Why Home Loan Interest Is Too High for Indian Buyers?

A recent survey carried out by the Indian Mortgage Guarantee Corporation IMGC-Kantar IMRB showed that high housing loan interests and lack of savings are factors that discourage Indians to own a house. According to the survey, borrowing money is another constraint for people that prevents them from investing in a new property. The survey also revealed that the younger generation (25-44 years) is keen on buying affordable houses in smaller towns than metropolitan or mini-metros.

Conducted in two phases, this survey had a sample size of about 4,100 respondents from towns, mini metros, and metros. These respondents were people who had opted for a home loan. The age group was segregated into 25-34, 35-44, and 45-55.

At the launch of the report the MD & CEO of National Housing Bank, Sriram Kalyanraman said, "Housing sector is poised for higher growth, especially in affordable housing segment by the Housing-for-all by 2022 Mission and infrastructure status accorded by government, apart from various other measures,"

As high as 38% participants of the survey had the same opinion that the home loan interests are too high. An equal number of people gave the reason that their savings aren't enough to meet the expenses of buying a new home. Other factors listed in the report were higher property rates and insufficient loan availability.

The report also pointed out that home ownership delays are being caused due to high dependence on personal savings to pay for down payment.

When questioned about the progress on Housing-for-all, Mr. Sriram Kalyanraman addressed by saying that apart from the government lending and loan subsidies, many other private developers launched projects under affordable housing. He added, "The full data has to come from private sector. Once we take it, I think we will surely be in line with Housing-for-all by 2022." Furthermore, he shared that presently small-sized houses of about 500 square feet are in great demand.

It is also believed that demonetization has led to a fall in the property prices. This fall is indicative that it is the right time to invest in properties in various cities. Buying apartments in Bannerghatta Roads, Bangalore, or residential properties in OMR, Chennai, or apartments in Hyderabad will become easier for the public.

Mr. Sriram Kalyanraman also believes that prices are sure to come down and demonetization has helped a lot of clients. In addition, there is far more transparency in the buying and selling of houses in the INR 15-20 lakh segment.

The report also stated that many Indians still live with their parents, than in a rented place or self-owned house, which shows their financial dependence. Amitava Mehra, the CEO of IMGC said, "There is a gap in the market. These can be managed to a large extent by mortgage guarantee backed loans. With availability of higher loan to value (LTV), Indian home buyers can achieve their home buying dream by not relying solely on personal savings."

This is a guest post by Dinesh Dawde.