Stock market crash forces home buyers on backfoot

The stock market crash has created ripples across various segments in Indian scenario. The already suffering home loan market has suffered further setback. People who were willing to take a home loan are now nowhere in sight. The market meltdown has left them high and dry, with little funds and a broken heart.

Many people have witnessed as much as 40 percent decline in their investment portfolio. Many home buyers were contemplating to fund their home loan installment or down payments from stock market gains. Now the advantage being eroded, they have to look for other avenues or defer the decision altogether.

Builders and property brokers all have acknowledged this slowdown after the slump in markets. The pressure on home loan segment has been tremendous during the past year or so. Earlier it was the astronomical rise in floating interest rates, which shattered the budgets of middle class home loan borrowers, now this slump has again dented their confident.

The banks are also facing huge flak for not relenting to the demand of lowering interest rates particularly for the sub 20 lakh home loan in India. The finance minister, Reserve Bank of India (RBI) have all done their part and are regularly pressing the banks to cut interest rates. However, the banks feel that the liquidity situation and cost of funds have already had an impact on their net interest margins and they can't afford any more discounts on home loans.

A major chunk of the initial investment that a home loan borrower has to make is composed of the down payment towards the home loan. This amounts to as much as 15-20 percent of the entire home loan. Banks put this as an essential requirement to give home loans. For a 20 lakh home loan this down payment could be anything between 3-5 lakhs.

The interest on a home loan of 20 lakh at 10 percent floating rate of interest is around Rs. 19500/ month. This is also a big amount in India, where average salary is still pretty low. Despite a growing section of society, which constantly earns above 60K per month, the rest of the population struggles to make the ends meet. The finance minister, who constantly encourages people, particularly the small investor to use the stock market has once again failed in providing a stable investment environment. The stock market has again played to the tunes of the big sharks, while the small investor has been again marginalized. It's the same old story of dashed hopes and empty pockets.

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