Affordable home buyers paying 20% more EMI over last 2 years: Anarock

financialexpress.com:

The equated monthly installments (EMI) of affordable home buyers rose 20% in the last two years, a report from Anarock research showed on Wednesday.

Home buyers are paying an EMI of Rs 27,300 in July 2023, much higher than Rs 22,700 in July 2021. Similarly, the overall interest amount rose to Rs 35.5 lakh in July 2023 from Rs 24.5 lakh earlier.

The floating interest rate for home loans has risen to 9.15% as of date from 6.7% in July 2021. The growth in the interest rate reflects the Reserve Bank of India repo rate hike of nearly 250 bps.

The latest data comes when the share of affordable housing in overall sales has shrunk to around 20% in January-June 2023 from 31% a year ago as buyers have been desisting from purchase decisions.

Home loans are structured such that the payments in the early years are mostly interest. When more of their payment is going to interest rather than principal, it will take longer for home buyers to build equity and own more of the home.

“It also means that they have a reduced opportunity to benefit from appreciation if they sell the property, because less principal has been paid off,” the report said, adding that issues relating to the interest rate on home loans need to be addressed in the next Union Budget.

Despite the recent blip, bankers are confident that the affordable housing segment will see traction going ahead considering the steady migration to urban and semi-urban areas from rural areas.