Consecutive increases in interest rates have raised the equivalent monthly installments (EMI) up to Rs 12,000 for those with loans of Rs 1 crore and above.
Considering, for example, a full pass-through of a repo rate hike, the Mumbai home loan of Rs 2 crore, the EMI fell from Rs 159,898 per month before the rate hike to Rs 164,807 in May and now Rs 171,041 in June, according to a report by HEY.
“The bank I got a loan from recently informed me that the EMI will continue to increase based on government rates. This will put additional pressure on the monthly budget for us,” said Ravi Krishnan, who took out a loan of Rs 1.5 crore last year, the financial daily.
Generally, lenders increase the term of the home loan, which keeps the EMI stagnant. It is, however, a good idea to opt for a higher EMI instead of an increased tenure, as the total interest expense becomes much higher if the loan term is increased.
Shishir Baijal, Chairman of Knight Frank, told the daily: “The performance of the broader economy will have a greater bearing on market dynamics for the remainder of the year as it dictates income levels for buyers. of house and demand much more directly”.
Meanwhile, many banks raised interest rates on home loans following the central bank’s decision to raise the policy rate by 90 basis points, in two tranches, to 4.90% in a serious attempt to calm still high inflation.