Home buyers looking for flats on the outer fringes of Mumbai and other cities like Nashik and Pune will benefit the most from the reduction in the interest rates by public sector banks on Monday.
Public sector banks announced that home loans up to Rs 5 lakh would be given at a maximum interest rate of 8.5%, while those between Rs 5 lakh and Rs 20 lakh would be offered at 9.25%.
“The Mumbai market will not be affected by this decision as no flat in the city is below Rs 20 lakh. For larger metros, the limit should have been set at Rs 50 lakh,” said Boman Irani, chairman of the Rustomjee Group, which is setting up middle-income housing projects in Virar and Thane.
According to him, more than 50% loans given out by banks are for homes less than Rs 20 lakh. “This decision is for the entire country. But it would have given a bigger boost if housing projects in the metros had benefited,” he added.
Said Anshuman Magazine, chairman & managing director, CB Richard Ellis, South Asia: “This shows some effort by the government to support the housing market. Although this is expected to have some impact on the market, it won’t be a significant one as the overall confidence level of consumers to invest has to improve.”
However, he added that this reduction won’t have a significant impact on the real estate market. “It would have made a larger impact if the limit had been increased to Rs 40 lakh. Besides, confidence levels are lacking and consumers are waiting for prices to correct. The overall sentiment is down,” he added.
Mumbai-based developer Pujit Agarwal said over the past four years when the market was booming, most developers had stopped catering to the lower income group and were only concentrating on high value products. “The interest cut will lead to a flurry of developers catering to this segment now. Developers are already going back to the drawing board to make smaller flats.”
Chairman of Maharashtra Chamber of Housing Industry (MCHI) Pravin Doshi said EMI were becoming unaffordable because of high interest rates and this decision will help ease the burden. “It will benefit consumers in Dahisar, Mira Road and Virar. But in Mumbai it will not make any difference,” he said.
Pravin Banavalikar, CEO of Tanaji Malusare City, which is setting up a low-cost housing project in Karjat, said the reduced interest rates have come as a big boost. “We are constructing flats costing between Rs 2 lakh and Rs 7.5 lakh. This comes as a big relief for clients in the lower income group,” he said.