I was looking at home loan interest rates in India and US. We all know US is at 3% at this point.. India is well way ahead at almost 10. What I dont understand is why is there such a huge gap? I don't have much knowledge of finance so if someone can share their views that would open up my 'Gyan Chakshu' :)
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  • Originally Posted by sethia
    I was looking at home loan interest rates in India and US. We all know US is at 3% at this point.. India is well way ahead at almost 10. What I dont understand is why is there such a huge gap? I don't have much knowledge of finance so if someone can share their views that would open up my 'Gyan Chakshu' :)


    Just two things which are interrelated
    1. Inflation
    2. Growth
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  • Current account deficit

    which in turn depends on trade imbalance and capital account spending (= corruption and nepotism)
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  • I understand inflation .. but whats up with growth?
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  • Originally Posted by sethia
    I was looking at home loan interest rates in India and US. We all know US is at 3% at this point.. India is well way ahead at almost 10. What I dont understand is why is there such a huge gap? I don't have much knowledge of finance so if someone can share their views that would open up my 'Gyan Chakshu' :)


    1. Inflation (0 in USA, 10% in India)

    2. Currency risk (of depreciation of INR)

    3. By growth he means low growth in USA and high growth in India which causes the inflation differential
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  • And I thought it should be other way around ! If there is a growth potential govt should help by cutting interest rates so it becomes more affordable for more people .. may be I am wrong here too !
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  • Originally Posted by sethia
    And I thought it should be other way around ! If there is a growth potential govt should help by cutting interest rates so it becomes more affordable for more people .. may be I am wrong here too !


    More growth in India is leading to more imports such as crude, gold, electronic items etc. This is putting pressure on rupee. By keeping high intrest rates to attract foreign capital the rupee is finding difficult to stabalise at 54/55.
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  • you will see similar difference in deposit rates also (greater in india and very low in US)...the same funda applies!!
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  • In US you can also get home loan for 80 years
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  • Originally Posted by investor101
    you will see similar difference in deposit rates also (greater in india and very low in US)...the same funda applies!!


    I agree on that.. Saving's interest rate is pathetic here !

    But I am not sure if mortgage terms are actually up to 80 years.. what is the max term in India? 30 years I guess?

    Any idea if the interest rates are going down in India anytime soon?
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  • Dollar is a world reserve currency. Rupee is not. So lot of countries buy dollar bond. That keep interest rate down. Also debt securitization and other financial instrument keep interest rate down in US.
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  • I think it is bit logical atleast at this stage -- you cant hv super high interest rate in a ccy which is world reserve ccy else ppl would crowd in n reduce interest rates

    As for india .. foreign investors demand higher yield for investing in a country visibly filled with corruption, nepotism (i m not saying US is free of these things).

    As for my outlook, though still bearish on rupee for short term, my view wud gradually change if modi comes to powe nxt yr .. if that happens n you see more development being done in india like gujarat, then rupee wud be in demand n subsequently interest rates wud decline .. but this wud b a slow gradual process ..
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  • Yes, legal system is also important. In US if you dont pay mortage for 90 days or so , the property goes into foreclosure. India legal system is a mess. So for lender US system is less risky. Also the debt rating agency are from US.
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  • India mein inflation 10%+
    private sector mein koi hike nahi
    pata nahi log home loan kaise chukate hain
    us mein inflation near 0%
    private sector mein sab job outsourced
    isiliye loan lene ki kisi ki himmat nahi
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  • I guess sub currency value ka khel hai.. USD is very strong given that EURO zone is again falling in recessions ( it may be mild one but still). I hope it does not mean more interest rate in India.

    In India everyone is having black money so they just convert black into white through loans... Regular guys with no black are the ones who suffer. I really do hope that congress goes out and whoever comes does something for remove corruption
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