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No hopes on softer interest rates
It is common knowledge that the much feared correction in property market is finally here, and from a buyer’s point of view, it is good news as prices have got more realistic. While prices are moving downwards on the property front, the same cannot be said on the loans front. Banks are either sticking to old interest rates or are offering discounts only on loans with respect to certain properties. Going forward, there is not much hope for softer interest rates at lea
st in the short term, owing to inflation.
As you are aware, there has not been much good news from this segment in the last couple of weeks and in fact, the inflation has surged towards the 6 per cent mark. In reality, this percentage is even a tad higher and naturally, is well above the comfort level. While the Reserve Bank of India has taken inflation management as one of the key issues for itself, there has been growing consensus among economists that the (average) benchmark rate is unlikely to move below 5 per cent in 2008. That is not very comforting news for home loan borrowers.
An average inflation of rate of over 5 per cent means a moderate interest rate regime for consumers and hence for those looking to invest in property, it means a higher outgo. Already, EMIs which were in the range of Rs.1,000 per lakh (for 15 year loans) have moved to over Rs.1,100. Hence, home loan seekers will have to strike a balance between their EMIs and cash flows.
One of the simplest options is to keep the EMI low so that it does not strain your monthly income. Unfortunately, it is not such a simple task as most of us go in for loan because we do not have the resources to fund it through savings.
SRIKALA BHASHYAM
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