Banks 'interest' may go up, buyer interest to slow down; property prices shoot up, as input costs zoom
MUMBAI, Aug 6 (The CONNECT) - The RBI Monetary Policy Committee hiked repo rate by 50 basis points to 5.4% and the Standing Deposit Facility (SDF) stands adjusted to 5.15%.
From the real estate sector’s perspective, this upward revision will impact the sentiments of home buyers, who have remained positive despite the hike in the property prices due to the consecutive rate hikes and other factors like increased stamp duty and rising construction costs.
Here are some industry voices:
Sanjeev Chandiramani, COO – Ruprel Realty: It is a hat-trick of sorts as the Reserve Bank has raised the repo rate for third time. With the hike, the overall bench mark rate goes by 1.4 per cent which could push up the banks’ lending rate. This in will have a cascading effect on the real estate buyer sentiment. We will the government supports the industry with some reliefs such as reduction in stamp duty and ensuring prices of inputs such as cement and steel under check from inflationary pressures.
Pritam Chivukula - Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI - "After two years of unchanged repo rate, 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 ahead of 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 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 fuelling 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 third 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 as the festive season commences.
Ramesh Nair, CEO, India and Managing Director, Market Development, Asia, Colliers - RBI hiked the repo rate for the third time in a row by 50 bps to 5.4% as the government tries to control inflationary pressures. With this, the repo rate has now increased by 140 bps in the last 3 months, with the rate hovering above pre-pandemic levels. Domestic economic activities remain resilient despite the challenging global financial and geopolitical environment, leading to the withdrawal of the accommodative stance by the RBI. The RBI kept its growth target unchanged at 7.2% for FY 2022-23. With respect to the rising repo rate, several banks have already begun rising home loan rates and this trend is expected to continue. Over the last year, the housing sector has seen a recovery in demand across segments, and the higher home loan rates could dent homebuyers’ sentiments, especially in the affordable to mid category. However, we do not see a significant impact on the high-end and luxury segments due to the higher home loan rates.
Amit Goyal, CEO, India Sotheby’s International Realty - Given the need to tame inflation, the RBI decision to increase the repo rate by 50bps is on expected lines. With this third consecutive hike in the repo rate, we are now back to pre-pandemic levels, highest since August 2019.
Home loan rates are now expected to settle around 8% per annum, which can put a short-term psychological dent on the demand for the mid and affordable housing segment, but we won't see that continuing for long. We are still in the comfort zone of a single-digit rate. With pent-up demand for housing post-COVID, strong economic growth and a steady job market, we expect the demand momentum to continue in India's residential housing segment, especially in the top 6 cities, where office leasing and absorption has been strong.
Pankaj Pal, Group Executive Director, AIPL - The RBI decision is on the expected lines considering the current inflationary scenario. The lending and deposit rates are likely to firm up. It may have a slight impact, but we don’t foresee a major impact on the demand side in the housing market. It is likely to remain robust as real estate is largely viewed by buyers as the best investment option considering the volatility in the equity market, gold as well as other investment avenues.
Saransh Trehan, Managing Director, Trehan Group - RBI has already raised interest rates a couple of times this year, and it had very little or rather no impact on the demand for real estate as the Indian economy is one of the best performing economies globally and the consumer sentiment is on a high. As a result, the demand for all kinds of properties continues to remain high and the scenario is unlikely to change in the near future.
V Swaminathan, Executive Chairman, Andromeda loans and Apnapaisa - With this repo rate hike of 50 bps, we are seeing the highest rates that existed pre-pandemic during 2019. This lending rate calibration by the RBI could signal a downward trend in borrowers looking for home loans, as both new & existing home loan EMIs are set to go up, ushering in a wait-and-watch attitude among new homebuyers.
Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. - Keeping the current market conditions and inflation in mind, the move by RBI was expected to keep the economy on the track in the current highly volatile scenario. The rising prices of raw materials had already added to the woes of the developers and now the decision of RBI to increase the repo rate will temporarily dent the current demand momentum. Also, for first-time home buyers, acquiring a home is considered as the biggest asset and these short-term decisions are likely to have a major impact on a buyer’s decision.
Akhil Mittal, Senior Fund Manager-Fixed Income, Tata Mutual Fund- Taking inflation head-on, RBI has raised rates by 50 bps, in line with our expectations. While showing faith in growth, MPC gave higher priority to address inflation, maintain financial stability in growing global financial volatility, and ensuring policy does not lag behind. In doing so, RBI has shown its resolve towards meeting medium term inflation target and ensuring stability to support medium to long run growth for the economy. The endeavour to get real rates in positive territory, as mentioned earlier by RBI, gets closer with this move and we expect another 50-bps rate hike by MPC over next couple of MPC meetings before the pause.
As we are much better relatively in terms of growth and inflation, we might not have to tighten as aggressively as western countries and hence might not need to turn around policy direction sooner, which reduces policy uncertainty. RBI has chosen to be cautious now and leave policy space for future support to growth.