For the fourth time in a row, to combat inflation, RBI’s monetary policy panel hiked the repo rate and interest rates by 35 basis points to 6.25 per cent.
For the fourth time in a row, to combat inflation, RBI’s monetary policy panel hiked the repo rate and interest rates by 35 basis points to 6.25 per cent. This sudden spike might have an unplanned effect on several business segments, even though these measures are essential to tackle inflation. Here are some candid reactions from the real estate industry on the recent hike…
“The rate hikes by RBI won’t have a significant impact on the home buying sentiment. However, the central bank has been on a rate-hiking journey in order to tame the rising inflationary pressures. Understanding this, even home buyers are aware of the fact that these rates were transient and unsustainable. They were expecting the hike and are thus prepared for it. Several banks have already started passing the burden to home loan borrowers. We expect the demand to sustain, considering the necessity to own a home is of profound importance today. 2022 has favoured the luxury housing segment; the home buyers deliberately grabbed the opportunity of festive offers and sealed the deal. Similarly, with the consumers being confident about the economy, the real estate sector will register a remarkable year end, setting an example for 2023.” Surendra Hiranandani, CMD, House of Hiranandani
“The continuous rate hikes may lead to short-term turbulence in the overall housing demand when buyers are optimistic of making a home purchase decision and this may add to buyers’ overall acquisition cost. The real estate sector had started seeing gradual recovery across key property markets, driven primarily by end-users; however, the repeated rate hikes may impact the interest rate-sensitive sector. Low interest rates have been the biggest factor in the resurgence of real estate demand in the last few years and hence the rate hike would mean a hurdle in affordability. However, there is a positive sentiment, as affordability and disposable incomes of new-age homebuyers are much better than in the past. Despite the odds, we’re still hopeful as there is significant pent-up demand from a very large population base and first-time home buyers.”
Ramani Sastri, CMD, Sterling Developers
“After the 35 basis points (bps) hike in repo rates, we expect the Reserve Bank of India to soften its stand in the upcoming months as international crude prices and other global commodity prices have corrected from the peak. We will now start to see a revival in demand in the real estate sector as the uncertainty surrounding interest rate hike is nearing an end. We believe that the real estate sector has started seeing a gradual recovery across key property markets, driven primarily by end-users.” Amit Jain, CMD, ARKADE Group
“The apex bank’s decision to hike rates is very much on the expected lines considering the inflationary scenario. It may result in hardening of home loan rates. The demand for housing has remained strong despite successive hikes over the last one year or so, and we hope it will continue to remain so. We also expect the latest hike to be the last of rate hikes as any further increase we start hurting the home buying sentiment, especially in affordable and mid-segment.”
Pradeep Aggarwal, Founder & Chairman, Signature Global
“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 fifth time in a short period will have a short-term effect on the sentiment of home buyers 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 again to lighten the home buyer’s load by reducing stamp duty to boost the sentiments.”
Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty
“This increase in repo rate is part of an ongoing effort to bring under control the high level of retail (CPI) inflation, which is currently between 6 per cent and 6.5 per cent. In this cycle of rate increases, the repo rate has increased by 225 basis points (bps) after the most recent increase. Even though the projection for GDP has been scaled back, the central bank has signalled that it does not intend to hurt the growth sentiment by hiking interest rates too much. In general, the increase in the repo rate represents measured steps that are commensurate with the changing economic conditions. The increase may have a temporary effect but will be of no influence on the housing market in the medium to long term as the demand for housing remains robust.”
Rohan Pawar, CEO, Pinnacle Group
“With global and domestic inflationary pressures continuing to drive central bankers, the rate hike by RBI is on expected lines. So far, despite home loan interest rates increasing by 150 basis points demand for residential across top seven cities has been very strong. We believe this momentum should continue till home loan rate remains in single digit. We just hope that strong GDP growth, a steady jobs scenario and an elevated capex investment cycle will keep demand for real estate intact.”
Amit Goyal, CEO, India Sotheby’s International Reality
“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 once it is stable.”
Dr. Sachin Chopda, Managing Director, Pushpam Group
“RBI has done a fine balancing act as the central bank continued with its efforts to tame inflation and at the same time prioritising growth. Nobody, may it be industry or consumers, want high-interest rate regime. We are hopeful and expect that going forward as inflation situation improves the rates will definitely taper.”
Saransh Trehan, MD, Trehan Group
“The RBI has increased the repo rate for the fifth straight time as it looks to curb inflationary tendencies. This time the RBI increased repo rates by a slower 35 basis points to 6.25 per cent. We can expect the banks to continue to increase housing loan rates mirroring the trend in repo rates. Affordable and mid-housing are the most sensitive to prices, and we might see some slowdown in the short term, with an increase in housing loan rates. We do not expect a significant impact on the high-end and luxury housing demand. At the same time, the RBI has also revised the FY23 GDP forecast from 7 per cent earlier to 6.8 per cent. However, the Indian economy continues to be resilient, with noticeable credit growth in the system.”
Piyush Gupta, MD, Capital Markets & Investment Services, Colliers India
“The RBI has come far from synchronised rate hikes in its policy, as inflation outlook is beaming. Attempting to taper inflation, the Central Bank’s hike in the repo rate, much to expectations, will force the banks to increase lending rates impacting the quantum of home loans off-take and pushing EMIs upwards. The EMI-driven housing market will thus have a cumulative effect and gradually it will slower the housing inventory turnover by weakening the homebuyers’ affordability shadowed by increased interest rates. A lesser repo rate hike would have helped tackle inflation, yet managing growth. Mumbai’s residential realty market, which has already been hit by increased interest rates, will further get impacted for the home buyers in the pricing category of INR 1 crore and above.”
Samyak Jain, Director, Siddha Group
“RBI’s decision to hike the policy rates for the fifth 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 few months which had a minimal impact on the housing demand. But, this decision will further put a dent on the home buyer’s sentiments impacting the overall demand for a short period of time.”
Shraddha Kedia-Agarwal, Director, Transcon Developers