With homebuyers already stretched on EMIs and loan tenures, a further hike in interest rate will hit them hard, says Colliers.
NEW DELHI, Mar 30 (The CONNECT) – Realty industry experts hope for a freeze on repo rate hikes by the RBI for some time as the hike home loan interest might impact the market sentiments.
“To mitigate the loss caused by the increase in interest rates, not only should the government restrict any further increase in home loan interest rates, but it should also encourage state governments to provide rebates on stamp duty,” said Pradeep Aggarwal, Founder & Chairman, Signature Global (India) Ltd
Over the past three quarters, the interest rate on home loans has risen to over 9%, representing a 40-50% increase from the historical low of 6.5% per annum. As a result, many home loan borrowers are feeling the impact of this significant increase in interest rates, Aggarwal said.
He said though there hasn't been a significant impact on housing demand so far, any further increase in policy rates could push the home loan interest rate beyond the psychological barrier of 10%, which could have a substantial impact on buyer sentiments and affordability.
Vimal Nadar, Head of Research at Colliers India, said Home loan interest rates are already at an alarmingly higher level of 9.5% and above in response to the increase in repo rates.
While the rationale for another potential hike is being justified for inflation containment amidst a global gloomy environment, it is pertinent to evaluate its adverse impact on the real estate sector, he said.
With homebuyers already stretched on EMIs and loan tenures, a further hike in interest rate will hit them hard. The impact will be compounded in the current environment where the industry expects a lesser increase in income levels with housing prices remaining firm, Nadar added.