Realtors see rise in home loan rates; demand for affordable, lower-to-mid-income housing may be hit

The RBI’s decision to raise the repo rate by 25 basis points will result in an increase in interest rates on home loans and may impact demand for affordable and lower mid-income housing segments, according to property developers and consultants.

The real estate industry is also hoping that RBI’s move on Wednesday would be the last round of hike in the repo rate.

Realtors’ apex body CREDAI National President Harsh Vardhan Patodia said the continuous increase in interest rates would dampen sentiment in borrowing for individuals and businesses alike.

NAREDCO National Vice Chairman Niranjan Hiranandani said, “The outrageous hike of 250 basis point since May 2021 needs to be warranted before it turns negative for the ascending Indian economic growth curve.”

The impact of the increase on home loan interest rates would be a deterrent in the affordable housing segment, he added.

Real estate consultant Anarock Chairman Anuj Puri said, “With repo rates now at 6.5%, there could be some repercussions on housing uptake as home loan interest rates will head further north. The rates had already crept up after five consecutive rate hikes over the last one year. This will add to the financial burden on homebuyers as, apart from home loan interest rates, property prices have also inched up in the past two to three quarters.”

Pointing out that interest rates may breach the 9.5% mark after Wednesday’s increase, Mr. Puri said there might be some pressure on sales volumes in the affordable and lower-to-mid-range housing segments, which are more cost-conscious.

Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd, said, “From a real estate standpoint, the rate hike will push the home loan interest rate further. As a result, a slowdown in the home buying sentiment may be witnessed in the upcoming quarters.”

Developers should seek to offer financial assistance for homebuyers to balance the business dynamics and give a boost to the ongoing momentum, he advised.

“However the demand fundamentals remain strong as they are linked to job confidence,” Mr. Dutt said.

Dhruv Agarwala, Group CEO, Housing.com, said banks would pass on the 25-basis point increase to homebuyers in the form of increased home loan rates; still, he pointed out, the borrowing rate for homebuyers would continue to remain within a comfortable zone.

“Homebuyer sentiment is strong and we don’t see this hike derailing the strong momentum in the residential real estate market,” he added.

Atul Banshal, Director Finance, Omaxe Ltd., said there would be a short-term impact on the mid-segment and affordable housing.

The repeated rate increases may have a short-term impact on overall housing demand and the buyers’ overall acquisition cost would go up, said Ramani Sastri, Chairman & MD, Sterling Developers.

Amit Goyal, CEO, India Sotheby’s International Realty, said the increase in repo rate would certainly increase the home loan interest rates, but expected the housing demand to remain intact.

Amit Modi, director, County Group, said the present increase should not cause much concern, as the quantum was still relatively less.

Colliers India CEO Ramesh Nair said: “Home loan interest rates are already in the higher bracket of 8-9%. Further, housing prices are expected to largely remain firm in the upcoming quarters. On the optimistic side, we hope not to see a further rise in the repo rate and a resultant increase in loan rates.”

The continuous rise in home loan interest rate is now expected to impact actual sales moving beyond sentiment disruption of homebuyers, Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.

Aniket Bharadia, Co-Founder of PropCatalyst, said: “We have consistently seen rate hikes for last 2 years, which has hurt multiple businesses a lot, especially real estate and allied industries. We look forward to a pause or reduction for at least a year now for the businesses to come out of this tightening monetary policy.”