Home loan interest rates too high for Indian buyers: Survey

New Delhi: High interest rates on home loans and reluctance to borrow are dissuading Indian buyers who have to dig into savings to buy a house, a study has revealed.

The study conducted by India Mortgage Guarantee Corp. and Kantar IMRB indicated that about 38% respondents saw home loan interest rates as too high while equal number of respondents cited lack of savings and unwillingness to borrow as constraints to own a house. Higher property rates (32%) and insufficient loan availability (32%) were cited as the other factors deterring home buying plans.

“High dependence on personal savings to pay down payment for first-time home buyers also delaying home ownership,” the report said.

The report also showed there is significant demand for affordable housing among the younger demography (25-44 years) in smaller towns than in metros and mini-metros.

“Housing sector is poised for a higher growth, especially in affordable housing segment by the Housing-for-all by 2022 Mission and infrastructure status accorded by government, apart from various other measures,” said Sriram Kalyanraman, managing director and chief executive of National Housing Bank, at the launch of the report.

Asked about progress on the government’s Housing For All scheme, Kalyanraman said a number of private developers have launched affordable housing projects; government lending and loan subsidies are also furthering the drive.

“The full data has to come from private sector. Once we take it, I think we will surely be in line with Housing-for-all by 2022,” he said.

The survey was conducted in two phases with a sample size of about 4,100 respondents from metros, mini-metros and towns who have either home loans or have applied for it. They were divided into 25-34, 35-44 and 45-55 years age groups.

At present, there is a lot of aspiration in terms of demand for small-sized houses of about 500 sq. ft, and with demonetisation, it seems property prices are coming down because alternative currency has gone out, said the National Housing Bank CEO. “So prices are bound to come down. It has also helped a lot of customers, there is more transparency to buy houses in Rs15-20 lakh segment,” he added.

The IMGC-Kantar IMRB report says that almost half of millennials (46%) in India live with parents, than in rented (31%) and self-owned homes, reflecting their financial dependence.

“There is a gap in the market. These can be managed to a large extent by mortgage guarantee backed loans. With availability of higher loan to value (LTV), Indian home buyers can achieve their home buying dream by not relying solely on personal savings,” IMGC CEO Amitava Mehra said.