Mumbai: Hike in repo rate to impact sentiments of home buyers; rise in home loan EMI may act as sentiment disrupt

With developers offering various schemes, it will also be time for homebuyers to take advantage of these benefits.

Sanjay JogUpdated: Friday, September 30, 2022, 05:17 PM IST
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Realty players on Friday said that the RBI’s move to hike the repo rate by 50 basis points during the festive season may impact the sentiments of home buyers, who have remained positive despite the hike in property prices due to the consecutive rate hikes and other factors like increased stamp duty and rising construction costs. The revised home loan EMI would increase by an average of 8-9% as compared to 6 months back. The continuous rise in home loan EMI is expected to act as a sentiment disruptor.

Knight Frank India CMD Shishir Baijal said it will have an impact on the sentiments across all buying categories, especially in the wake of the current festive season. Tight liquidity conditions along with the repo rate hike would lead to a significant rise in the cost of funding, impacting home loan rates as well. ‘’Going by the current trends we expect about 50% of this will be passed onto the home loan borrowers. A rise in home loan rates will further impact affordability across the markets. As per Knight Frank affordability index will deteriorate by another 2% This might slow down home buying decisions for the short to medium term. However, we hope, India’s steady economic growth and revival in consumer’s sentiment towards the economy will bring back confidence amongst the end users and support their home buying activities,’’ he noted.

However, CREDAI President Harsh Vardhan Patodia observed that the demand continues to stay robust and the realty sector is expected to perform well in the next few months as well owing to the festive period driving a positive sentiment as it is considered an auspicious time to invest in assets like properties. ‘’We expect the rise in repo rate not to impact positive consumer sentiment significantly. Developers are also running multiple festive offers which will aid overall demand. The hikes are happening to quell inflation and stay on track owing to the CPI’s rising costs.’’

Shapoorji Pallonji Estate CEO Venkatesh Gopalkrishnan said the RBI move might impact the home loan category, which may influence the buying sentiments of affordable to mid-segment home buyers. ‘’Overall, in comparison to the global trend of inflation, the real estate sector is hopeful that this rate hike will not completely dampen the buying sentiment. Additionally, the ongoing festive season is likely to bring in some positive movement as homeownership remains important for home buyers and will eventually result in sales, especially in the luxury and premium categories. With developers offering various schemes, we believe that now is the time for homebuyers to take advantage of these benefits,’’ he added.

JLL India Chief Economist and Head of research and REIS Samantak Das pointed out that home loan interest rates inching towards 9% and above may result in moderation of housing sales growth in the medium term, especially post the current festive season.

Moreover, ANAROCK Group Chairman Anuj Puri said home loans will get dearer soon which could impact residential sales to some extent during the upcoming festive quarter, particularly in the affordable and mid-range housing segments. ‘’The hike in home loan rates will be in addition to the other increasing costs such as inflationary trends of construction input costs. With the overall acquisition cost increasing further, developers will have to seriously consider doling out targeted offers and discounts to boost sales during the critical festive quarter. The silver lining is that only when the home loan interest rates breach the 9.5% mark will housing sales see a ‘High Impact’. If rates remain between 8.5-9%, the impact is expected to be moderate,’’ he opined.

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