RBI turn on the heat
The credit policy has brought in selective controls for the housing sector. The requirement of increased provisioning by banks i.e. setting aside a portion of profits to cover possible defaults, residential housing loans along with commercial real estate loans will make them costlier. “RBI has noted the rapid increase in loans to the real estate sector and as much to the housing loan industry. As we are aware there was a 84% increase in credit offtake and this is what RBI wants to slow down until normalcy is reached”, opines Pritam Chivukula, Head Agency, Colliers International.
How will affect the home loan interest rates?
The banks expectedly are going to pass on the cost to the consumer but the rate increase is likely to be selective. “With the provisioning norms being hiked from 0.4% to 1% and with existing liquidity issues, banks will be forced to hike interest rates for home loans esp. for loans over 20 lacs. There is an expected increase between 25-50 basis points”, says Pritam Chivukula.
Banks have not yet jumped into the bandwagon of increasing rates though it seems that they are waiting for each other to break the still waters. Pankaj Desai, Head Retail Assets, Kotak Bank is cautious in his approach, “It is too early. There has not been any change in rates so far but we expect the rates to go up in near future.”
What should be your strategy?
If you are a loan seeker or have a floating rate loan under Rs 20 lacs
You are least likely to be affected. We do not expect home loan rates to increase in this pocket. The rates should remain stable here as the increase in this segment has already taken place and the banks would be not be inclined to touch this bracket.
If you a loan seeker or have a floating rate loan over Rs 20 lacs
Bad news for you. The rates are moving up for this segment however the hike should be about 50 basis point. With RBI asking the banks to slow the credit offtake in this segment the high-end segment is going to be the first where the breaks will be applied.
What experts are saying
Pritam Chivukula, Head Agency
Colliers International
Home loans seekers generally run a home loan for an average of 8-10 years. Thus short term increase in rates should not distract consumers from going for variable rates because over the tenor of the loan the rate will average out in favour of the consumer as India aligns itself to rates prevailing in the developed markets.
Pankaj Desai, Head Retail Assets
Kotak Bank
There are not many options available for fixed rate. We believe that floating rate is a better option since the customer will get benefit of lower rate if rates go down in future. Also, the fixed option will be expensive and there is no sense in committing oneself to higher rate for the entire tenor of the loan.
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