State Bank of India (SBI), the country’s largest money lender welcomed the new year by slashing the marginal cost of funds based lending (MCLR) by a whopping 0.96% for one year. MCLR is the benchmark rate to which all home loans are linked. These rates have been cheapest for the past six years; this was further welcomed by other banks slashing their MCLR rates too.
The reduction in the MCLR rates simply means that the home loans would now be available at a cheaper rate since most of the home loans are locked in at a one-year MCLR. The older loans can avail this benefit post one-year completion of their MCLR period.
This move has ignited the spark in the real estate sector, which has seen a steady rise in demand from fresh buyers. The industry witnessed massive struggle to cope up the with the unaffordable prices which were a directly proportional to the poor demand from the consumer’s end. With the slashed interest rates the market looks up.
Demand for both realty and office properties are bound to witness a steady rise as the demand is going to drive two-fold. The housing sector is expected to see more traction as the central bank has reduced the risk weight on the housing segment, which means lenders would have to keep aside a lesser capital at the time of borrowing.
The reduced interest has simplified the finance process associated with lending for borrowers, which leaves the borrowers on a high note. New borrowers will also see an increase in the eligibility with a 50-basis point drop in home loans. The reduced rates will also result in lowering of equated-monthly installments.
Overall the slashed in interest rates would garner a lot more demand in the housing sector as the interest rates transcend into an interested rate for the consumer.
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