Improved affordability, lowest-ever interest rate pushing home loan demand

 According to mortgage lenders, favourable demographics, greater affordability of residential properties, and record low mortgage rates are driving demand for house loans.

Several large banks, mortgage businesses, and housing finance companies have slashed interest rates on house loans over the festival season to capitalise on the rebound in housing demand following the COVID-19 pandemic's second wave.

The interest rate on house loans can be as low as 6.5 percent in some situations.

When asked about the impact of HDFC's decision to drop mortgage rates for the Christmas season on home loan disbursals, Managing Director Renu Sud Karnad noted that while the lower interest rate helps, it is only one of several factors that contribute to the increase in demand for home loans.

"Housing is far more affordable today than it has ever been. Property prices have stayed relatively constant across the country in recent years, although income levels have risen "she remarked

People are also moving to larger apartments, according to Karnad, due to the need for more room following the COVID-19 pandemic's breakout.

"Because of the epidemic, people are working from home, getting their education from home, and doing their leisure from home," she remarked.

The company is optimistic, according to LIC Housing Finance's managing director and CEO, Y Viswanatha Gowd, because there is a need for ready-made dwellings.

"There is already a backlog of demand, and the labour market is improving. Because markets are becoming more open, our clients' sentiments are also rising. Vaccination comfort has given individuals more confidence to wander around and physically look at properties before making a decision "Gowd remarked.

Gowd anticipates robust housing demand during the festival season and beyond, particularly in the prefabricated and cheap home segments.

Ramesh Nair, the new CEO of property consultancy Colliers India, stated that major Indian banks had slashed house loan rates ahead of the festive season to entice homebuyers.

"This will increase demand for homes in all price ranges, including entry-level, mid-range, and high-end. The stage has already been laid for a resurgence in housing demand. Stable house costs, increased salaries in technology sectors, and a higher urge to own a home all contributed to this "he stated

The recent rate cuts by banks, according to Nair, are a welcome effort for homebuyers and will nudge those on the fence towards making a purchase.

According to Nair, the disbursement of housing loans increased 9.2% year over year in August 2021.

"This is a positive indicator, and house loan disbursements will continue to climb in the months ahead," Nair said.

Karnad went on to say that demand for housing and house loans has increased as a result of a number of favourable factors.

"A combination of variables, including as favourable demographics, increased affordability, and India's lowest ever house loan interest rates, are driving demand for home loans," said HDFC MD.

According to Karnad, the real estate market and home financing sentiments have strengthened as a result of the strong recovery in economic growth and smaller employment losses than expected.

"...far lower employment losses than anticipated during the epidemic, followed by a strong recovery in economic growth and attitudes, have resulted in enhanced confidence, which is critical when making one of life's most important investment decisions, such as buying a home," she remarked.

Karnad commented on festive season housing sales and home loan disbursals, saying that the festival season is considered an auspicious period for purchasing a new home and that it improves the Indian real estate industry.

"Having said that, we've seen healthy increase in house loans not just during the holiday season, but throughout the year...," she said.

According to V Swaminathan, CEO of Andromeda and Apnapaisa, banks are hoping to take advantage of the holiday season by giving house loans at historically low interest rates.

According to Swaminathan, the country's housing loan market has recovered, with a year-on-year increase of 9.6% in terms of portfolio outstanding (PoS) in the third quarter of 2020-21.

Meanwhile, Bank of India announced a 35 basis point reduction in home loan interest rates and a 50 basis point reduction in vehicle loan interest rates as part of its festive offer on Sunday, with the minimum rate now starting at 6.50 percent on home loans and 6.85 percent on vehicle loans, down from 7.35 percent previously.

Customers applying for new loans as well as those seeking loan transfers will be eligible for this special rate, which will be in effect from October 18, 2021, until December 31, 2021, according to the bank.

Processing fees for both home and auto loans are also abolished until December 31, 2021, according to the statement.

Conclusion

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