If anyone is planning to buy a home in the near future, the current economic situation is considered favorable. On one hand, the Reserve Bank has reduced the repo rate, while on the other hand, the pace of property price appreciation has also slowed. This means that buyers are getting cheaper loans, and home prices are not rising as rapidly. Consequently, entry for new buyers has become easier than before.
Home Loans Become Cheaper
The repo rate is the rate at which the Reserve Bank lends to banks. When this rate is lower, banks’ funding costs decrease, allowing them to lend to customers at lower interest rates. Therefore, the repo rate influences the interest rates on home loans, car loans, and personal loans. Last year, the RBI provided significant relief by reducing the repo rate from 6.50% to 5.25%.
Over the past year, the repo rate has experienced a significant decline, resulting in a reduction of the EMI burden for home loan borrowers. This situation is particularly beneficial for those with floating-rate loans.
EMI Benefits
To illustrate, a home loan of ₹50 lakh initially taken at an interest rate of approximately 8.5 percent for 30 years would result in an EMI of over ₹38,000 per month. Now, with the interest rate reduced to approximately 7.25 percent, the EMI could be around ₹34,000. This means savings of over ₹4,000 per month are possible. These savings could amount to over ₹50,000 per year, proving to be a significant benefit in the long run.
Experts’ Opinion
According to experts, the full benefit of the repo rate cut is only available to those with floating-rate home loans directly linked to the repo rate. Those with fixed-rate loans do not receive immediate relief. In such a situation, if someone’s loan is carrying a high interest rate, they can take advantage of a lower interest rate by transferring the balance to another bank.
Property Price Rise Slows
Real estate sector data shows that home price growth in major cities has slowed compared to previous years. While prices had been rising in recent years, the growth has now slowed. This has made home purchases easier for new buyers.
In some major cities, annual property price growth was once quite high, but now it has become quite limited. Additionally, many cities have experienced a decline in home sales, resulting in a more balanced market.
Could buying a home currently be beneficial?
Low interest rates, controlled property prices, and competition among banks are three major factors that are benefiting home buyers. If interest rates rise again in the future or property prices rise rapidly, buying a home could become more expensive. Therefore, many experts consider the current period a good opportunity.
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Rohit P
My name is Rohit Pal, and I have been working in the field of journalism for the past five years. During this time, I have written on a variety of topics, including business, automobiles, technology, and politics. I have worked with several major organizations and am currently working with Timesbull.
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