Would Home Loan
RATE OF INTEREST
Impact the growth of HFC's
- On the face of it looks like "Not really".
- The repo rate going-up by 0.5% would mean increasing in home loan rates prevailing in the range of 6.90 % - 7.30 % to 7.40 - 7.80 %.
- If we consider tenure of 240 months, the increase in EMI may just go up Rs.31 per lakh per month. It may look reasonable for existing customer.
- It still looks like the golden era of 2000 to 2007 of 7.25 or 7.75%.
- I am sure some of the smart people would have also taken loans at fixed rate at that point of time.
What about the affordable segment?
- Well, it is easy to say that the segment may not be price sensitive as access is more important than the ROI.
- The calculation of EMI per lac at 14.50% and 15% for twenty (240 months) shows an increase of Rs.37 per month. An increase of Rs.370 per month on ten lakh can pinch the family.
- Would they rework family expenses? Have we seen the savings capacity to absorb this increase?
However, the cause of worry would be the increase in tenure of the loan and surely this would have moved beyond the retirement age or the norms of the financial institution in the salaried segment and in self-employed segment considering the fact that the loan amount would have been given considering the maximum allowable tenure.
The bigger concern is the stretch the families may face with the inflationary situation prevailing at this point of time.
Going forward ,should the appraisal look at the prevailing rate of interest or should actually look at 0.50% - 1.00% increase in the pricing that may come in next 12-36 months and the possibility of tenure breach and the impact of savings of the family.
At this point of time expecting the cost of construction to be stable would be fool hardy. It is important to educate and protect the future of the customer life cycle. One can argue the positive impact of downward cycle that may happen, but the question is can we predict?
