Is housing sensitive to the rate cycle?
seen the impact of a similar drop in interest rates is much higher in the case of the home loan.
Also, since a home loan is a long term loan, this translates into a much higher credit eligibility for a home loan for an end user as compared to an auto loan. Hence, home loans are impacted to a greater extent with a small decrease in interest rates as compared to an auto loan.
With increasing loan eligibility amounts, the purchasing power gets a bigger spurt. The interest impact hence gets magnified for a home loan as compared to an auto loan.
There are other macroeconomic factors governing the housing sector in particular. A very important factor is that rural housing and rural housing finance are a priority sectors as per National Housing Bank. We as financiers have an unsaid responsibility of supporting housing development in rural areas, and provide more impetus towards this sector.
The author is MD, Tata Capital Housing Finance Limited
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