There has been a pick-up in retail credit, says Renu Sud Karnad, Joint Managing Director, HDFC.
Do you think home loan rates have bottomed out? What are the factors that may lead to an increase in interest rates over the next 3-6 months?
Interest rates have come down sharply over the past few quarters. There is ample liquidity in the system and rates are likely to remain stable for some time. With the expected GDP growth rate of 6-6.5%, impending government borrowing programmes and expected credit growth, interest rates are likely to have an upward bias over the next six to seven months. However, they are unlikely to rise sharply.
Would you advise a potential borrower waiting on the sidelines to go ahead and borrow now?
Yes, because this is a good time to buy property. Not only have interest rates come down, property prices have reduced substantially. However, interest rates per se do not deter actual users (those who want to buy a property for their own use). It is property prices that tend to impact the buying decision more than interest rates. Only when the customer is comfortable with the property price, would he think of buying it and then look for a loan. With property prices bottoming out, this is probably the best time for potential home buyers who have been waiting to buy but had deferred their decision due to high prices.
How does a low teaser rate for a fixed tenure compare with the slightly higher ticket rate?
Since the beginning of this year, we have seen a lot of banks announcing several schemes like the 8% rate. However, what one needs to keep in mind is that these rates are fixed for a particular period. After that, the normal (much higher) rates apply. So, one needs to be careful and check out the effective rates throughout the loan tenure. Further, interest rates will increase or decrease over the period of the loan, but the property you buy will stay with you for life. So, the customer needs special attention as he is making the largest investment of his life. Just by providing concession of a few basis points in the short term does not make a smart customer change his mind. This is why we provide the customer with personalised home loan counselling and flexible repayment options, and guide him through the entire process of buying his dream home.
