Big relief! Home loan interest rates set to fall; you dream house now gets a step closer

Getting a house of one's own is virtually a mission impossible for most people. When it does happen, it takes away entire life's savings too. Well, in this scenario, RBI's statement comes as a big relief. For those living in metro cities, RBI's new policy statement has brought good news, as interest rates on home loans up to Rs 35 lakh may get comparatively cheaper. Along with those who want to get a home loan up to Rs 25 lakh in other places may also get benefitted as the Reserve Bank of India yesterday increased the limit of housing loans for qualifying under priority sector lending (PSL). 
 
According to RBI statement, "In order to bring greater convergence of the priority sector lending guidelines for housing loans with the affordable housing scheme, and to give a fillip to the low-cost housing for the economically weaker sections and lower income groups, it has been decided to revise the housing loan limits for PSL eligibility from existing Rs 28 lakh to Rs 35 lakh in metropolitan centres (with population of ten lakh and above), and from existing Rs 20 lakh to Rs 25 lakh in other centres." 
 
The apex bank, however, stated that the overall cost of the house in the metropolitan centre and at other centres should not exceed Rs 45 lakh and Rs 30 lakh, respectively to qualify for this benefit. Overall home loan rates may become costlier after RBI's 25 basis point hike in repo rate, but loans up to above-mentioned limit may cost comparatively less. 
 
Notably, banks are required to lend around 40 per cent or their total loans to priority sectors including micro enterprises, agriculture sector, borrowers from weaker section and so on. Since default rates are higher in these segment, lenders may extend loans to those priority sectors where default rate is less.
 
According to a Times of India report, default rate in housing loans in the range of Rs 10 lakh to Rs 35 lakh is comparatively low, the reason, the RBI’s decision is likely to encourage lenders to lower rates in the small-ticket home loan segment to increase market share. The decision is also likely to boost the number of first-time home buyers in the affordable segment, say experts, adding that the Pradhan Mantri Awas Yojana (PMAY), launched in 2015, would get a fresh impetus as the housing scheme aims to achieve ‘Housing for All’ by the year 2022. 

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It may be noted that large lenders including State Bank of India, Punjab National Bank, ICICI Bank, Kotak Mahindra Bank and Union Bank of India have started increasing their benchmark marginal cost-based lending rates (MCLR). This indicator is a target, where banks decide interest rates for loans like personal loans, housing loans, travelling loans and others.