Home loan EMI in affordable housing category up 20% in last 2 yrs: Anarock

Home loan EMIs for customers who bought properties less than Rs 40 lakh have gone up 20 per cent in the last two years due to a rise in mortgage rate, according to real estate consultant Anarock.

The consultant pointed out that the affordable housing segment suffered the most during the COVID pandemic and has not recovered in the last two years.

Anarock said that affordable home buyers have been paying almost 20 per cent more in their EMIs over the last two years. The floating interest rates for home loans up to Rs 30 lakh have risen from 6.7 per cent in mid-2021 to nearly 9.15 per cent now.

"Home loan borrowers who were paying an EMI of approx. Rs 22,700 in July 2021 are now paying about Rs 27,300 today -- an increase of approx. Rs 4,600 per month. This 20 per cent increase in the EMI has resulted in a jump of approx. Rs 11 lakh in the overall interest component - from approx. Rs 24.5 lakh interest payable in 2021 to approx. Rs 35.5 lakh today," Anarock Head-Research Prashant Thakur said.

The total interest payable over a 20-year tenure is now more than the principal amount, he said.

"If a buyer seeks to buy a property worth less than Rs 40 lakh, factoring in the LTV (Loan to value) ratio, the total borrowed amount is Rs 30 lakh for a tenure of 20 years. In this scenario, the buyer would have paid an EMI of Rs 22,700 in 2021, when the interest rates stood at approx 6.7 per cent," Thakur said.

At this rate, the total repayment to the bank was around Rs 54.5 lakh, of which the interest component was about Rs 24.5 lakh - less than the total principal amount, he added.

"Today, when home loan interest rates hover at around 9.15 per cent, this buyer's EMI is approx. Rs 27,300. The total repayment to the bank at this rate is now approx. Rs 65.5 lakh, of which the interest component will be approx. Rs 35.5 lakh - more than the total principal amount," Thakur said.

Pradeep Aggarwal, Founder & Chairman of Signature Global, said the government should offer special concessions to buyers in the affordable segment to alleviate the increased EMI burden. "This will help in sustaining the demand in this price-sensitive segment," he added.

Anarock said that the share of affordable housing in overall sales in H1 2023 shrunk to 20 per cent. Likewise, in the top 7 cities, this segment's share in the overall housing supply in H1 2023 plunged to 18 per cent against 23 per cent in H1 2022.