Home loans will remain cheap for a little longer

• Home loans, which are already at their lowest level in the last 10 years, will continue to remain at lower rates.
• As a result, shares of housing finance companies rose on expectations of strong demand to continue resulting in more sales.
• Here is an explanation on why mortgage loan rates will remain low.

It is an icing on the cake for people looking to buy a house on equated monthly installments (EMI).

While home loan rates are already at a decade low, it will now continue to remain lower for some more time.

This is because India’s central bank, on Thursday, decided to keep the interest rates for banks unchanged at 4%. The decision to not raise interest rates benefits home loans as housing finance companies or banks that offer home loans are directly linked to interest rates for banks as per the Reserve Bank of India (RBI) mandate.

Basically, this means that if interest rates are not increased, home loan rates will also not rise and banks will continue to offer at current rates.

Most banks are currently offering home loans starting at an interest rate of around 6.5%.
The continuing low rates has brought strong demand for housing finance companies whose core business is to offer home loans.

One of the largest lenders HDFC addressed that demand for home loans and pipeline of loan applications continues to remain strong. “The increasing sales momentum and new project launches augurs well for the housing sector,” said HDFC in its latest quarterly earnings results.

As a result, shares of housing financiers rose on expectations of doing good business as demand continues because of low home loan rates.
Besides, analysts say this is also positive news for real estate companies as there will not be any hike in home loan rates. Currently, home loan rates are between 6.5%-7%, this is one of the lowest home loan rates in history. We continue with our buy call on Sobha Limited and Oberoi Realty with a target price of ₹1060 and ₹1250 respectively,” said Yash Gupta, equity research analyst at Angel One.

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