Financing your dream home only in your dreams!

Indian economy is struggling hard to get out of the inflation whirlwind. In its bid to lower down the rising inflation rate, government is desperate to implement tighter monetary measures. It's evident that the recent hike in the CRR ratio from 7.75% to 8% is yet another curative effort. However, such tightening in the monetary climate can prove to be disastrous for the home loan providers and of course the borrowers themselves. The major home loan providers are of an opinion that tightening in the policies might compel the banks and miscellaneous housing financing companies to increase the home loan rates.

Consequently, the borrowers who have taken loans at the lower rates of 7-8% just a couple of years ago will not be able to pay the interest amount due for the specific loan period. Furthermore borrowers who are bound by the longer repayment period of 20 years or more will be severely hit. Any further increment from the current rate of effective rate (9.5-12.5%) will make loan repayments really difficult for them.

But it seems like the housing finance companies(HFC) will face the maximum brunt. Even now many HFC'S are borrowing funds from the commercial banks at a higher rate of 9-10%. There is a huge possibility that the recent increment will push the interest rate to a higher level that will finally effect the end borrowers. Although the motive behind the recent hike in the CRR is to curb the menace of inflation, but in the longer run it will discourage people to finance their houses. In future, financing home will indeed be a tough call.