NEW DELHI: The Reserve Bank of India (RBI) for the second time in two months has raised its benchmark interest rate by 25 basis points on inflationary concerns and will not have much impact on housing sales, but it can delay for revival of the sluggish real estate sector, according to experts and realtors.
“From a real estate perspective, this hike will negatively impact buyer sentiment with the logical result on quantum of sales,” Realtors’ body NAREDCO President Niranjan Hiranandani said.
Real estate sector is facing a multi-year slowdown due to low demand and significant delays in execution of housing projects by developers.
Property consultant Knight Frank India CMD Shishir Baijal said the increase in repo rate was on expected lines given the current inflationary trend.
“However, looking at the challenging residential market scenario, we were hoping that the RBI would have paused the rate hike thereby providing a fillip to the buyer sentiment,” he added.
Anshuman Magazine, Chairman, India and South East Asia, CBRE, said: “Most banks are expected to realign their deposit and lending rates following this policy announcement. However, the move is unlikely to impact the real estate sector as most of the home loans are floating in nature and come with 15-20 year tenure. Hence, the rise and fall in interest rates get balanced out during the loan life cycle.”
JLL India’s CEO and Country Head Ramesh Nair said: “This may be a mental setback for the end users as despite a healthy GDP, lending rates for homes and other desirable goods will move northwards.”
“While this may lead to a hike in home loan rates as well, the overall real estate sector now rests on a strong footing and buying decisions may not be altered by these marginal changes,” said Anuj Puri, Chairman – ANAROCK Property Consultants.
He said the hike in policy rates could affect the entry level housing market as very low ticket size purchase decision might be pushed further.
However, Nair said the overall sales velocity is expected to remain stable for the rest of the year as most major markets have bottomed out.
Dhruv Agarwala, Group CEO, Proptiger.com, Housing.com and Makaan.com said: With the rates now going up, borrowers can expect a further rise in loan costs after the latest RBI policy and the markets are expected to dip slightly but with the stability, it has achieved in the past, it is expected to recover from the slump eventually.”
Credai National Vice President Manoj Gaur, who is also MD of Gaurs Group, said the RBI should have reduced repo rate to boost housing demand.
Noida-based developer ABA Corp Director Amit Modi said: “It is huge blow for real estate sector which is yet to recover from the impacts of demonetisation and the implementation of GST even after a whole year.”
He hoped that banks would not increase interest on home loans as housing segment was still in recovery mode unlike auto sector which was growing steadily.
Joe Verghese, MD, Colliers International India said: “It looks like that the opportune time for discount hunting in case of residential investments is slipping away. We should be at the last stages of the phase to buy at good bargains.”
Deepak Kapoor, Director, Gulshan Homz, said the decision of RBI to increase the rates again twice in a row is a clear indication that the apex bank wants to retain its aggressive approach in the upcoming months.
Gurgaon-based developer BDI group MD Ssumit Berry said the increment in repo rate might seem to dampen sentiments in the market but for the real estate fraternity, it might have little or no impact.
Dhiraj Jain, Director, Mahagun Group, said there is still room for financial institutions to cut down on their lending rates for their customers.
Credai Ghaziabad General Secretary Gaurav Gupta said the increase in the lending rates affects the growth in real estate as the net cost on the buyer for the housing unit gets increased, while RG group MD Rajesh Goyal said the sentiments would be hit in the real estate market.
Mumbai-based developer Sumer group CEO Rahul Shah said the home loan rate might go up thus impacting customer sentiments.
Dhaval Ajmera, Director, Ajmera Group, said: “This move will make further dampen the already low spirits of the real estate sector, making the home loan more expensive for potential seekers. On one hand where the government is gunning big for ‘Housing for All’ and affordable housing, such moves are totally out of sync with the vision at centre”.
Gaurav Mittal, MD, CHD Developers, said the rise in repo rate is not likely to hurt the sentiment of the buyers.
Amit Ruparel, MD, Ruparel Realty said, “RBI’s decision of increasing the repo rate is a major concern for the housing sector as it has hiked the rates consecutively…With this decision, home loans are likely to get costlier.
Nitesh Kumar CEO TDI Infracorp said” Most of the inventories sold by real estate developers these days are mainly sold on easy home loan facilities and Subvention schemes as interest rates were going down over last one year. Most of the people living on rent were buying their own house as their EMI were equivalent to their monthly rent, now with announcement by RBI to increase repo rate by 25 basis point in consecutive quarter, the interest rate will go up in a big way leading to decrease of sales in the real estate Market . With real estate sector trying to overcome and was on revival mode this will dent the sectors growth. ”
CMD of Tulip Infratech Parveen Jain says, ‘The increase in repo rate shall have negligible effect on the Real estate, Housing Finance and Home loans as slight increase or decrease in Repo rate does not matter which is bi-monthly and not a permanent fixture.
“Instead we need to look at the larger picture that the increase in repo rate is being done to strengthen the banking system and the economy which shall become more growth oriented and stabilized in the long run without affecting the Real estate & Housing Finance. Hence we should take the increase in repo rate in a positive way for the overall economic growth of the nation,” he added.
“Just about when markets started looking up a bit, and robust direct and indirect tax collection started trickling in, this increase in repo rate by RBI will plateau the accelerating pace of economy. Naturally, the cost of funds will go up. This will also adversely impact investor sentiment which in turn will further effect the real estate sector,” said Anil Saraf, Chairman & Managing Director, ASF Group.
“The rate hike of 25 bps was on expected lines, but it is surprising that this is the second hike implemented by the Central Bank despite maintaining “neutral” stance. Inflation is expected to trend upwards and might surprise in the second half of the year owing to increase in MSP and higher government spending,” said Surendra Hiranandani, Chairman & Managing Director, House of Hiranandani.
“The hike will certainly impact credit growth and further delay the revival of the real estate sector. Construction activity had started to pick up slowly post the implementation of policy reforms, but the rise will hurt consumer sentiment. The sector was looking for some encouragement that would move the needle towards accelerated growth post RERA & GST. Interest rates and regulation will decide the long term success of the real estate sector in India,” he added.
“I personally believe that it’s not a surprise move by the RBI as everyone in the real estate industry was expecting this move and approach towards the Repo rate. Even thought after today’s RBI announcement, increase of 0.25%, we believe that the home buyers who are planning to take loan should not worry – as it will be difficult for many banks to increase the interest rate and I am confident that banks will still lower the EMIs towards the loan” said Rohit Poddar , Managing Director, Poddar Housing and Development.
Rajashree Nambiar, MD & CEO, Fullerton India Credit Company Limited said, “The rate hike was consistent with the medium term inflation mandate and to that extent removes uncertainty from the markets. Having delivered two back-to-back rate hikes, RBI now has the flexibility to pause, be data dependent, review the progress of the monsoon and crude prices. In our view, this outcome combined with MPC’s neutral stance benefits retail borrowers and home buyers as interest rates are likely to remain stable for the foreseeable future.”
“The increase in policy rate will delay the revival of the country’s housing market, As per the performance of the residential real estate sector, the rise and fall in home loan will not impact the sector. I don’t think a minor rate hike would have too much of an impact. Home loan rates are still quite attractive and tend to balance each other out over long term,” said R K Arora, Chairman, Supertech Limited.
With PTI inputs