According to property developers and consultants, the RBI’s decision to increase the repo rate by 25 basis points will result in a rise in interest rates on home loans and may hit the demand for affordable and lower middle-income housing segments.
The real estate industry is also hopeful that the RBI’s move on Wednesday will be the last round of repo rate hikes.
Harshvardhan Patodia, national president of CREDAI, the apex body of realtors, said the continuous rise in interest rates would hit the borrowing sentiment for individuals and businesses alike.
NAREDCO national vice-president Niranjan Hiranandani said, “An outrageous hike of 250 basis points from May 2021 needs to be warranted before it turns negative for the rising Indian economic growth curve.”
He added that the effect of increase in home loan interest rates would be a hindrance in the affordable housing segment.
Anuj Puri, chairman, real estate consultant Anarock, said, “With the repo rate now at 6.5%, there could be some impact on housing uptake as home loan interest rates will move further north. The rates had already increased after one year. This will increase the financial burden on homebuyers, as apart from home loan interest rates, property prices have also increased in the last two to three quarters.
Pointing out that interest rates could cross the 9.5% mark after Wednesday’s hike, Mr Puri said there could be some pressure on sales volumes in the affordable and low- to mid-range housing segments, Those who are more cost-conscious.
Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd. said, “From a real estate perspective, the rate hike will further push up home loan interest rates. As a result, a slowdown in home buying sentiment may be seen in the coming quarters.”
He advised that developers should offer financial assistance to homebuyers to balance the business dynamics and boost the ongoing momentum.
“However the fundamentals of demand remain strong as they are linked to job confidence,” Mr. Dutt said.
Dhruv Agarwal, Group CEO, Housing.com, said banks will pass on the 25 basis point hike to homebuyers in the form of increased home loan rates. Nevertheless, he said, the lending rate for homebuyers would remain within a comfortable zone.
“Homebuyer sentiment is strong and we do not see this rising at a stronger pace in the residential real estate market,” he added.
Atul Banshal, director finance, Omaxe Ltd, said there would be a short-term impact on mid-segment and affordable housing.
Ramani Shastri, chairman and managing director of Sterling Developers, said frequent rate hikes could have a short-term impact on the overall housing demand and would increase the overall acquisition cost of buyers.
India Sotheby’s International Realty CEO Amit Goyal said the increase in repo rate will definitely increase home loan interest rates, but housing demand is expected to remain intact.
Amit Modi, director of the County Group, said the current increase should not cause much concern, as the volumes were still relatively small.
Colliers India CEO Ramesh Nair said: “Home loan interest rates are already in the high bracket of 8-9%. Moreover, housing prices are expected to remain largely stable in the coming quarters. The repo rate and increase and consequently increase in loan rates.”
The continuing rise in home loan interest rates is now expected to hit actual sales, further adding to the disinflation of sentiments among homebuyers, said Samantak Das, chief economist and head of research and development at REIS, India, JLL.
PropCatalyst Co-Founder Aniket Bharadiya said: “We have seen rate hikes continuously for the last 2 years, which has caused a lot of damage to many businesses, especially real estate and allied industries. Looking forward to it. Now year for businesses to come out of this tight monetary policy.”