Developers expect home loan interest rates to fall

Credai hopes banks will reduce repo rates by at least 2%, which will push down home loan interest by at least 7%

The developer community has said that one positive impact of the demonetisation will be that banks again will be flush with liquidity of approximately Rs15 lakh crore and will be compelled to lend aggressively. To do that, they will have to lower interest rates. Demonetising currency has also removed surplus liquidity from the market, which is likely to result in reducing inflation.

Credai wants home loan interest rates to be brought down. (Abhinav Saha/HT Photo/Picture for representational purpose only)

“We expect that the RBI will definitely, in the coming months, reduce repo rates (rates at which RBI lends money to banks) by at least 2% so that a home loan can be brought down to at least 7%. With the home loan rates coming down to such levels of sub 7% in the next year or so, the atmosphere will become more like in the West where home loans are available at 5% and below,” Credai, the umbrella body for real estate developers has said in a statement.

India has a documented shortage of housing and an aggressive domestic demand for real estate. This essentially means that in the presence of a lower home loan interest regime, a larger pool of homebuyers will be able to avail loans to buy the homes they always wanted. This could be made possible in as soon as the next six to 12 months.