PANAJI
Having a home of their own is the dream of most families in India and people strive hard to achieve this dream. But the hike in the interest rates of home loans by banks, will adversely affect the buyers.
Now the home loan consumers will have a bigger hole in their pockets, as the instalments they are already paying would also be higher. The new buyers would also shy away from chasing their dream of owning a home.
As it is, the real estate and construction industry is facing multiple issues and is battling on several fronts. Add to this the rise in the prices of land, especially in Goa, which would make it a distant dream to have a home.
The Reserve Bank of India (RBI)’s announcement of hike in repo rate by 40-basis point will affect all floating rate home loans. Following this the public sector bank, Bank of Baroda (BOB) increased its interest rate on home loan from 6.5 % to 6.9 % along with Bank of India administering the similar hike.
HDFC has increased its prime lending rate by 30 basis points. Federal Bank’s home loan interest rate has gone up from 7.65% to 8.05%. There are five banks that are offering lowest home loan interest rates “ Bank of Maharashtra (6.8%), Punjab & Sind Bank (6.6%), Bank of India (6.85%), Punjab National Bank (6.5%) and Kotak Mahindra Bank (6.6%).
Commenting on the hike in the interest rate on home loans, noted real estate developer from Goa, K Kulsekhar states that it is very unfortunate. “The prices of homes have gone up by 15-20 % from pre-lockdown period to the current post-Covid period,” he says.
The construction industry has been facing several issues and the Covid pandemic, followed by the lockdown and even the post-lockdown period has been very crucial, admits the real estate developer and explains the difficult phase during the lockdown when construction workers left for their hometowns in the absence of work.
As the life is limping back to normalcy and industries gearing up to make up for the losses post Covid, the real estate business was hoping to come back to track, but the prices of the construction material shot up due to the shortage of raw materials, and this again, reflected in the prices of homes and apartments, points out Kulsekhar.
On the other hand former president of Goa Chamber of Commerce and Industries Nitin Kuncolienkar, reasons that the rate of interest in home loans have gone up due to the inflation in the system which compel the rate revision.
“Banks too have to maintain their costs and funds and obviously this is a result,” says Kuncolienkar. However, he raises the point that this will impact the salaried class more.
“The government salaried class gets dearness allowance, while the private working class and business people do not avail this facility. As the rate of interest keeps fluctuating in home loans, the impact will be on most of the people who have already taken loans and paying instalments. Their instalments will be higher and salaries same, so the drain will be on the cost of living and savings.”
If the homes are pricy with their rates going up, the demand naturally, will fall, as the investors will wait for one or two years to buy an apartment till the rates come down.
This would defer the buying of homes or flats, feels Kuncolienkar. Thirdly, he points out that the hike in the steel and cement prices have resulted in higher construction cost which is understandable.
“But let’s not forget that the construction industry is also grappling with highest level of corruption at all levels, from the purchase of the land to approval process. The legal and illegal costs are high and the government has to come down heavily to curb the corruption at all levels. If the government brings down the corruption rats, it will help the industry,” says the youngest and longest serving president of GCCI.
