Home loans demand steady rate hike trends defy RBI, thanks to monsoon

RBI has increased the policy repo rate by 1.4% over the past three monetary policies, bringing the rate to 5.4%. In a rate hike scenario, the cost of funds also increases for banks, which therefore pass on the impact to borrowers by increasing their lending rates.

Many major banks and NBFCs have raised their benchmark lending rates, which are linked to the repo rate, over the past three months, also pushing home lending rates higher. Equivalent monthly installments (EMI) have also become more expensive. However, bank credit growth continues to accelerate despite the upward trend in rates.

The latest RBI data shows that scheduled commercial bank (SCB) credit growth jumped to 14.2% in June 2022 from 6% a year ago and 10.8% a quarter ago.

According to a Skymet Weather report on Thursday, in July, India recorded 117% rainfall, while August has so far recorded 111% rainfall.

Monsoon in India runs from June to September. The Skymet report highlights that June is the least rainy month with an LPA of 165 mm (approximately), followed by September with 170 mm of precipitation. July and August are the main monsoon months with LPAs of 280mm and 255mm (appx) respectively

According to the report, the two main monsoon months providing adequate rainfall are not a common feature. In the past 25 years, on only 4 occasions has precipitation exceeded 100% of LPA, during the main monsoon months. Another inference during such episodes is a “normal” or “above normal” monsoon season for the country with total rainfall >/= 100% LPA.

How the monsoon accelerates the demand for mortgages

According to Ravi Subramanian, MD and CEO, Shriram Housing Finance, agriculture dominated states like West Bengal, UP, Punjab, Gujarat, Haryana and MP have strong positive influence on rainfall as well a good monsoon helps to increase their per capita income and in turn, the demand for basic necessities like housing in these small towns increases. Agriculture provides livelihood for about 58% of India’s population. Thus, the last 4 consecutive years of normal monsoons have had a positive impact on demand in the rural economy.

“Coupled with the Indian government’s efforts to propel housing for all, the demand and availability of affordable housing has increased and with this demand for affordable housing loans has had a positive ripple effect. Tier 2 and Tier 3 markets saw a strong rise in housing. over the past 4 years thanks to the positive economic drivers and a good monsoon,” he said.

Furthermore, the CEO of Shriram Housing Finance explained that the government’s efforts for affordable housing have resulted in several affordable housing projects in semi-urban and rural areas. The massive reverse migration following the lockdowns caused by COVID-19 has also led many people to leave cities and return to their hometowns, meaning that reliance on agriculture for livelihoods in the rural India has shrunk. Over the years, reliance on the monsoon alone has diminished with increasing irrigation coverage and non-agricultural centered development.

Meanwhile, Manish Sheth, MD and CEO of JM Financial Home Loans, said, “The monsoon always has a profound impact on the health and growth of India’s agriculture-based economy. in all strata of society. »

Sheth further stated, “With the ‘above normal’ monsoon forecast, particularly in the western and southern parts of the country, we will see a steady increase in per capita income levels. Coupled with growing penetration from the affordable housing finance company in Tier 2 and 3 cities and their ability to assess income, this will pave the way for deserving buyers to own their dream home.”

Explaining the performance of Shriram Housing Finance, which is the 4th largest Affordable Housing Financier in India, Subramanian said, “Our AUM has grown 3 times over the past 3 years to reach ₹6,000 crore today and 60-65% of our home loan disbursements come from non-metro locations on average. The number and value of loan applications saw a slight increase over last year from non-metropolitan areas. The non-metropolitan region contributed 50% of the number of loans disbursed a year ago and today it is close to 70%. Our borrowers in rural India depend on a mix of agricultural and non-agricultural activities. A normal monsoon has a positive ripple effect in our key states of Andhra Pradesh, Telengana and Tamil Nadu.”

In the affordable housing segment, Sheth said, “We are seeing a recovery in demand for housing in Tier 2 and Tier 3 cities as the monsoon and farm incomes are catalysts for home loan growth. Abadi Village Survey and Mapping with Improvised Technology in Village Areas (SVAMITVA) and the current trend of remote working are also driving demand for home loans in Tier 2 and Tier 3 markets and beyond. of the.”

Check out some of the latest home loan interest rates from major banks and NBFCs

Shriram housing finance:

At Shriram Housing Finance, home loans are offered up to ₹1,000,000 ₹10 crore with a tenure of up to 25 years. The interest rate starts at 8.9%. Here, the maximum loan can be used up to 90% of the cost of the property.

Bajaj Finserv:

According to the website, home loans for salaried applicants range from 7.70% to 14%. For independent candidates, the NBFC imposes interest rates of 7.95% to 14%.

LIC Housing Finance:

Earlier this week, LIC Housing Finance raised its prime rate by 50 basis points with effect from August 22. The LIC Housing Prime Rate (LHPLR) is now 15.80%.

On home loans, LIC Housing charged an interest rate of 8.05% on loans up to ₹50 lakh and 8.25% on over ₹50 lakhs to ₹2 crore for employees and professionals who have a CIBIL score greater than or equal to 700, are eligible for these rates.

However, LIC Housing offers an interest rate of 8% on home loans greater than or equal to ₹10 lakh with a CIBIL score of 700 or above.

SBI home loans:

As of August 15, on regular home loans, SBI charges 8.05% on borrowers with a CIBIL score greater than or equal to 800. While the rate is 8.15% on credit scores 750-799, the rate is 8.25% on credit scores 650-699, and the rate is 8.35% on CIBIL scores 650-699.

The bank levied 8.55% on borrowers with a credit score of 550-649. The rate is 8.25% for borrowers with NTC or 101-200 credit scores.

There is a 0.05% concession available for female borrowers subject to a minimum EBR of 8.05%.

HDFC Bank mortgage rate:

The retail prime rate (RPLR) of the largest private lender is currently 16.05%.

On home loans up to ₹30 lakh, the bank offers an interest rate of 8.10 to 8.50% for salaried women and 8.15% to 8.55% for others.

In addition, on home loans from ₹30.01 lakh to ₹75 lakh, the rate is 8.35-8.75% for employed women and 8.40-8.80% for others. While the rate is 8.45-8.85% for female employees and 8.50-8.90% for others with mortgages greater than ₹75 million.

These interest rates are 10 to 15 basis points higher for self-employed borrowers.

ICICI Bank home loan interest rates.

For salaried borrowers choosing home loans up to ₹35 lakh, the bank has interest rates between 8.10 and 8.85%, while the rate is similar on the loans above ₹35,000,000 ₹75 million. However, the rate is 8.10 to 8.95% on loans above ₹75 million.

RR is the lending rate linked to the repo rate.

While, for self-employed borrowers, the private banker charged a rate of 8.20 to 9% on home loans up to ₹35 lakh and above ₹35,000,000 ₹75 million.

However, the rate varies from 8.20 to 9.10% on loans above ₹75 lakh for self employed.

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