisitions, a home is chosen after extensive family research.
Home loans have variable interest rates, and unlike auto or consumer loans, they are long-term, averaging 12-15 years, according to the speaker.
“And thus the rise in interest rates has relatively less impact on cash flow. Usually, 2-3 interest periods are played during the 12-15 year loan period. So borrowers understand that interest rates can also decrease during such a long loan term, Sud explained.
The merger of HDFC Bank and HDFC, the country’s largest home lender, is currently underway.
In the last 12-15 months, home sales have experienced a strong comeback, according to real estate agents Karnad, Solanki and both.
Real estate consultancy JLL India chief economist Samantak Das stated that starting from March 2016, the average mortgage interest rate was on the decline and fell to 6.95% till April 2022.
This was in line with the evolution of the RBI’s policy (repo) rate, which fell from 6.25% in March 2017 to 4% in March 2022.
According to Das, the transition to the mortgage interest rate will be 140-150 bps, so the mortgage interest rate will be around 8.85 percent. RBI increased the repo rate by 190 basis points in the current fiscal year.
“Nevertheless, apartment sales are still strong and may rise to the top of the decade by the end of 2022. This may be due to strong holiday demand combined with stable pricing and relatively lower mortgage interest rates compared to a peak of 10-11 percent. seen 8-10 years ago,” he said.
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