What’s Happening?
In today’s Reserve Bank of India (RBI) Policy Meeting, the central bank raised interest rates by 50bps to 4.9%. This came as another trouble for the real estate sector, but the RBI also gave the industry some relief. The central bank increased the existing limits on individual housing loans by urban and rural cooperative banks. Moreover, the rural cooperative banks are now allowed to extend finance to commercial realty projects. This will help both the cooperative banks and the realty space.
RBI says such measures will improve the credit flow to the housing sector. This means that customers can now get more home loans from a cooperative bank near home. The home loan limit in tier-I was Rs 30 lakh, and tier-II was Rs 70 lakh. Now, it has increased to Rs 60 lakh in tier-I and Rs 1.4 crore in tier-II. This will boost the real estate market that has been down this year due to global inflationary pressures, supply chain disruptions and a rise in raw material prices.
Should Investors Be Worried?
The real estate market will not hit bottom because they have already hiked property prices owing to the continuous rise in raw material prices. It is said that the recovery in the real estate market will continue, albeit at a relatively slower pace. Furthermore, RBI’s decision to increase the home loan limits for cooperative banks will aid the realty space.
Key Positives
Sanjay Dutt, MD & CEO of Tata Realty and Infrastructure, says the input costs for supply are on the higher side and combined with the loan rates, it will cause mild discomfort to homebuyers because prices will rise and will quickly return to pre-COVID levels. Moreover, the property sales are robust in tier-II and tier-III cities.
What Lies Ahead?
The announcement of the cooperative banks was a good relief. The home loan limits were last revised almost a decade ago and with the increase in the housing prices, increasing the limit was a much-needed move. There would be an improvement in the affordable housing segment.
