Affordable Housing Buyers’ EMIs Jump Over 20% in Last 2 Years
- Floating interest rates for home loans up to INR 30 lakh shot from 6.7% in 2021 to 9.15% as on date
- Home buyers paying EMI of approx. INR 22,700 in July 2021 now shelling out approx. INR 27,300 – up approx. INR 4,600 per month, or 20%
- Overall interest amount up by approx. INR 11 lakh in the period – from approx. INR 24.5 lakh in 2021 to approx. INR 35.5 lakh currently
- Total interest payable for a tenure of 20 years now exceeds the principal amount
- Interest rate growth reflects RBI repo rate hike of nearly 250 bps (from 4% to 6.5% as on date) showing direct correlation b/w repo rates & floating home loan rates
Mumbai, 2 August 2023: In the Indian residential real estate market, affordable housing suffered the greatest impact of the Covid-19 pandemic – and unlike the other segments, has not recovered in the last two years. With buyers of this segment increasingly desisting from purchase decisions, affordable housing sales are languishing, and developers have accordingly curtailed its supply.
A recent report by ANAROCK finds that the share of affordable housing in overall sales in H1 2023 shrunk to approx. 20% – an 11% decrease against the corresponding period in 2022. Likewise, in the top 7 cities, this segment’s share in the overall housing supply in H1 2023 plunged to 18%, against 23% in H1 2022.
The mounting desolation is not helped by the fact that affordable home buyers have been paying almost 20% more in their EMIs over the last two years. The floating interest rates for home loans up to INR 30 lakh have jumped up from 6.7% in mid-2021 to nearly 9.15% today.
Prashant Thakur, Regional Director & Head – Research, ANAROCK Group, says, “Home loan borrowers who were paying an EMI of approx. INR 22,700 in July 2021 are now paying approx. INR 27,300 today – an increase of approx. INR 4,600 per month. This 20% increase in the EMI has resulted in a jump of approx. INR 11 lakh in the overall interest component – from approx. INR 24.5 lakh interest payable in 2021 to approx. INR 35.5 lakh today.”
The total interest payable over a 20-year tenure is now more than the principal amount. If a buyer seeks to buy a property worth <INR 40 lakh, factoring in the LTV (Loan to value) ratio, the total borrowed amount is INR 30 lakh for a tenure of 20 years. In this scenario, the buyer would have paid an EMI of INR 22,700 in 2021, when the interest rates stood at approx. 6.7%.
“At this rate, the total repayment to the bank was approx. INR 54.5 lakh, of which the interest component was approx. INR 24.5 lakh – less than the total principal amount,” says Thakur. “Today, when home loan interest rates hover at around 9.15%, this buyer’s EMI is approx. INR 27,300. The total repayment to the bank at this rate is now approx. INR 65.5 lakh, of which the interest component will be approx. INR 35.5 lakh – more than the total principal amount.”
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Affordable Housing Buyers’ EMIs Jump Over 20% in Last 2 Years
