Nagpur: The pandemic period has seen a push for affordable housing in the city. The rise in interest rates should affect the monthly budget of buyers in this segment, real estate professionals believe.
In Nagpur, a typical loan size in an affordable house preferred by the low and middle income segment ranges from Rs12 to Rs30 lakh. There are also more expensive homes in the segment for technical reasons, sources in the real estate industry said.
Home loans were available at 6.5% interest before the hikes. At this rate, the EMI per lakh came to Rs745 for a typical duration of 20 years. “If rates are raised to 7.4% after the hike, the EMI would be Rs 800 per lakh for a loan with a repayment period of 20 years,” said Deepak Trivedi of Bhagwati Consultants.
For a Rs12 lakh loan, the EMI increases to Rs9,600, an increase of Rs660 from the previous installment. The spread increases with the amount. Those with an Rs30 lakh loan may have to shell out an additional Rs 1,650.
“Majority of buyers in this segment have an income level below Rs 50,000 per month. Any increase can upset their budget,” Trivedi said.
Ranjit Dani, a financial consultant, also said the pandemic has seen an increase in people buying affordable or low-cost homes. “Although there were also buyers who had factored in a likely rate hike in the future. Low-cost home buyers who normally need to stay frugal may feel the heat,” Dani said.
The consultants say the majority of lenders don’t give borrowers the option to change the EMI or mandate. On the contrary, the mandate is immediately modified. According to experts, it is always advisable to increase the EMI, not the duration.
“If the tenure is increased, the amount allocated to the principle reduces and also increases the borrower’s overall expenses at the end of the tenure,” Trivedi said.
Low interest rates, subsidies and stamp duty rebates have enticed many people in the low and middle income segments to buy a home. Given the hassles during the pandemic, people falling into the income brackets also thought about buying their own homes as EMIs were almost the same as rent.
Sunil Duddalwar from Himalaya Builders also confirmed that there is a push in this segment. Agreeing that EMIs could increase, Duddalwar said no major impact was seen on demand. “Even existing buyers would be able to easily absorb the impact. Affordable housing prices vary with distance. Properties in the inner circle of the city range between Rs30 lakh and Rs40 lakh,” he said declared.
Gaurav Agrawalaa, secretary of the Confederation of Real Estate Developers Associations of India (CREDAI), said the impact of the EMI would be marginal compared to the rise in prices of other items. “In addition to affordable homes, the sale of properties in all segments has increased and demand is expected to remain,” he said.