High Home Loan Rates Can Bring Down Property Rates Article

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High Home Loan Rates Can Bring Down Property Rates

High home loan rates can bring down property rates. The statement may sound ironical as well as unbelievable but it is true. It does so by persuading builders to bring down prices.

Author: Aditya Jaiswal

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High Home Loan Rates can bring down property rates. The statement may sound ironical as well as unbelievable but it is true. It does so by persuading builders to bring down prices. The Reserve Bank of India (RBI) measure of higher provisioning for home loans above Rs 20 lakh was done to cut seconds home investments. The apex bank wants to keep investors at bay from the real estate sector.

Increasing interest of investors in buying properties in India especially in Mumbai, Delhi, Pune, and Bangalore is believed to be a major factor pushing property prices. These cities are generally the investors’ favorite. And, easy availability of home finance can be seen as another factor for the same.

Investors buy home loans to invest in properties located in nascent cities and then hold on to them for a while till the property rates start soaring. Once they rose, the investors sell them for a profit, thereby making a good killing. Contrary to this, end users tend to buy home for purely the living purpose, regardless of how much its value appreciates.

In a buoyant market like Indian real estate, rates of properties increase faster than the cost of funds. In the present scenario, if capital appreciation in certain locations goes a little more than the interest cost, the investor considers investing in properties through home loan beneficial.

The trend can easily be figured out in metros like Mumbai and other cities. Real estate prices recently hold steady in South Mumbai and has gone significantly in areas such as Vashi, Panvel, and Kharghar. Property developers here are offering good discounts of up to 16% on the property price they quoted earlier.

About Author

Aditya Jaiswal, advisor of home loans for NRIs, is an associated editor with the site: http://www.guide2homeloan.com. The site is an online portal to provide home loan advice on home loans in India including types of home loans in India, home loan interest rates in India provided by home loan providers in India.

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