Rs 25 lakh loan at 5% needed for middle-class homebuyers: Naredco president

Around 30% of Indians are unable to afford home loan EMIs at current rates, says G Hari Babu

The government should provide home loan up to Rs 25 lakh at a lower interest rate of 5 per cent to the people of the middle class, a prominent realtors’ body appealed to the government against the backdrop of soaring home prices.

G Hari Babu, president of the National Real Estate Development Council (Naredco), in an online interaction with Business Standard, said that the middle class in India accounts for roughly 30 per cent of the total population and is mainly dependent on rental accommodation.

This is because they cannot afford huge equated monthly instalments (EMIs) at the current interest rates of 8.75-9 per cent, Babu said.
 

 

“For a majority of these 30 per cent, salaries are around Rs 50,000-Rs 70,000. Out of this, they can pay Rs 15,000-20,000 towards EMI. But for Rs 20,000, what is the loan eligibility today? It is only Rs 20 lakh,” he said.

“Can any builder provide any type of accommodation for Rs 20 lakh in any major city like Mumbai, Delhi, Bengaluru today?” he asked, adding, “There is no place for people who are drawing a salary under Rs 1 lakh.”

The situation has been exacerbated by rising prices and rents. According to real estate consultancy Anarock, the average price of homes in the top seven Indian cities has increased by 45 per cent since 2019. During the same period, average rent has jumped 64 per cent.

“We requested the Central government last year also and this year also that they have to provide a loan for Rs 25 lakh to these people at 5 per cent interest rate,” he added.

“Up to Rs 25 lakh, if 5 per cent fixed rate of interest is available for the first five years, then their EMI will come down to Rs 16,000-17,000. Then they can put some more money by borrowing or raising another Rs 10-15 lakh at regular interest rates and buy one bedroom, hall, kitchen (BHK) home,” Babu said.

Babu also said that the demand for luxury and ultra-luxury housing in India is being driven by 10 per cent of the population. Another 60 per cent, consisting of the economically weaker section (EWS), is being taken care of by the government using free housing schemes, he added.

“In the last 24 years, the Indian economy has developed so much but two-third of the total asset value that we have created, has gone only to 10 per cent of the population. All the major realtors are serving only these 140 million people,” he said.

For others, the interest rates have made paying EMIs difficult, and the number of new bookings is falling.

“Before Covid-19 pandemic, the interest rates were low at around 6.25 per cent. During that time, everybody thought that we could buy homes. So, they somehow paid the advances and booked their flats,” he said, adding that it is this demand that India is seeing today.

“Today when they need to register the flat, the interest rates are 8.75 per cent...That demand is over. Today at 8.75 per cent, hardly anyone is booking the flats, except those 10 per cent,” he said.

According to Babu, the demand for luxury homes is likely to remain high for the next 30 years, but for others, prices of homes may start deflating as early as next calendar year.  
 

“That is my prediction,” he said.