How Interest Rate Changes Affect Apartment Prices in Trivandrum

Posted onJul 01, 2025

If you’re planning on buying an apartment in Trivandrum, there are a number of aspects you have to think of, especially the finances. You have to make a budget for the purchase, research the ideal locations, decide the size of the flat, and so on. Many factors affect the price of apartments, and the interest rate is one of them. What do bank interest rates have to do with property prices? Here is the answer.

How are Interest Rates Fixed?

The interest rates that banks charge you when you avail loans from them, depend on something called the repo rate. This is the interest rate charged by the central bank of India, the RBI, when banks borrow money from it. The interest rates that banks charge their customers will obviously be slightly higher than the repo rate, which is how they earn money.

There is also something called the reverse repo rate; this is the interest paid by the RBI to banks on the money they deposit in the central bank. Again, the interest paid by banks to their customers on savings and fixed deposits will be slightly lower than the reverse repo, which allows banks to earn.

Keeping track of repo rate changes must be an important part of your real estate investment strategies in Trivandrum. 

What Happens When the Repo Rate Changes

When the RBI increases the repo rates, banks have to pay more interest, which means they will hike the interest they charge their customers, making loans, including home loans, more expensive, with higher EMIs. This may put the apartment price out of reach for many people, and pull down the demand for property. They may wait for prices to go down before they purchase a flat. Only those who are in a position to buy without a loan may go ahead. Of course, when demand is low, prices may also come down.

When repo rates decrease, banks will also reduce interest rates, making home loans more affordable. When home loans become affordable, apartments become more affordable; more people are in a position to buy, and the demand increases. If the demand exceeds available housing, the prices may go up again slightly. Builders may be wary of increasing the price too much, as that will again cause demand to fall.

How Do Interest Rates Impact Construction?

Interest rates are increased by banks on all kinds of loans, whenever repo rates are increased. Builders often borrow working capital, to purchase construction materials, pay wages, etc. When the cost of borrowing goes up, it directly increases the cost of construction, consequently increasing the price of the flats. Even if interest rates are slashed later, builders cannot reduce the price of the flats as they have already paid more interest to the lender, and they have to recover that cost.

How Do Interest Rates Affect Rental Yields?

The price of the apartment is often directly related to the rent; generally, the lower the cost of the flat, the lower the rent. The more expensive the apartment, the higher the rent that will be charged. Again, with lower rent, it becomes easier to get tenants and ensure high occupancy; with higher rents, you could face the prospect of vacancy, which in turn impacts your earnings or rental yields.

Other Factors That Affect the Demand for Apartments

In addition to interest rates, there are many other factors that can increase or decrease the demand for flats. If a city or town is in the boom stage and is rapidly developing, there will be a steady influx of people in need of housing, and even high-rent flats will get occupied quickly. This can happen even in specific areas within the same city or town. For example, if an IT park is coming up in a locality, the demand for apartments may be high in that location, despite high rates.

Conclusion

Market fluctuations are a given; interest rates keep changing ever so often. That should not stop you from purchasing an apartment in Trivandrum. If you're exploring luxury apartments in Trivandrum, Come to Varma Homes, where we understand your aspirations and not only provide you the best 2 and 3 BHK homes in the segment, but also connect you with the best lenders in the market. Thanks to the stellar reputation we enjoy in the industry, you can expect a hassle-free loan approval process, provided your credit history is good.

Searching for Apartments in Trivandrum? You’re in Safe Hands. At Varma Homes, we offer more than just 2 & 3 BHK apartments; we offer peace of mind. Get expert guidance, trusted lender connections, and a home that fits your budget even in a shifting market.

FAQs

How do interest rate changes impact the prices of apartments in Trivandrum?

Interest rates directly affect home loan affordability. When interest rates rise, EMIs become higher, which can reduce buyer demand and potentially lower property prices. On the other hand, lower interest rates make home loans more attractive, increasing demand for apartments in Trivandrum, which may drive prices up over time.

Is now a good time to invest in apartments in Trivandrum despite fluctuating interest rates?

Yes, especially if you’re financially prepared. Trivandrum is a growing city with increasing infrastructure and job opportunities. Even if interest rates fluctuate, the long-term value of apartments in Trivandrum remains strong. Partnering with trusted developers like Varma Homes can also help you access better financing options.

Do changes in interest rates affect rental income from apartments in Trivandrum?

Indirectly, yes. Higher interest rates can slow property purchases, increasing demand for rentals which can boost rental yields. Conversely, if more people are buying, rental demand may stabilize. That said, in thriving areas of Trivandrum, well-located apartments tend to maintain good rental income regardless of rate shifts.