According to property consultants, the RBI’s decision of raising the benchmark interest rate will increase the cost of home loans and impact housing sales, particularly in low- and middle-income areas. Wednesday’s hike by the RBI of the benchmark rate was 50 basis points. Anarock, Knight Frank India and India Sotheby’s International Realty, Colliers India and India Sotheby’s International Realty, and Investors Clinic, all property consultancy firms, stated that the RBI’s action was in line with inflation control and would lead to an increase in home loan interest rates.
On RBI’s rate hike Real Estate Developers expect slowdown in housing demand in short-term
Anuj Puri, chairman Anarock, stated that the rate hike would push up home loan interest rates. These had already been creeping upwards following last month’s surprise announcement on monetary policy.
He said that interest rates will not rise as much as they did during the 2008 global financial crisis, when they were as high as 12 percent.
Puri stated that “Nonetheless, the current increase will reflect in residential sale volumes in the coming months, more so in mid-segments and affordable.”
He pointed out that the housing market remains largely user driven. “…There is no need for investors to seek the lowest entry point. He observed that genuine demand is based on an underlying desire for homeownership.
Puri stated that the repo rate hike was inevitable. “…but we are now in the red zone. He said that any future increases will have a significant impact on the housing market.
CBRE’s chairman and CEO – India South East Asia, Middle East & Africa Anshuman Magazine stated that the RBI’s decision of raising the repo rate was a welcome move considering the sharp rise in global inflation as well as tightening monetary measures by central banks around the world. We believe this will be a significant step in reducing inflation in the medium-term.
Ramesh Nair, CEO of Colliers India, expects banks to slowly pass on the rise in repo rates as higher home loan rates over the next few months.
He advised homebuyers that they should take advantage of current home loan rates as housing prices are expected to rise.
Dhruv Aggarwala CEO of Housing.com/ProperTiger.com stated that the twin rate increases by the apex banks would eventually result in home loan interest rate rates going up and thereby impact buyer sentiment.
Home loans will get more expensive, according to Shishir Baijal (CMD Knight Frank India),
Baijal stated that rising interest rates, as well as increased property construction costs and price pressures, could negatively impact real estate buyers’ sentiment.
Amit Goyal, India Sotheby’s International Realty CEO, does not expect any significant impact on the housing market’s demand side. The market is strong.
Goyal expected inflation to fall by year’s end, which would allow the central bank to return to a lower rate regime.
Anurag Mathur, CEO of Savills India, stated that the benchmark lending rates have increased by 90bps in a very short time span and will continue to rise in the coming months. This will lead to a significant increase in home loan EMIs compared with the previous fiscal year.
“The impact on the EMI-dependent affordable segment of residential real estate will be greatest among all segments. Notable, real estate developers will feel the impact of the rising cost of borrowing as well as on the supply side,” he said.
Chairman of Mumbai-based The Guardians Real Estate Advisory Kaushal Agarwal stated that while the RBI’s decision to raise the repo rate may temporarily slow down the sector’s growth, the demand will continue to sustain.
Samantak Das (chief economist and head of research, REIS, India) stated that “the rise in policy rates is expected to act more like a sentiment disruptor to the home buyers, given how mortgage rates are likely increase”.
Das stated, “Affordability is high and buying momentum will remain largely intact.”
Honeyy Katiyal (founder of Investors Clinic) believes that the real estate industry will be most affected by the rise in interest rates. He had hoped for stable interest rates.
Shrey Aeren (Managing Director & Country Chief of Berkshire Hathaway Home Services Orenda) stated that the rate increase acts as a psychological barrier even in premium housing segments.
He said that the impact on affordable housing will be greater, as it is mainly driven by sentiments. However, with the recent announcements by real estate developers of higher prices, there will be a double cost to consumers.
Shiv Parekh (Founder of hBits) stated that the rate hike will have an immediate impact on the residential housing market, and will affect the buyers’ purchase price.
hBits allows fractional ownership of real property.
According to Ashish Narain, CEO and founder of PropertyPistol.com PropertyPistol.com the RBI’s move could have an immediate effect on home buying in the short-term.