Thanks to Reserve Bank of India’s (RBI’s) consecutive rate hikes, home loan interest rates have now peaked. This is, therefore, the right time to prepay a part of the loan, subject to the availability of excess funds.
In an email interview with MintGenie, Manoj Viswanathan, managing director and CEO of HomeFirst Finance Company also recommends home owners to prepay the loan, but also qualifies his statement and says that one should keep some funds aside for the emergency needs.
He also speaks about the future of green housing, affordable housing and shares reasons as to why housing finance continues to be a blend of physical and digital.
Q. As home loan interest rates are hovering at a high level, do you suggest borrowers to prepay a part of their loan if they can afford to do so?
Yes, if you have any excess funds with you, it is always a smart decision to use it for prepayment of your loans since it can save you from paying interest on that much amount in home loan EMIs in the future.
If you have the option, opt in for smaller but regular pre payments. However, first you must ensure that you have money put aside for any big foreseeable expenses and some emergency funds for a rainy day.
Q. What are your views on the future of green housing in India? Do you believe it is going to be a big market in the time to come?
In our country, building your home is a major landmark in our lives and people still prefer to build their homes by themselves.
Green Housing, despite having numerous benefits for homeowners from cost saving to a healthier lifestyle, is not yet very popular among potential homeowners and the contractors who undertake home construction of standalone houses.
This presents a huge opportunity for the various entities engaged in the home construction ecosystem to explore and promote the benefits of green homes.
Q. Please share your thoughts on the affordable housing market in India? How big is this in the big cities such as Mumbai and Delhi?
The classification of affordable housing is quite varied. One of the most accepted definitions classifies Affordable Homes as “homes in the price range of 5 to 25 lakh purchased mostly by first time home buyers”.
Most metro cities grow in a circular shape with the affordable housing industry located along the urban peripheries. With a large population, understandably, suburbs of the metro cities are the biggest hubs for affordable housing.
Q. What are your expectations about the change in interest rates going forward? Do you think RBI will further raise the key interest rate?
Inflation has moderated in both India and USA, leading to the popular consensus that interest rates are likely to stay put for a while. However, we cannot entirely rule out the possibility of a 25-bps hike.
Q. With a rapid pace of technology, a lot of investment-related products are sold and managed by fintech firms. Are we witnessing a similar trend in the housing finance space also?
The fundamental difference between housing loans and other financial products is the presence of a physical aspect i.e., the property itself which is an immovable asset. The service delivery has to incorporate this in the process.
Housing loan providers also need the ability to manage large balance sheets which is not required for fintechs that are selling investment products.
Also, first time home buyers in the segment that we are catering to need a bit of hand holding. Housing finance will probably remain “phygital”, blending digital experiences with physical ones.
Q. Can you shed some light on the buying pattern of millennial buyers: for instance, whether they are opting for the luxury segment over affordable housing? Have you noticed any other noticeable trend in this space?
Every generation feels like a “millennial” generation for the previous generation but fundamentally human beings are similar.
India is becoming one of the youngest and fastest growing economies globally and has witnessed both - rising incomes and aspirations within the middle-class consumers.
With nuclearisation and urbanisation pushing the demands of the affordable housing industry, we are getting more younger homeowners than ever before who are fairly tech savvy and well informed.