Home sales could fall due to likely hike in interest rates on home loans: experts

The RBI’s decision to raise the benchmark interest rate will make home loans more expensive and affect home sales, especially in the affordable and middle-income segments, according to property consultants.

The RBI on Wednesday raised the main policy rate by 50 basis points.

Real estate consultancy firms Anarock, Knight Frank India, JLL India, Colliers India, India Sotheby’s International Realty and Investors Clinic said the RBI’s decision was on the expected line to control inflation and it would lead to higher prices. interest rates on home loans.

Anarock Chairman Anuj Puri said: “The rate hike will push up mortgage interest rates, which had already started to climb after the surprise monetary policy announcement last month.”

Interest rates will remain lower than during the 2008 global financial crisis, when they hit 12% and above, he said.

“Nevertheless, the current uptick will be reflected in residential sales volumes in the coming months, more so in the affordable and mid-range segments,” Puri pointed out.

He noted that the housing market is still largely end-user driven.

“…So there’s no investor mentality that’s looking for the lowest possible entry point. The real demand comes from an underlying aspiration for home ownership,” said he observed.

Puri said the rise in the repo rate was inevitable.

“…but we are now entering the red zone. Any future rise will have a marked impact on home sales,” he added.

Colliers India CEO Ramesh Nair expects banks to gradually pass on this repo rate hike in the form of higher home loan rates in the coming months.

He advised buyers to take advantage of prevailing mortgage rates as house prices are expected to rise.

Dhruv Agarwala, CEO of Housing.com and PropTiger.com, said: “The twin rate hikes by the apex bank would ultimately lead to higher mortgage interest rates, which would impact buyer sentiment.” .

Knight Frank India CMD Shishir Baijal said home loans are expected to become more expensive.

“Rising interest rates along with high housing construction costs and commodity price pressures could negatively impact home buyer sentiment,” Baijal said.

India Sotheby’s International Realty CEO Amit Goyal said he saw no major impact on demand from the housing market, which continues to remain strong.

Goyal hoped inflation would subside by the end of the year, allowing the central bank to return to a lower interest rate regime.

Samantak Das, Chief Economist and Head of Research and REIS, India, JLL, said: “The policy rate hike is likely to further disrupt homebuyer sentiment as mortgage rates are likely to rise.” .

“Affordability remains elevated and buying momentum should remain largely intact,” Das added.

Investors Clinic founder Honeyy Katiyal said rising interest rates will hurt the real estate sector the most. He hoped for a stable interest rate regime.

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