According to bankers, the affordable housing finance market has gained momentum recently and is expanding more quickly than it did before Covid. There is a definite need for cheap housing in tier-2 and tier-3 cities. Now, you can see a lot of reputable developers diversifying their business into these plans and establishing projects in tier-2 and tier-3 cities. Rural areas now have more affordable incomes. According to Virat Diwanji, president and head of consumer banking at Kotak Mahindra Bank Group, this is fostering growth in the affordable housing sector.
In keeping with the 250 bps increase in the current cycle, which was started by a 40 bps rate hike in an off-cycle meeting in May, home loans have been more expensive recently. This is due to the fact that the repo rate will be a factor in all floating-rate retail loans that banks grant from October 2019.
Bankers are worried that loans would eventually become prohibitively expensive for borrowers as a result of the constant increase in house loan interest rates. Several lenders have gone to the affordable housing market in this situation since the ticket sizes are smaller and the borrowers are less vulnerable to interest rate changes.
“The majority of clients (in the cheap housing segment) construct their own dwellings. There are many other components of the home-building process that must be organised before taking out a loan while building a home. The client is prepared to accept a loan after arranging all of those things. At that stage, the customer has many other priorities and is less concerned about the interest rate. Because of this, there has been no decrease in demand in that market, according to Manoj Viswanathan, CEO of Home First Finance.
Also Read:- Rate hike may further impact affordable housing demand
The typical ticket size in the affordable housing market is under 40 lakh rupees. Whereas the high-ticket housing segment often caters to paid people, the affordable housing segment typically caters to self-employed people.
Affordable housing loans often have interest rates that are “stickier” than loans for larger homes. According to experts, this indicates that the affordable housing market is less vulnerable to fluctuations in repo rates than high ticket-size loans.
source from: msn.com
