The recent decision by the Reserve Bank of India (RBI) to increase the repo rate by 25 basis points will lead to higher interest rates on home loans. It may also have an effect on demand for lower mid-income and affordable housing categories as per several industry experts. However, many experts also feel that the momentum in the residential space will stay intact. Some others feel that there will only be a minor impact in the short term. The industry is also hopeful that this is the last round repo rate hikes.
Some experts feel that there will be an impact on the affordable housing and mid-range categories in the short term, with periodic hikes affecting overall buyer sentiments and costs of acquisition alike. Some feel that the repo rate increase will not affect demand for housing hugely. Co-Founder and CFO at Square Yards, Piyush Bothra, stated that while this hike will make home loans costlier, the rates are still lower than home loan rates from a historical standpoint. He opined that residential demand is quite strong and widespread, with overall sentiments of home purchases expected to stay solid. Other experts feel that home loan rates are already in the 8-9% segment recently and the industry hopes for no further repo rate increases.
Actual sales figures may be affected in the short term as per some experts, with the realty market anticipated to witness a little volatility. Home buyer sentiments have resurged in the housing market over the last few years according to several property developers and experts. This should remain intact if the bigger picture is to be seen, although short-term sales figures may be impacted for a while. The industry is hopeful that there will be a reduction or pause in repo rate hikes in the near future, since the real estate industry and related sectors have been affected by the same.
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Published Date: Feb 8, 2023
