Will Lower EMI on Home Loans Boost the Residential Property Sales?

If anyone thinks of buying a home then his 2nd thought comes into mind is how to pay the cost of the property, it may be thru self funding i.e. hard earned savings or can take the property loan. I was mesmerizing about the change in last 3 years interest rates on home loans to see the effect on the demand of the property. In the year 2014- 3rd qtr, rate of interest on home loans was approx. 10.50% annually. This rate of interest was almost stagnant from last 3-4 years; there was hardly any change in interest rate. This is the time when real estate industry had significant change, which can be easily observed:

1. Property prices stopped increasing

2. Rate of interest for home loan started reducing

3. Sale of the property in terms of nos. or volumes started reducing, etc.

These are the major points which started happening in realty sector. Demand of the property should increase since there was no hike in property prices & also interest rate for home loans started decreasing but started happening just opposite to everyone expectation. If we see the current rate of interest offerings on home loan is approx. 8.35%-8.50% annually by major financial institutions.

Further if we calculate the EMI on home loan amount for e.g. if someone is taking home loan of Rs. 30,00,000/-, he used to pay EMI of Rs. 29,951/- monthly for 20 years tenure in the year 2014 with the effective rate of interest of 10.50%.And now in 2017 loan holder is paying off Rs. 25,750/- as a monthly EMI @8.35% rate of interest for the same amount & tenure due to whatsoever reason. Calculating the customer’s outgoings for the whole tenure, the difference amount is Rs.10,08,240/-. It means property is cheaper by said amount or we can say customer’s affordability/ eligibility/ purchasing power has increased by more than 10lacs. Even after increasing in customer’s affordability/eligibility/ purchasing power, there is no increase in property demand but it has opposite effect or we can say there is hardly or no demand of residential property. If it is so, we must find the actual reason to regain the status of residential property.

Everyone should know about other/hidden charges while availing for home loans:

You must ask your home loan provider or counselor about above said charges, if possible take it in writings, you never know how will it bounce back and ruin your all financial plannings. Also you must pay attention on terms & conditions (*).

Real estate sector is the 2nd largest employment generator/ provider after agriculture in India & if we won’t able to find the reason & solution, we would be inviting the huge unemployment & worst condition yet to come of real estate industry.

Further we should easily understand the future of real estate industry if it is not taken care, few reputed builders or real estate companies have already filed for insolvency & bankruptcy and many more builders are in queue for same. 60% of the projects have been stopped in tier1 cities and these companies can runaway/ vanish anytime from the market.

I personally feel that there is only one reason behind this worst situation of real estate industry i.e. uncertainties of the market, uncertainties of most of the industries & insecurity of the job. If we can work on these, real estate industry will definitely bump-up. We should also find who is responsible for this situation?

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