Cheap home loans won't stay for long

Recent home loan rate cuts by banks and financial institutions may not be there for long, as it would lead to increased number of defaults, according to experts. In fact, the lowered interest rates will not be beneficial for the Indian scenario in the longer run.
There are various reasons for this belief. First, there is an inverse correlation between home loan rates and property demand.
"Reduction in home loan rates will always lead to higher demand for properties. In 2006-07, when home loan rates were between 7.5-8 per cent, the property market was at its peak. With higher volumes come higher defaults and delinquencies. In the long term, lower rates will be beneficial for the real estate market but the loan provider needs to be careful in checking the worthiness of the loan taker."
"Sustained period of low interest rates become a fundamental necessity, if India has to achieve a higher home ownership among its populace." He added, "However, Indian banks unlike their US counterparts should not use low upfront interest rates as tools to make home buyers buy into intrinsically unaffordable properties. That would do more harm than good, as we all know by now from the US credit crisis." Therefore, those taking home loans at reduced or special floating rate of interest from banks should remain cautious and prepared for a possible increase of rates.