Home Buyer Interest – Interest @ Sub 9.5%

Home Buyer Interest – Interest @ Sub 9.5%

RBI Bid To Tame Inflation May Push Bank Rates

Realtors under real pressure to woo customers as cost of all inputs shoots with RBI policy

MUMBAI, Sep 30 (The CONNECT) - The 50 Bps hike by the RBI was expected, especially since no global economy has hinted towards any kind of moderation. Inflation continues to ravage almost all economies, and India is no exception. ANAROCK's recent Consumer sentiment survey also highlighted that at least 61% respondents saw high inflation as a major concern for them, seriously impacting their disposable incomes.

With this repo rate hike, home loans will get dearer soon, said Anuj Puri, Chairman - ANAROCK Group. This 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, Puri said.

Here are some more reactions:

Pritam Chivukula - Co-Founder & Director, Tridhaatu Realty and Treasurer,CREDAI MCHI said: "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 third time in a short period may have a short-term effect on the sentiment of homebuyers 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 to lighten the homebuyer’s load by reducing stamp duty to boost the sentiments in the festive season."

Kaushal Agarwal - Chairman, The Guardians Real Estate Advisory

"The recent consecutive rate hikes by the RBI were aimed at re-anchoring the inflation expectation and strengthening the economy. Thus far, the rise in property prices due to the increased interest rates, metro cess and higher stamp duty had not affected real estate sales over the last few months, thereby confirming that there is genuine demand for housing. But this move by the RBI to hike the repo rate again ahead of the festive season might temporarily limit the growth momentum of the real estate sector."

Cherag Ramakrishnan, Managing Director, CR Realty: ''With  the upward trajectory in interest rates firmly established by RBI, the homebuyers while feeling the pinch in the short term may rush to purchase their homes and lock in their home rates at the earliest. This has been the trend in the last quarter, and we see that trend accelerating in the coming two quarters as well. Based on the sales data of the last two quarters, even post the rate hikes, the off season sales are at an all time high. The fear of rising property prices and further interest rate hikes is only further fueling the latent demand conversion. With limited inventory close to readiness, the demand for ready or close to possession homes will see an exponential increase in the coming quarters.''  

Shraddha Kedia-Agarwal, Director, Transcon Developers: "RBI's decision to hike the policy rates for the fourth 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 couple of months which had a minimal impact on the housing demand. But, this decision will further put a dent on the homebuyer's sentiments impacting the overall demand for a short period of time."

Jitrendra Shah, Managing Director, Rockford Group: "The decision by the RBI to hike the repo rate to pre-pandemic levels was anticipated to keep the inflationary expectations under check. This move may impact the overall growth of the industry by dampening sales momentum while property prices are already on rise. However, we believe that this will also encourage the fence-sitters to make the most of the current schemes offered by developers in the market and take the plunge."

Bhushan Nemlekar, Director, Sumit Woods Limited: "Due to the pandemic and the geopolitical issues, the input costs were already high and now with these consecutive rate hikes, it will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted and this will result in undesired rate hikes across the spectrum. However, we did not see much impact on the buying spree in the last couple of months since there are genuine buyers in the market to keep the momentum going."

Jitesh Lalwani - President, HomeSync Real Estate Advisory: "RBI’s decision to hike the key policy rates for the third time in a row will have a serious impact on the housing loan EMIs but we are still bullish about the real estate sector the way it has performed in the past few months. Yes, homebuyers are concerned about the skyrocketing property prices but  we believe that this move may push homebuyers who are still deliberating to seal the deal. However, we urge the Government to take some necessary measures to control the rise in property prices so that it will help to boost the demand in the upcoming festive season."

Dr. Sachin Chopda, Managing Director, Pushpam Group: "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 during the ongoing festive season.’’

Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers: "RBI hiked the repo rate for the fourth time in a row by a further 50 bps to 5.9% as the government remains committed to tame inflationary pressures amidst global headwinds. However, domestic economic activities remain promising, thus providing the Central Bank with the required elbowroom to continue withdrawing its accommodative stance. Resultantly, RBI slightly moderated its growth target to 7% for FY 2022-23.

In response, banks are expected to continue raising their home loan rates in the next few months. With the festive season in the offing, developers are likely to dole out attractive schemes to attract fence sitters and first-time homebuyers. As the rate hike was on expected lines and the market has largely recovered from the pandemic lows, the home buying sentiment is not likely to be impacted significantly”

Amit Goyal, CEO, India Sotheby’s International Realty: In the last 5 months, RBI increased the repo rate by 190 basis points, from 4% In April to 5.90% now. The RBI has taken into consideration the broader economic and liquidity scenario and needs to curb the inflation further. Falling rupee is also a major concern amidst global uncertainty, besides high fuel prices. It is important to understand that policy rates and regulation will decide the long-term growth of the economy and the real estate sector.

Murthy Nagarajan, Head-Fixed Income, Tata Mutual Fund: RBI has lowered its GDP growth forecast to 7 % and CPI inflation has been maintained at 6.7 % for the current financial year. 67 % of the fall in forex reserves by 100 billion USD is due to revaluation effect. MPC maintains it stance of withdrawal of liquidity from the system. RBI refuses to state what could be the terminal repo rates and remain date dependent. Overall, the monetary policy is not as hawkish as market expected. Global adverse development has been acknowledged but RBI monetary policy stance is pre dominantly domestic driven. Rates market should take this positively and should trade in a range.

Akhil Mittal, Senior Fund Manager-Fixed Income, Tata Mutual Fund, “Maintaining vigil on global macro developments while recognising domestic strengths and vulnerabilities, RBI increased policy rates by 50 bps, largely in line with market expectations. Pausing short of igniting any terminal rate expectations, RBI committed to data dependence for policy moves. I believe it is a very balanced policy and calmed market nerves, which had become edgy post recent fed actions and financial market volatility. As far as rate trajectory goes, I believe RBI would not want to let the interest rate guard down as it makes our currency vulnerable. Hence, as of now, we see repo rate going to 6.40%-6.65% range in next couple of policy meetings. Interest rates are largely expected to remain range bound for now.”

The hike might impact consumption sentiments negatively ahead of the festive season. However, from a home buyers’ perspective, home loan rates will still remain below 9% per annum and they must utilize this opportunity and make their purchases by cashing in on offers and festive discounts in the market.

Piyush Bothra, Co-founder and CFO, Square Yards: The RBI has taken another aggressive stance by recalibrating the repo rates for the fourth time this year to further rein in the inflation and restore the economic health of the country. In real estate parlance, this revision won’t have any significant impact on consumer sentiments which is buoyant at present. In spite of the hike, the affordability of the home loan is still good, and robust housing demand and growing income stability will continue to keep the real estate sector in an advantageous position. Besides, with the festive season knocking on the door, the residential sector is expected to put up a good show, as the market is overflowing with new buyers. However, we may see an exercise of caution from second and upgrade home buyers.

Saransh Trehan, managing director, Trehan Group: This is the fourth consecutive rate hike by the apex bank in the last five months. However, the demand in the housing market continues to remain robust despite subsequent rate hikes, in fact in many cities it is improving. So, we don’t see any major impact in the scenario even after today’s RBI decision. However, with home rates hovering between 8-9%, further tightening, if any, will start to impact the sectoring and thereby the overall economy.

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