Interest rate at 10-year low, discounts – Banks and builders hope for a recovery over the holiday season

Customers buy firecrackers and fireworks from a stall during Diwali 2020 | Dhiraj Singh / Bloomberg

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New Delhi: India’s biggest banks and home builders are offering interest rates and decade-low discounts to boost demand ahead of festival season.

In anticipation of consumers easing their purses over the three-month period, lenders including the State Bank of India, Housing Development Finance Corp., Kotak Mahindra Bank Ltd. 6.7% – the lowest level in a decade.

Lenders are hoping to capture a relatively secure set of borrowers as the lingering impact of the pandemic continues to threaten the asset quality of many banks. The drop in interest rates was helped by a large amount of money after the Reserve Bank of India injected billions of dollars to protect growth.

Builders are offering discounts and giveaways to homebuyers, postponing payment plans, and waiving fees to tap an emerging real estate market recovery. They are joining a host of Indian companies – from manufacturers of consumer durables to auto makers – cutting prices to boost demand during the holiday season. Walmart-backed e-commerce giant Flipkart is offering discounts of up to 80% on select electronics in a billion dollar sale.

Given stable house prices and a market filled with holiday offers, “the announcements of reduced mortgage rates are timely and will give home sales a boost,” according to Samantak das, chief economist and head of research at the real estate research firm Jones Lang LaSalle Inc.

This view is supported by a recent JLL survey of six major Indian cities which predicted that more than 80% of 2,500 respondents plan to buy a home in the next three months.

Das expects the festive offers to increase home sales by 30-35% in the second half of the year compared to the first six months.

Adhidev Chattopadhyay, equity research analyst at ICICI Securities, expects “developers to post record sales figures in the second half of fiscal 2022 thanks to new launches,” he said in a note.Bloomberg

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