The Reserve Bank of India (RBI) Governor Shaktikanta Das announced the Monetary Policy statement on February 8, 2023, increasing the repo rate by 25 bps as widely expected. The repo rate hike will undoubtedly push up the home loan interest rates, which had already crept up after five consecutive rate hikes this year.
Here is what real estate industry experts have to say:
Dr Niranjan Hiranandani -National Vice Chairman- NAREDCO
“The Economic survey evidently indicated the upward growth trajectory of the Indian economy, corroborated by RBI pegging the FY23-24 GDP growth rate at 6.4%. Indian economic resilience is reflected with improved capex, enhanced capacity utilization, improved urban and rural consumption, augmented investments and jobs creation. The geo-political tumultuous, recession signals, and weakening of western economies will reorient the growth scale towards the booming economy of India. This phenomenon will continue to draw high global traction which will fuel the demand across the real estate asset classes. The pricing index of the affordable housing segment will have detrimental cascading impact due to projected sticky core inflationary trend. Though surplus liquidity will power credit growth in the real estate sector, demand economics may be challenged in the affordable house segment – which is the broad spectrum of the consumption pyramid. The outrageous hike of 250 basis point since May 2021, needs to be warranted before it turns negative for the ascending Indian economic growth curve. The impact of home loan interest rate hike will be highly deterrent in the affordable housing segment as it will impact the price sensitive homebuyers and fatigue the supply of the developers. The luxury and mid housing segment players will remain cautious with a bit longer sales cycle.”
Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory
“Consecutive rate hikes by the RBI this year were aimed at re-anchoring the inflation expectations and maintaining financial stability. Thus far, the rising cost of house ownership led by higher EMI, higher stamp duty and other factors has not affected real estate sales, which is a firm indicator of genuine demand for housing. But any further hike in the repo rate might temporarily limit the growth momentum of the real estate sector. Although the recently concluded budget was tailor-made keeping the salaried and the middle class in mind, a rate cut at this stage could have triggered the sentiments of the homebuyers sustaining the growth momentum.”
Pritam Chivukula – Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI
“RBI ‘s decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. But a rate cut would have been a big booster for the real estate sector which was overlooked in the recently concluded budget. The sharp acceleration of rates consecutively for the sixth time in a short period will have a short-term effect on the sentiment of homebuyers as low interest rates have been the biggest factor in the resurgence for real estate demand in the last two years. We hope that the State Government will step-in again to lighten the homebuyer’s load by reducing stamp duty to boost the sentiments.”
Himanshu Jain, VP – Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL)
“Keeping the current market conditions and inflation in mind, the move by the RBI was expected to keep the economy on the track in the current highly volatile scenario. The rising property prices had already added to the woes of the homebuyers and now the decision of RBI to increase the repo rate will temporarily dent the current demand momentum. Also, for first-time home buyers, acquiring a home is considered as the biggest asset and these short-term decisions are likely to have a major impact on a buyer’s decision.”
Bhushan Nemlekar, Director, Sumit Woods Limited
“Earlier, due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of quarters since there are genuine buyers in the market to keep the momentum going.”
Dr. Sachin Chopda, Managing Director, Pushpam Group
“RBI’s decision to hike the policy repo rate was anticipated, factoring the rise in inflation. The rate hike is likely to shrink liquidity in the economy overall, especially impacting the investor’s sentiments. There will be a short-term pause on the minds of the investors while assessing the volatility of the current market dynamics. However, they are bound to return soon in the market once it is stable.”
Dinesh Doshi, President, NAREDCO Progressive Neral Karjat Unit
As expected, RBI has raised the repo rate by 25 basis points to 6.5%. The obvious impact on home buyer sentiment is expected – mostly in affordable and budget segments – although overall, housing sales are not likely to be majorly impacted. With retail inflation finally within its tolerance band of 2% to 6% in the last two months of 2022, hopefully, we are at the end of the ‘hike rates’ cycle, and should not have any further home loan EMI hikes. Home buying sentiment should be positively impacted in days to come, with festivals like Gudi Padwa adding to the positive vibes.
Also Read: RBI RR Hike to Impact home sales
