RBI has hiked the policy repo rate by 1.4% in the last three monetary policies, taking the rate to 5.4%. In a rate hike scenario, the cost of funds also rises for banks, and hence they pass on the impact to borrowers by raising their lending rates.
Many major banks and NBFCs have hiked their benchmark lending rates which are linked to the repo rate, in the past three months making home loan rates rise as well. Equated monthly instalment (EMIs) has also gotten costlier. However, bank credit growth continues to pick up despite the rate hike trend.
The latest data from RBI shows that scheduled commercial banks (SCBs) credit growth jump to 14.2% in June 2022 from 6% a year ago and 10.8% a quarter ago.
According to a Skymet Weather report on Thursday, in July India witnessed 117% rainfall, while August month recorded 111% rainfall so far.
The monsoon in India is from June to September. Skymet report highlights that month of June is the least rainy with an LPA of 165mm (appx), followed by September with 170mm of rainfall. July and August are the core monsoon months with LPA of 280mm and 255mm(appx) respectively
As per the report, both the core monsoon months delivering adequate rainfall is not a common feature. In the last 25 years, only on 4 occasions, the rainfall was in excess of 100% of LPA, during the core monsoon months. Another inference during such episodes is, a ‘normal’ or ‘above normal’ monsoon season for the country with total rainfall of >/= 100% of LPA.
How does monsoon accelerates home loans demand
According to Ravi Subramanian, MD & CEO, Shriram Housing Finance, agriculture-dominated states like West Bengal, UP, Punjab, Gujarat, Haryana, and MP have a high positive influence on rainfall, thus a good monsoon helps raise their per capita income and in turn demand for necessities like housing in these smaller towns goes up. Agriculture provides livelihood to around 58% of India's population thus the last 4 consecutive years of normal monsoons have had a positive impact on demand in the rural economy.
"Coupled with the government of India’s efforts to propel Housing for All the demand and availability for affordable housing have increased and with that demand for affordable home loans has had a positive ripple impact. Tier 2 and Tier 3 markets have witnessed a strong uptick in housing over the last 4 years as a result of the positive economic drivers and a good monsoon," he said.
Further, the Shriram Housing Finance CEO explained that the government’s push for affordable housing has given rise to several affordable housing projects in semi-urban and rural areas. The massive reverse migration following the COVID-19-led lockdowns also led to a lot of people leaving cities and returning to their hometowns, which means the reliance on agriculture for livelihood in rural India has come down. Over the years reliance on solely, monsoon has reduced with rising irrigation coverage and non-agriculture-centric development.
Meanwhile, Manish Sheth, MD & CEO, JM Financial Home Loans said, "Monsoon always has a profound impact on the health and growth of India's agriculture-based economy. Therefore, IMD’s prediction of “Above Normal" monsoon this year shall boost the sentiments across all strata of the society."
Sheth further said, "With the “Above Normal" monsoon prediction, particularly in the western and southern side of the country, we will see a consistent rise in the per capita income levels. Coupled with the growing penetration of the affordable housing finance company in Tier 2 & Tier 3 cities and their ability to assess the income, will pave the way for the deserving home buyers to own their dream home."
Explaining the performance of Shriram Housing Finance which is the 4th largest affordable housing financer in India, Subramanian said, "Our AUM has grown by 3x in the last 3 years to touch ₹6000 crore today and 60-65% of our home loan disbursements on average come from non-metro locations. The number and value of loan applications have seen an uptick compared to last year from the non-metro regions. The non-metro region contributed 50% of the number of loans disbursed a year ago and today it stands at close to 70%. Our borrowers in rural India are dependent on a mix of agriculture and non-agriculture activities. A normal monsoon does have a positive rub-on effect in our key states of Andhra Pradesh, Telengana, and Tamil Nadu."
In the affordable housing segment, Sheth said, "we see a revival in the housing demand across tier 2 and tier 3 cities as the monsoon and farm income are catalysts for home loan growth. The introduction of Survey of Villages Abadi and Mapping with Improvised Technology in Village Areas (SVAMITVA) scheme and the ongoing remote working trend are also driving home loan demand in tier-2 and tier-3 markets and beyond."
Check out some of the latest home loan interest rates of major banks and NBFCs
Shriram Housing Finance:
At Shriram Housing Finance, home loans are offered to the tune of ₹1 lakh to ₹10 crore with a tenure of up to 25 years. The interest rate starts at 8.9%. Here, the maximum loan can be availed of up to 90% of the property cost.
Bajaj Housing Finance:
As per the website, home loans for salaried applicants range from 7.70% to 14%. For self-employed applicants, the NBFC imposes interest rates from 7.95% to 14%.
LIC Housing Finance:
Earlier, this week, LIC Housing Finance hiked its prime lending rate by 50 basis points with effect from August 22. The LIC Housing Prime Lending Rate (LHPLR) is now at 15.80%.
On home loans, LIC Housing has imposed an 8.05% interest rate on loans up to ₹50 lakh, and 8.25% on more than ₹50 lakhs to ₹2 crore for salaried and professionals who have a CIBIL score of greater or equal to 700, are eligible for these rates.
However, LIC Housing is offering an 8% interest rate on home loans greater or equal to ₹10 lakh with a CIBIL score of equal to or greater than 700.
SBI Home loans:
With effect from August 15, on regular home loans, SBI imposes 8.05% on borrowers having a CIBIL score greater or equal to 800. While the rate is 8.15% on credit scores 750-799, the rate is 8.25% on credit scores 650-699, and the rate is 8.35% on CIBIL scores of 650-699.
The bank levied 8.55% on borrowers having a credit score of 550-649. The rate is at 8.25% for borrowers with NTC or credit scores of 101-200.
There is a 0.05% concession available to women borrowers subject to minimum EBR, i.e 8.05%.
HDFC Bank home loan rates:
The largest private lender's retail prime lending rate (RPLR) is currently at 16.05%.
On home loans up to ₹30 lakh, the bank offers an 8.10-8.50% interest rate to salaried women and 8.15% to 8.55% to others.
Further, on home loans from ₹30.01 lakh to ₹75 lakh, the rate is 8.35-8.75% for salaried women and 8.40-8.80% for others. While the rate is 8.45-8.85% for salaried women and 8.50-8.90% for others on home loans above ₹75 lakh.
These interest rates are higher by 10-15 basis points for self-employed borrowers.
ICICI Bank home loan interest rate.
For salaried borrowers choosing home loans up to ₹35 lakh, the bank has interest rates between 8.10-8.85%, while the rate is similar on loans above ₹35 lakh to ₹75 lakh. However, the rate is 8.10-8.95% on loans above ₹75 lakh.
RR is the lending rate linked to the repo rate.
Whereas, for self-employed borrowers, the private banker levied an 8.20-9% rate on home loans up to ₹35 lakh, and above ₹35 lakh to ₹75 lakh.
However, the rate ranges from 8.20-9.10% on loans above ₹75 lakh for self-employed.
