Property prices are softening, festive season is on the cards and a bouquet of offers is at your disposal, but is there something which is still holding you back?

Property prices are softening, festive season is on the cards and a bouquet of offers is at your disposal, but is there something which is still holding you back?

A recent survey conducted by Magicbricks.com reveals that high interest rates on home loan are the biggest barrier when it comes to making a decision on buying a residential property for self-use.

Every second respondent who participated in this pan-India survey said that they could buy property in the next 6 months but the high rates of interest on home loan are the biggest deterrent for them.

The impact is just not limited to the current interest regime. Three out of every ten respondents said they are apprehensive that the interest rates may hike further. The home loan rates in India, at present, float in the range of 10 to 11.50 per cent.

“With home loans having gone up now, home buyers might continue to remain cautious and delay their purchase decisions further,” said Anshuman Magazine, chairman and managing director, CBRE South Asia Pvt. Ltd. On the whole, demand in the real estate market is expected to remain subdued over the remainder of the year, he added.

Apparently, a home buyer wants to keep his liabilities as low as possible. A slight hike in the interest rate disturbs the monthly budget of a middle-class family in a big manner.

Consider this: Home loan interest rates are increased by a moderate-looking 0.25 per cent, from 10 per cent to 10.25 per cent. The impact: An addition of Rs 17 per lakh on a repayment period of 20 years. Now, given the current prices, an average 2BHK apartment in a tier-I city (and many tier II cities) costs Rs 50-90 lakh and a hike of Rs 17 per lakh translates into a monthly outflow of Rs 850 on a Rs 50-lakh home loan. This when coupled with the increasing cost of living creates a deep hole in the pocket of a common man.

According to Lalit Kumar Jain, chairman, Confederation of Real Estate Developers Associations of India (CREDAI), the Reserve Bank of India (RBI) shall take a fresh approach towards real estate, particularly from the home buyer’s point of view.

The RBI, in view of taming the inflation and squeezing excess liquidity from the market, has taken tough stance with respect to monetary policy. The recent steps have although worked in the favour of macro-economic environment; also controlling the fall of Indian Rupee against the US Dollar.

At the ground-level, an average home buyer by and large is preferring to sit around the fence and wait till the interest rate regime starts moving in the favourable direction.

Under its second quarter monetary policy review on 29 October 2013, the apex bank increased the repo rate by 25 basis points to 7.75 per cent. This is the second such hike in a period of one and a half months.

The RBI, on 20 September 2013, had raised the repo rates by 25 basis points, from 7.25 to 7.50 per cent, under its mid-quarter monetary policy review, released on 20 September 2013.

Vikram Jethwani, Magicbricks.com Bureau