The Impact of Home Loan Interest Rates on the Indian property market

It is every person’s dream to buy a house that they could call their own. To many people, they aren’t just some simple bricks and walls but so much more than that. However, the gap between the income of the people and the cost of living is quite high and this rift is expected to increase even further. Thus, it is almost impossible for the people of working classes to buy a piece of property for themselves with the help of their savings. Thus, for many of the people, the dream of owning a house never transforms into reality. However, unlike the earlier days when the people had no other support other than the traditional financiers; there are now a number of banks and NBFCs (non-banking financial companies) providing assistance to the people by lending them money. The home loan interest rates provided by banks and NBFCs (non-banking financial companies) are much lower than those provided by the traditional financiers. These are the reasons because of which the impact of home loans has grown in the property market.

Ganesh is one such example of the people whose lives have been made better by home loans. Living in a rented apartment for most of his life, he always dreamed of buying his own house someday. However, the income that he earned and the capital that he had saved wasn’t substantial enough to cover the total amount required to buy a property in India. After getting suggestions from his family and friends he finally decided to apply for a loan. He approached the lender with a little hesitation, however, soon all his doubts were cleared and he finally used the loan money to buy a property. He now owns a house that he can call his own.

Some of the interesting facts regarding home loans are:

• ·         Importance of credit score: If a person’s credit score is bad or not up to the requirement, then that person is not eligible for a home loan. The credit score is affected by one’s repayment history towards previous creditors.
• ·         Income factor: The income that a person earns plays a major part; as the amount of loan that a person is eligible for is directly proportional to the amount of money that he earns. So, the higher the income of a person, the more amount of loan he is eligible for.
• ·         Tenure: The longer the tenure, the less the amount of strain one faces while making repayments. Thus tenure plays an important part in home loans.

What are the home loan interest rates in India?

The home loan repayment is done in a flexible form. This flexibility is provided by the EMIs (equated monthly installments) and the long tenure for repayment provided by the lenders; banks and NBFCs (non-banking financial companies). The home loan interest rates are the interest rate one principal amount borrowed by that person. The interest rates for banks and NBFCs (non-banking financial companies) are lower than those provided by traditional financiers. There are many financial institutions which provide these loans at lower interest rates for women. This has resulted in the increase in the number of people applying for a loan. Hence, the home loan interest rates have affected the Indian property market as there are more people investing in the properties with the help of loans.