It is well known that RBI’s repo rate hike has paved way to make home loans more expensive. However, realty experts feel that the demand for homes county-wide will not witness massive impact. While home loan rates are likely to settle at around 8 per cent, the existing demand in the market is expected to keep the industry buoyant. Let us see what the market experts feel about this.
Direct impact on real estate
Anuj Puri, Chairman, Anarock says, “This is the third consecutive rate hike in the last two months and finally marks the end of the all-time best low-interest rates regime – one of the major factors that drove housing sales across the country since the pandemic. This whammy comes along with the inflationary trends of primary raw materials, including cement, steel, labour that had recently led to a rise in property prices. Together, these factors – rising home loan rates and construction costs – will impact residential sales that did reasonably well in the first half of 2022.”
As per ANAROCK Research, approximately 1.85 lakh units were sold in H1 2022 across the top 7 cities. The repo rate now stands at 5.4 per cent, thus reaching the pre-pandemic levels. While inflation has partially eased as compared to the surge in April, it continues to be above the RBI’s target.
Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers says, “With this, the repo rate has now increased by 140 bps in the last three months, with the rate hovering above pre-pandemic levels. Domestic economic activities remain resilient despite the challenging global financial and geopolitical environment, leading to the withdrawal of the accommodative stance by the RBI. The RBI kept its growth target unchanged at 7.2 per cent for FY 2022-23. With respect to the rising repo rate, several banks have already begun rising home loan rates and this trend is expected to continue.”
Demand for homes to sustain
Amit Goyal, CEO, India Sotheby’s International Realty says, “Home loan rates are now expected to settle around 8 per cent per annum, which can put a short-term psychological dent on the demand for the mid and affordable housing segment, but we won’t see that continuing for long. We are still in the comfort zone of a single-digit rate. With pent-up demand for housing post-COVID, strong economic growth and a steady job market, we expect the demand momentum to continue in India’s residential housing segment, especially in the top 6 cities, where office leasing and absorption has been strong.”
Pankaj Pal, Group Executive Director, AIPL says, “We don’t foresee a major impact on the demand side in the housing market. It is likely to remain robust as real estate is largely viewed by buyers as the best investment option considering the volatility in the equity market, gold as well as other investment avenues.”
Saransh Trehan, Managing Director, Trehan Group says, “RBI has already raised interest rates a couple of times this year, and it had very little or rather no impact on the demand for real estate as the Indian economy is one of the best performing economies globally and the consumer sentiment is on a high. As a result, the demand for all kinds of properties continues to remain high and the scenario is unlikely to change in the near future.”
Investment trends could shift
Kenish Shah, Co-founder, PropReturns says, “Investment philosophies will change as a result of the additional increase of the repo rate of 5.4 per cent to beat inflation. As opposed to equity products, investors will seek to diversify into fixed income high yield assets like bonds, and income-producing commercial real estate. Investors’ best defense against inflation will be diversification.”
End of realty bull-run?
Ankit Kansal,MD, 360 Realtors says, “Across the globe, we have seen central banks increasing repo rates and the recent hike by the RBI is an extension of a larger global phenomenon. Meanwhile, what is interesting is the overall healthy underlying economic sentiments. Post-pandemic, the Indian economy is poised to grow fast in the coming quarters and this is infusing positive sentiments in the Indian real estate industry as well.”