This Diwali, home loans demand is likely to accelerate despite EMIs getting costlier. Here’s why

It needs to be noted that during the festive season, home buyers tend to invest in properties. The upcoming festival is expected to be no different especially currently when the real estate sector has made a strong comeback after the pandemic. Buying affordable homes is likely to pick up momentum. Home loans are one of the mediums for buying a dream house as they eliminate the need for lumpsum cash. Home loans have flexible tenures and reduce the burden of gathering hefty cash to buy houses since you can repay your dues via equated monthly instalments (EMI). Also, there are tax benefits of ₹1.5 lakh applicable on your home loan principal amount under section 80C of IT ACT, among others.

This fiscal year FY23, RBI hiked the repo rate by 190 basis points in the four consecutive policies to 5.9% which forced banks and NBFCs to hike home loan interest rates making EMIs costlier. However, the demand for affordable housing stays robust and the festive season is likely to set a path for strong growth in the sector.

The 5-days Diwali festival will begin on October 22 with Dhanteras followed by Lakshmi Pujan (Main Diwali) on October 24 and to end on October 26 with Bhai Dooj.

According to Sahil Shah – Director, Investments at Certus Capital and Earnnest.me., the real estate sector has made a tremendous comeback after the pandemic. CY2022 is shaping up to be one of the best years for residential sales in almost a decade after prices remained practically flat, in real terms, between 2015 and 2021. Another factor driving people to buy homes is their experience during the lockdown when they were restricted to staying within four walls.

Shah added that “Today, most are looking to buy/upgrade to the best home they can afford. COVID-19 also shifted the focus towards spacious homes, away from densely packed cities. For the more affluent / HNI segment, second homes have emerged as a sought-after option, both from an investment and long-stay use perspective. Finally, there is a certain migration from tier 1 cities to tier 2, as certain sectors embrace, especially tech, embraced remote working.”

Meanwhile, Manish Sheth, MD & CEO, of JM Financial Home Loan believes there are factors that will spark stronger demand for housing loans in the upcoming festive period. He said, “We need to understand that as the Indian economy bounces back above pre-covid levels of activity, the same trend will be seen with consumer spending.”

“We can expect more Indians to be splurging on essentials that will include homes. Homeownership has become a necessity rather than a luxury. If we are to analyse credit growth rates across the different geographies and sectors in India today, it is clear that we are at the start of a long-term upcycle and it seems improbable that demand will wane anytime soon. The monsoon this year has been good and the mood is upbeat among upcountry consumers as well,” Sheth added.

“All these factors will fuel stronger demand growth in housing loans in the upcoming festive period,” JM Financial Home Loan CEO said.

Furthermore, Ravi Subramanian, MD, and CEO of Shriram Housing Finance highlight that the festive cheer is back after 2 years with consumer sentiment being upbeat this festive season. The real estate sector has seen a buoyant demand in the post-pandemic era.

Subramanian said, this trend seems to continue gaining momentum during the upcoming festive season when buyers tend to invest in properties because it is considered to be an auspicious period for home buying. Further, riding on the wave of sustainability and prospective investment, the secondary housing segment has emerged as a sought-after option for buyers. Buyer behaviour across cities have changed and the preference to buying vs renting is a trend we have seen take prominence. Many home buyers due to WFH and flexible working hours have moved to larger premises.

Also, the Shriram Housing Finance CEO added, “We are seeing a consumer shift, where buyers are keen to upgrade from 1 BHK to 2 BHK and 2 BHK to 3 BHK. Further, with flexibility in the place of work, we are also seeing consumers buying or upgrading their residences in their home towns, thus driving up demand in tier 2 and tier 3 cities for affordable home loans in the country. The confidence in future earnings, coupled with the pandemic-induced importance of homeownership, will continue to drive residential sales this festive season in Tier 2/3/4 cities. Shriram Housing Finance is among the top 5 affordable housing finance companies in India and we are expecting demand for affordable home loans this festive season to be 25-30% higher than the last 2 years.”

Here are some of the major banks’ and NBFCs’ home loan rates

SBI home loan rates

SBI is offering a concession of 15 basis points to 20 basis points as a festive campaign offer between October 4, 2022, to January 31, 2023. Under the campaign, the interest rate varies from 8.40% to 9.05%. This is compared to normal interest rates ranging from 8.55% to 9.05% on home loans.

The interest rates are on regular home loans and will depend upon a borrower’s CIBIL score.

ICICI Bank home loan rates

After RBI hiked the repo rate by 50 basis points to 5.9% on September 30th, ICICI Bank followed by increasing its benchmark lending rate.

Currently, a salaried employee at ICICI Bank pays interest rates from 8.60% to 9.35% on home loans up to ₹35 lakh, and from ₹35 lakh to ₹75 lakh. On home loans above ₹75 lakh, the rates vary from 8.60% to 9.45%.

The interest rates are higher by 10 basis points to 15 basis points for home loans to self-employed borrowers.

HDFC home loans interest rates

This NBFC giant offers home loans starting at 8.4% per annum to a maximum of 8.90%. The interest rates are applicable to Home Loans, Balance Transfer Loans, House Renovation, and Home Extensions Loans.

Further, under standard home loans, the NBFC offers 8.60 – 9.10% and 8.65 – 9.15% to women and others on loans up to ₹30 lakh. The rate of interest is between 8.85 – 9.35% for women and 8.90 – 9.40% for others on home loans between ₹30.01 lakh to ₹75 lakh. Meanwhile, on home loans from ₹75.01 lakh and above, the interest rates are 8.95 – 9.45% for women and 9.00 – 9.50% for others.