Slight rise in interest rates won’t impact demand for home loans: Deepak Parekh

Deepak Parekh, chairman of the Housing Development Finance Corporation, said a slight increase in interest rates will not impact demand for home loans as rates are at historically low levels.

Speaking at a CII event, the veteran banker said a home loan is a long-term loan where interest rates go up and down and a customer who wants a house won’t hold back because as interest rates rise.

The interest rate environment has remained supportive over the past three years, but there are signs that the cycle is turning, with some of the world’s central banks raising rates. The Reserve Bank of India, however, has promised to maintain its ultra-accommodative stance until growth resumes on a sustainable and sustainable basis.

“Obviously we are at the bottom of the interest rate cycle, but there is enough confidence in the central bank that any interest rate increases, if any, from now on will be calibrated and non-disruptive. “, Parekh said while commenting on whether home loans would be affected if interest rates were to rise.

“The government has continued tax incentives on home loans, which also reduce the effective rate paid on a home loan. The reason this concern has arisen is that since banks have moved to external benchmark or repo-linked lending, there has been no upward increase in benchmark policy rates so far,” did he declare.

According to Parekh, rising interest rates will not be a drag on home loans. “Remember we’ve seen home loan rates as high as 17-18% in the past. Today, interest rates are still at historic lows, so a slight increase will not impact demand for home loans,” he said.

On whether house prices will rise, Parekh said some high-end high-end projects have already seen a price hike of 15-20%, although such a rise is not the case in all the domains.

“With the exception of a few metropolitan cities, prices in the affordable housing segment are stable. The sweet spot for housing is still in the price range of Rs 5 million to Rs 10 million,” he said.

He said that while some pockets across the country are experiencing a slight price hike, it can be absorbed.

“What needs to be watched closely is if there is a continued increase in building material costs, which could pass through to the home buyer. There are, however, measures that can mitigate this impact, such as facilitating shorter construction cycles, ensuring faster approvals and activating a Goods and Services Tax credit for properties in progress. of construction. This would especially help affordable housing projects,” he said.

Asked by the commercial real estate industry in a post-pandemic era, Parekh said the jury is still out on workspace – work from home, return to work or have a flexible working model in the future . “Perhaps the three options can coexist. Yet the broader point is that whichever option is chosen, it remains positive for the real estate sector,” he said.

According to Parekh, the new supply of office space in major metropolitan cities is expected to be around 45 million square feet this year and an estimated quarter of this new supply is already pre-let. This demand is largely coming from the IT, e-commerce and professional services space. “Rentals are fairly stable so far, but there could be a slight uptick in some premium projects,” he added.

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