Housing Sector Affected by Rising Home Loan Rates

January 22, 2008	(1 votes, average: 2 out of 5)  Loading ...
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The housing sector has been severely affected by rising home loan rates. The sector has witnessed a massive fall of 26.6 per cent in 2006-07 from 29.1 per cent in 2005-06 and is expected to slow down further to touch between 17 and 20 per cent in the current fiscal.

In a study named ‘Impact of rising home loan rates’, by ASSOCHAM revealed the fact. The study also points out that the real estate market has already seen a drop of 60 per cent in sales. Its impact could further worsen if reversal in rising interest rates for housing is not addressed urgently.

Prior to fiscal 2005-06, the preceding three fiscals had seen the housing sector record a year-on-year rise of 49.5 per cent, 73.9 per cent and 48.6 per cent respectively. Since no suitable corrective measures to contain the interest rates on housing segment have been effected, nearly 60 per cent of home aspirants are staying away from the pre-launch sales.

According to the study several projects are being delayed from the developers end because of the hesitancy shown by the buyers end in depositing advance amount at the time of pre-launch bookings. Referring to differential between EMIs, the study says the approximate change in EMI for housing loan of Rs.10 lakh works out to be Rs.3,250 and puts an additional burden of Rs.39,000 per annum on end-users.

The study also says that speculators play a significant positive and negative role in pushing the prices of property by more than 20 per cent and rise in interest rates helps speculators to dictate the prices.

News Published Under:   Home Loans |

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