The COVID-19 pandemic resulted in a huge hit in the residential real estate industry. Not all is gloom and doom in the real estate sector, as even before the pandemic, the sector was weighing down on the supply side. Due to delays in projects and a high debt burden, it put off potential customers generating negative headlines. As the overall economy slowed down, consumers also witnessed slow income growth.
However, since the last three quarters, the demand for residential real estate has improved. A couple of factors attributed to this swing are:
- Home prices have not grown much and have instead eased. The RBI’s home prices index states an average fall by 1% in the third quarter of 2020.
- The RBI has cut its repo rate by approximately 115 bps in the previous financial year to boost the economy. This has led to an overall drop in interest rates.
- Currently, several incentives are being offered to potential homebuyers. Incentives in the form of “No equated monthly installments (EMIs) until possessions” have steadily boosted home buyer demand. On the other hand, states like Maharashtra have temporarily cut stamp duty. It was implemented in two phases between September 1, 2020, and March 31, 2021.
Reasons why purchasing an apartment in the current real estate market could be affordable
For first-time homebuyers or consumers looking forward to an upgraded lifestyle – the current market scenario could prove to be an ideal time. Looking purely from a financial standpoint, the two core factors working in sync for the favor of homebuyers are – subdued residential prices and low cost of credit.
The RBI’s repo rate now stands reduced and will continue to remain low as RBI is supporting an easy monetary policy to face the economic challenges. This low policy rate has encouraged banks and financial institutions to offer a low lending rate regarding home loan interest rates. This low home loan interest rate has highly motivated individuals to opt for home loans and fulfill their long-standing desire of buying a house.
The home-loan interest rate dip is the lowest in the last couple of decades. Further, some leading banks are offering home loan interest rates in the range of 6.25 to 6.65%. Lower home loan interest rates translate to lower EMI payments for the borrowers.
Let us consider an example- A borrower takes a home loan with an interest rate of about 6.65% for a term of 10 years and the principal amount of the home loan is Rs. 50 lakhs, then the EMI calculates to approximately Rs. 33,000/-. This amount is about Rs. 12,000/- less than a home loan interest rate with a regular 9% interest rate. Calculating the overall home loan interest rate savings of this entire transaction comes to a whopping total of Rs. 14.4 lakhs approx.
There is excellent convenience involved while opting for a home loan. Individuals can check the companies’ websites and compare home loan interest rates. There is a free home loan EMI calculator available where once primary data regarding the home loan plan is input, it then provides the cost to be borne by the borrower. It helps to arrive at a home-loan decision conclusion. The home loan EMI calculator is easily accessible and simple to navigate. With facilities like doorstep service and zero processing fees, a home loan option is enticingly doable. It is due to these attractive facilities, individuals are foreseeing the fulfillment of their dream. Hence, due to the above factors, today, purchasing an apartment has become affordable.