Home loans get costlier; HDFC home loan interest rates up 65 bps in 1 year

A roof over one’s head is everyone’s wish — poor or rich. However, over the last year, this dream has become more distant for many, as the interest rates on home loans have surged.

HDFC’s home loan rate, which stands at 9 per cent now, is 65 bps higher than that in December 2017, Kotak Securities said in a research report. The spread between home loan rates and 10-year AAA yields is 163 bps. To add to it, all India cement prices are increasing, the report added.

Nevertheless, the sales momentum remained steady in December with residential real estate sales growing at 9 per cent on a year basis, even after a drop of 38 per cent in the launch activity. This has resulted in a 10.5 per cent decline in all-India inventory to 1.25 billion square feet from 1.4 billion square feet in December 2017, said the report.

Sales growth for the coverage universe was 28 per cent on a year basis in Q3 of FY19 at Rs 46 billion, compared to trailing three-month increase of 22 per cent on a year basis for the industry with aggregate sales of Rs 192 billion..

The outstanding loans to commercial real estate sector grew at rate of 4 per cent in a year from Rs 1.82 trillion in December 2017 to Rs 1.9 trillion in December 2018. Real estate prices remained flat with all-India prices at Rs 5,320 per square feet in December 2018.

The government has proposed to reduce the tax rate on under-construction properties. This will have a mixed impact on the housing sector with high-price inventory (such as Mumbai and NCR) benefitting the consumer, Kotak report said. On the other hand, the absence of input tax credit would impact overall costing in cities such as Bangalore with lower realisations.

Lower tax rate would reduce the differential pricing for under-construction and completed properties and affect the consumer behaviour, said the report.