LIC Housing Finance offers some of the best loan rates on the Indian real estate market. Is it worth investing right now?
The stock price of LIC Housing Finance Limited, an Indian real estate company, dropped 1.95% on Wednesday before the bell. Later last week, LIC took symbolic possession of a Mumbai property after the contractor failed to repay their obligations.
Vasant Sagar Properties had borrowed Rs 570 rupees (68.5 million USD) with Subhash Chandra as guarantor for the reclamation of a Churchgate property in Mumbai, specifically a plot in Backbay Reclamation Estate.
After both the borrower and the guarantor failed to repay the obligation, LIC Housing Finance was forced to take possession of the property.
LIC Housing Finance is one of India’s largest real estate players, being a subsidiary of the Mumbai-based Life Insurance Corporation. The Indian real estate market is one of the largest in the world, with 89% of households owning the home they live in. According to the iMARC group, in 2022 India’s real estate market was worth 256.8 billion USD.
However, the Indian real estate market was strained by constant rate hikes by the Reserve Bank of India. Interest rates have currently peaked at 6.50%, up 250 basis points since May 2022.
Nevertheless, LIC Housing Finance posted a 13.24 billion rupees increase in profits for the second quarter of 2022. This is on track with the rise in housing demand in India following the Covid-19 pandemic.
Is it worth buying a house in India?
LIC Housing Finance normally offers many incentives for new homeowners in India. From competitive mortgage rates to flexible repayment options, from low processing schemes to the overall Indian tax benefits, this sounds like a great investment.
Unfortunately, similarly to what is happening in the West, mortgage interest rates are skyrocketing as a result of high inflation (7.44% in July) and constant central bank hikes.
At the moment, the interest rate with EMI (equated monthly installments) for most LIC loans is 8.50%. These include home loans, construction loans, and home loans for non-resident Indians (NRI).
The recent strife between LIC and Vasant Sagar Properties could also be a sign of weaker demand and lowering confidence. As a conclusion, this might not be the best moment to invest in the Indian real estate market.
Nevertheless, this market is projected to skyrocket in the coming years. According to the India Brand Equity Foundation (IBEF), the real estate sector is expected to amount to 20% of India’s GDP by 2030, totaling over a trillion US dollars.
In general, India will soon become an extremely convenient market to invest in, and the real estate sector will be no different.
