Home loans of up to Rs 35 lakh may cost less in cities


Image used for representation only The decision of the Reserve Bank of India (RBI) to hike repo rates by 25 basis points, showing tightening in the interest rates, might make all loans including house loans more expensive, but the revision of real estate loan limits for top priority sector financing (PSL) from existing Rs 28 lakh to Rs 35 lakh may lead to decrease in the rate of interest on mortgage approximately Rs 35 lakh.

In its policy decision, RBI, in order to offer a fillip to the low-cost real estate for the Financially Weaker Areas and Lower Income Groups, it decided to revise the real estate loan limits for eligibility from existing Rs 28 lakh to Rs 35 lakh in urban centres, and from existing Rs 20 lakh to Rs 25 lakh in other centres, offered the total expense of the home unit in the urban centre and at other centres does not surpass Rs 45 lakh and Rs 30 lakh, respectively.

Anuj Puri, Chairman - ANAROCK Residential or commercial property Consultants- stated that the decision to increase the limitation would be a huge increase for the newbie home buyers who are wanting to buy properties in the economical section. Besides getting aid benefits of Rs 2.68 lakh from the central government under schemes like Pradhan Mantri Awas Yojna, owning a home in the cities will soon become a reality for lots of.

As banks have to lend around 40% of its overall loan to concern sectors like micro enterprises, debtors from weaker sections, and agriculture sectors to name a few where default rates are high, they (banks) tend to lend aggressively to those priority sectors where default rates are low. The default rates in housing loans in the variety of Rs 10 lakh to Rs 35 lakh is comparatively low. Therefore, bankers state the RBI's choice would prompt banks to lower rates on small ticket mortgage section to increase market share.

Nevertheless, on the issue of rate hike by RBI, developer communities are important. Jaxay Shah, President, CREDAI National said, "The choice to trek the Repo rate by 25 basis points might result in suppressed development in the Indian realty sector which has revealed substantial durability over the last 18 months." He said Indian real estate requires lower rates to supply further thrust to 'Real estate for all by 2022' which would likewise allow the sector to spearhead the development of the Indian economy.

On the other hand, validating the rate trek on account of inflationary patterns, worldwide hardening of rate of interest as likewise petroleum costs moving upwards, Niranjan Hiranandani, President NAREDCO, said the hike of 0.25 basis points in the repo rate would not make a significant difference to realty. Nevertheless, he added that in the long run, "we would prefer rates boiling down".

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