The RBI Monetary Policy Committee hiked repo rate by 50 basis points to 5.4% and the Standing Deposit Facility (SDF) stands adjusted to 5.15%.
By Varun Singh
From the real estate sector’s perspective, this upward revision will impact the sentiments of home buyers, who have remained positive despite the hike in the property prices due to the consecutive rate hikes and other factors like increased stamp duty and rising construction costs.
Here are the reactions from the real estate experts:
Dr Niranjan Hiranandani -National Vice Chairman- Naredco & MD- Hiranandani Group, “Industry reckons the RBI’s focus on sustainable economic growth with Real GDP forecast at 7.2% for FY23, while continuing its monetary intervention to tame global inflation headwinds by increasing repo rate by 50bps. As the home loan borrowing is at the flexible rate, short term interest rate spike will certainly hurt the homebuyers’ sentiments, but it averages out the cost positively in the long term. Developers are conscious about the inflationary pressure building up with the spiralling economic discord and will chalk out deal sweeteners on the back of festive tailwinds. Industry recommends the continuation of two thong approaches in the way of fiscal as well as monetary intervention to contain the consequential impact due to the global upheavals. Real estate continues to be a good bet for investment with sustainable consumption demand at play even after the interest rate cycle wanes off.”
Anuj Puri, Chairman – ANAROCK Group, “A rate hike was expected, but the expectation was for a maximum of 35 bps. The hike by 50 bps is definitely on the higher side, and home loan lending rates will now edge further into the red zone. 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, etc., that have 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, approx. 1.85 lakh units were sold in H1 2022 across the top 7 cities. The repo rate now stands at 5.4%, 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.”
Pritam Chivukula – Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI “After two years of unchanged repo rate, RBI ‘s decision to hike the interest rates to tackle the inflation and ensure domestic economic recovery was a no-brainer. The sharp acceleration of rates consecutively for the third time in a short period may 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 to lighten the homebuyer’s load by reducing stamp duty ahead of the festive season.”
Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory“The recent consecutive rate hikes by the RBI were aimed at re-anchoring the inflation expectation and strengthening the economy. Thus far, the rise in property prices due to the increased interest rates, metro cess and higher stamp duty had not affected real estate sales over the last few months, thereby confirming that there is genuine demand for housing. But this move by the RBI to hike the repo rate again might temporarily limit the growth momentum of the real estate sector.”
Cherag Ramakrishnan, Managing Director, CR Realty”With the upward trajectory in interest rates firmly established by RBI, the homebuyers while feeling the pinch in the short term may rush to purchase their homes and lock in their home rates at the earliest. This has been the trend in the last quarter, and we see that trend accelerating in the coming two quarters as well. Based on the sales data of the last two quarters, even post the rate hikes, the off season sales are at an all time high. The fear of rising property prices and further interest rate hikes is only further fueling the latent demand conversion. With limited inventory close to readiness, the demand for ready or close to possession homes will see an exponential increase in the coming quarters.”
Shraddha Kedia-Agarwal, Director, Transcon Developers“RBI’s decision to hike the policy rates for the third consecutive time was anticipated on the back of high inflation and economic recovery. We had already started seeing a vertical movement in the home prices from the past couple of months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer’s sentiments impacting the overall demand for a short period of time.”
Jitrendra Shah, Managing Director, Rockford Group “The decision by the RBI to hike the repo rate to pre-pandemic levels was anticipated to keep the inflationary expectations under check. This move may impact the overall growth of the industry by dampening sales momentum while property prices are already on rise. However, we believe that this will also encourage the fence-sitters to make the most of the current schemes offered by developers in the market and take the plunge.”
Bhushan Nemlekar, Director, Sumit Woods Limited
“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 months since there are genuine buyers in the market to keep the momentum going.”
Jitesh Lalwani – President, HomeSync Real Estate Advisory
“RBI’s decision to hike the key policy rates for the third time in a row will have a serious impact on the housing loan EMIs but we are still bullish about the real estate sector the way it has performed in the past few months. Yes, homebuyers are concerned about the skyrocketing property prices but we believe that this move may push homebuyers who are still deliberating to seal the deal. However, we urge the Government to take some necessary measures to control the rise in property prices so that it will help to boost the demand in the upcoming festive season.”
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 as the festive season commences.’’
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