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When Is The Right Time To Get A Home Loan?

New Delhi (India), December 9: Buying a home in India has evolved from being a symbol of status or luxury, to being one of necessity in our current times.

According to The State Bank Of India, “India’s home loan market, currently valued at about Rs 24 lakh crore, is expected to double in the next five years, mirroring the overall trend in the country’s aspirations to become a $5 trillion economy by then”.

“So, when will you buy a house?” is a common question heard in most Indian households at some point. It is usually followed by a chorus of self appointed armchair financial experts who spout stereotypical sound bytes such as “Buy Low and Sell High” or “Buy When The Interest Rates Are Low”, without having done any research about the history or trajectory of interest rates in India.

The first home loan to be granted in India was for the amount of INR 30,000/- to a gentleman in Mumbai, in the year 1978. India has been through many peaks and valleys ever since then in terms of its economy. However, the citizens of this country are fortunate to live in a developing nation which is witnessing an upward trajectory albeit slow and non-linear.

It is hard to imagine but at one point the interest rates on home loans were as high as 14% in the 1980s, with a minimal decrease to 12% in the following decade. Keeping in mind that the economy had just opened up after going through a bankruptcy in 1991. However, once the momentum of growth in the economy increased, the interest rates started to steadily decrease. The floating rate concept was introduced by ICICI bank in the year 2000. The rates plummeted down to approximately 7% around 2003-2004.

With an   eagle-eyed view it can be clearly observed that the interest rates which were as high as 14% four decades ago, has almost halved to 7% currently. This is a strong sign of a growing economy whose rates will further reduce down to 4%-5% in the coming two decades.

Despite the steady decline in interest rates, from a financial advisor’s perspective, the right time to purchase a home should be based on your necessity and requirement for one and not the fluctuating financial market.

Every Indian should proudly desire to purchase a home, not only because it is a valuable asset for the long term but also because we at Shree Consultant strongly believe that the interest rates will gradually decline in the coming years, as the country pushes forward to becoming a developed nation by 2047.

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