Everything that you buy has two types of costs: direct and visible, or indirect, and hidden. One of the hidden costs is the prevailing interest rates; it can also influence the demand for products in addition to pushing up the cost. As interest rates impact the purchasing power of people, it can cause major shifts in purchase decisions of assets like vehicles and property.
For this reason, you must consider the interest rates as an important component of your Real estate investment strategies in Thrissur. Apart from this, it is essential to study the trends in the real estate market, as it will help you select the right property to purchase.
The Repo Rate and Impact on Interest Rates
The RBI, which is the central bank of the country, levies a certain percentage of interest when it lends money to banks. This is called the repo rate or repurchase rate. The interest the RBI pays on the money banks deposit with it, is called the reverse repo rate.
This rate is periodically revised by the RBI, and may be increased or decreased according to the situation. When the repo rate is increased, it means that banks now have to pay more interest on the money they borrow from the central bank.
When the repo rate is decreased, they need to pay a lower amount as interest on the money they borrow from the central bank.
Similarly, when the reverse repo rate is increased, the banks can make more money; when the reverse repo rate is decreased, banks get less money in the form of interest from the central bank.
When banks have to pay more interest on money borrowed from the RBI, they will charge higher interest on loans they disburse, whether personal, auto, or home loans. The opposite happens when the repo rate is decreased.
Impact of Interest Rates on Home Buyers
When the interest charged on home loans is higher, it means your EMIs will be more, and you may be required to pay a higher amount as down payment for buying an apartment in Thrissur. When availing a home loan becomes more expensive, you may put off buying a new apartment, preferring to wait till the rates come down.
Only investors with sufficient disposable income will be willing to invest at such a time; overall, it decreases the demand for real estate. When demand sees a sudden drop, there could be a slight decrease in the cost.
With lower rates, the cost of your home loan obviously comes down, and it’s a smart thing to buy in such a market. With more people having purchasing power, it is possible that high demand pushes up the price of apartments a little.
How Does the Interest Rate Affect Construction?
When banks charge high interest, developers are also affected, as they take loans to complete their projects. The higher the interest, the greater their cost of construction. This impacts the final cost of the apartment as well. This is one price increase that will not reduce, as the builder has already paid more money to borrow and build the apartment.
How Do Interest Rates Impact Rental Yields?
When apartments become cheaper for purchase, the rental income you get will also be lower; while this may seem like loss of income, it will actually benefit you as you will get tenants easily and have higher occupancy rates and reduced vacancy rates. When interest rates increase, the rent you charge can also go up, making the apartment more expensive to rent, and it can increase the vacancy rates.
Conclusion
Though interest rates can significantly impact the demand for apartments, they are not the only reason. Other factors like the growth potential of an area, the urgency of specific individuals and so on, are other things to consider when buying an apartment. Varma Homes is a leading builder in Kerala and has a reputation for quality construction, superlative amenities, fair dealings, and excellent customer service.
Looking to invest in Apartments in Thrissur? Make smarter decisions by understanding how interest rate trends impact pricing. Explore premium properties with transparent pricing and quality construction. Book a Free Consultation Today.
FAQs
How do interest rate changes affect the cost of apartments in Thrissur?
Interest rate hikes increase home loan EMIs, making apartments less affordable and often lowering demand. Conversely, lower interest rates make home loans cheaper, boosting demand and potentially driving up apartment prices in Thrissur.
Is it a good time to buy apartments in Thrissur when interest rates are low?
Yes, buying when interest rates are low can reduce your overall loan cost and increase affordability. It’s an ideal time to invest in apartments in Thrissur, especially with trusted builders like Varma Homes offering quality projects.
Do rising interest rates affect apartment construction in Thrissur?
Yes, rising interest rates can increase construction costs for developers, which may lead to higher apartment prices. This makes it crucial to purchase early in the project phase before prices are revised.
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