All the leading banks in India have been lowering their home loan interest rates under their festive offers, they are cutting the interest rates by around 40-60 bps for borrowers with credit scores more than 800, for a loan of above Rs. 75 lakh. Leading banks like SBI, Bank of Baroda, HDFC, Punjab National bank (PNB), and Kotak Mahindra Bank have announced the home loan cuts. According to Renu Sud Karnad, Managing Director, HDFC Ltd., "Record low-interest rates, subsidies under PMAY and the tax benefits have helped."
New home loan interest rates by banks
|Bank||Home loan interest rate|
|Bank of Baroda||6.75%|
|Kotak Mahindra Bank||6.50%|
Samantak Das, Chief Economist And Head Of Research & REIS, JLL India thinks that the home loan interest rates cuts were introduced by banks is "Linked to credit scores and holds true irrespective of amount or employment category, the market will be buoyed with cheaper credit available across all categories of the residential buyer."
The real estate segment in India has been struggling with falling sales of new housing, both in affordable and luxury housing segments. Job cuts and salary cuts dragged Indians from investing in new housings. A large number of the newly built real estate were lying idle. In 2019, the real estate sector in India started to see much boost, while NRIs too contributed in the luxury segment. But the pandemic halted the boom. Builder too is doomed as the raw materials costs hiked considerably, but the real estate sales growth was not satisfying. Affordable property is really under pressure now, but large-scale investors are showing interest again.
The RBI earlier informed that banks' home loan books already increased by 8.9% y-o-y to Rs. 14.66 trillion till July. Now, this interest-rate cut might influence more Indians again to take home loans and buy new housings. As the economy has started to recover slowly, the present home loan cut is the need of the hour.
A recent CII-ANAROCK Consumer Sentiment Survey stated, "Investors' confidence in real estate has risen to 54% during the second Covid-19 wave, against 48% in the first wave. For the first time, affordable housing is the lowest priority, with more than 34% respondent home seekers focused on properties priced between Rs. 90 lakh to Rs. 2.5 crore. 35% favor properties priced between Rs. 45-90 lakh, just 27% respondents voted in favor of affordable housing (priced less than Rs. 45 lakh). In the previous H2 FY 2020 survey, approximately 36% respondent property seekers eyed budget housing." So, the banks' decision to reduce the rates for loans of above Rs. 75 lakh, is expected to bring positive changes in the real estate segment.