Home and car loans are expected to go down as a result of demonetization

By | March 18, 2019

Demonetization has had an obvious impact on market. Business and trade of all kinds of all kinds have been affected. It is also said that home and car loans will be affected to a greater extent due to ban on Rs. 500 and Rs. 1000 notes. The reason behind this is said to be the use of more black money in buying home and cars.

Home and car loans

Rich people use their black money mostly in buying luxurious homes and cars. Such people will now be in trouble. Now to buy such luxuries homes and cars, they have to use their cards, cheques or electronic modes. This will made it difficult for such people to buy costly homes and cars. However, people paying proper tax and dealing with white money will be benefited. As the loan rates will go down, such people will find it easy to buy homes and cars of their choice. People who have already taken home or car loans will see decrease in installments.

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After demonetization it is being believed that all banks will now decrease the loan rates. Banks that had already decreased the rates earlier will further decrease them. However this will take time. Experts from banking sector, says that the time to reduce the loan rates will be equal to the time taken for exchanging the currency. This means that approximately around six to eight months will be required to decrease the interest rates. However this will more depend on the survey by RBI on currency, to be conducted in the first week of December. This survey will decide to what extent the interest rates will be decreased. Due to ban on old currency notes of 500 and 1000, lot of money has got deposited in the bank. Due to this, banks will have lots of money to give loans. There will be reduction in EMI rates on home loans too.

Demonetization will affect home loans too. There will be reduction in taking home loans. This means that less people will take home loans now. This is being said due to less use of cash in the property sector now onwards.

There are not only benefits of demonetization. It is believed that there will be less demand in housing sector. However, as soon as the condition in the market will get better, there be fall in the home rates which in return will increase the demand. In the recent years there has not been increase in the loan from industrial sector and hence banks have now concentrated more on the smaller loan areas. In the past two years there has been increase of 18-19 percent in home loan sector. In the current year, till September, around eight lakh crore has been given in home loan.

According to a report, it has been said that due to demonetization, there will be reduction in the loan taken for property. This will decrease the re-sale value of the property. For instance, a house bought for Rs. 60 lakh some five years back will hardly be sold in eighty lakh which before demonetization was said to be sold for 1 crore.

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