ICICI Bank’s recent hike in home loans interest rates has forced everyone to think about the real estate prices. Will they shoot up or sink down? Such a step seems to have given a way for the prospects of paying even larger EMIs. Earlier, the banks had only increased the repayment tenure keeping the EMI fixed in cases where the extended tenure does not go beyond the borrower’s retirement age. This option is also not available now thereby crippling already suffered consumers.

Taking the EMI values into view, it was Rs. 868 per lakh at 8.5% interest. At 11%, the interest alone amounts to Rs 916 for fresh borrowers. This clearly underlines that the EMI can change with an extension in the tenure of repayment.

Bringing about a sudden hike in home loan interest rates seems to breaking the bank of consumers. Those who were paying Rs 10,000 as EMI in the year 2004, when the interest rates were around 7%, would now be paying Rs.15, 000 as the hike in EMI over the past two years is an even steeper 33%.
The situation has affected real estate sector badly, where the prices have started sinking down. Contrary to this, the commercial property rates across the country are still going up and the trend appears to continue in future, say real estate connoisseurs. Also, if present interest rates continue, the economy is likely to slow down, which would further result in a fall in interest rates.

Source: http://www.nrirealtynews.com

With this news piece, I'm also wondering whether the real estate prices will shoot up or sink down? Any answers..........
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  • SBI Chief - Positive about the Real Estate

    In a recent development after the increase of home loan rate by 1%(by Private Sector Banks), Mr O.P.Bhatt, Chairman State Bank Of India said that this will certainly put an affect on the demand for credit. According to him home loan rates will certainly effect the demand for credit but it will not affect the demand for buying homes.
    "We have just increased rates and the impact will come over the next few weeks. Though housing loan demand will dip, people will still continue to buy houses," State Bank of India chairman O P Bhatt told TOI.
    Now people will not buy apartments with all the luxurious features, rather they will opt a flat with some less features and in all cost them alot less. But the demand for buying houses will be still there without any affect of increase of home loan rates.

    "Experts are predicting that this move wont effect the Indian Real Estate rather it will effect the Credit Sector."

    Lets see What happens next?
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