Business

‘Rate hike likely to impact housing sales’

Developers may undertake mitigating measures to soften the blow on homebuyer affordability, says Shishir Baijal, CMD, Knight Frank India.

Developers may undertake mitigating measures to soften the blow on homebuyer affordability, says Shishir Baijal, CMD, Knight Frank India. | Photo Credit: MOORTHY G

The Reserve Bank of India’s (RBI) decision to raise interest rates will impact housing sales, according to top officials of real estate consulting firms and developers.

“With the hike of 50 bps in policy rates, home loan lending rates would now edge further into the red zone’ said Anuj Puri, chairman, Anarock Group.

“This whammy comes along with the inflationary trends of primary raw materials, including cement, steel, labour that have recently led to a rise in property prices. Together, these factors will impact residential sales,” he added.

“For the real estate sector specifically, the third subsequent rate rise will mean a deterioration of affordability and may impact the sentiments of home buyers,” Shishir Baijal, CMD, Knight Frank India, said.   

“With the cumulative rate hike until today, assuming complete transmission, a prospective homebuyer’s affordability shrinks by around 11%. [i.e. from an ability of purchasing a house of ₹1 crore value shrinking to ₹89 lakh now],” he said.

He said developers may undertake mitigating measures to soften the blow on homebuyer affordability. 

 “This [the rate hike] may impact the cost of capital, however an immediate impact on housing demand is not certain,” said Anshuman Magazine, chairman & CEO - India, South East Asia, Middle East & Africa, CBRE.

“There has been an increase in appetite for home ownership post the pandemic, and with the upcoming festive season, it might generally withstand the marginal changes in loan rates,” he added.

“As a result of this move, the home loan interest rates are likely to increase,” said Abhishek Kapoor, CEO, Puravankara Ltd. “However, against the backdrop of rising income and employment levels and buoyant customer sentiment, this spike in rates is unlikely affect residential sales.”  

  Sales in the real estate sector are mainly funded through retail financialinstitutions and we expect that marginal changes will have a minimal impact on buying decisions, ”  M. Murali, CMD, Shriram Properties Ltd., said,

However, Surendra Hiranandani, chairman & MD, House of Hiranandani said, “The increase in repo rates will have an effect on interest rates as well as homebuyer attitude. This year has seen a steady increase in home sales, but the ongoing climb in mortgage rates may overwhelm a buyer.”


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Printable version | Aug 5, 2022 7:02:24 pm | https://www.thehindu.com/business/rate-hike-likely-to-impact-housing-sales/article65731991.ece