Friday, September 22, 2023

RBI 35 Bps Rate Hike Will Not Rock Housing Sector Says Anarock Anuj Puri

Repo Rate Hike Impact on Housing Sector: Housing sector in India has been facing recession for a long time. It was affected by the economic slowdown. When the situation improved a bit, demonetisation broke the back. RERA got hit. The impact of Goods and Services Tax (GTC) on various inputs of this sector. And finally Corona destroyed the entire economy. Now in the era of increasing repo rate, housing loan is becoming expensive. Today, the increase in the repo rate by 35 basis points (bps) has increased the concern of the housing sector.

What is the opinion of experts

The repo rate was at a low level during the Corona era. Accordingly, the interest rate on housing had also reached 6.6 to 7 percent per annum. Many people came under this attraction and took loans and bought houses. After that, now his EMI is increasing continuously. Initially, when the repo rate increased, the health of the real estate sector was not affected much, because interest rates were historically low and builders expected that even a slight increase in interest would not change people’s decision to buy a house. But after this increase, the real estate sector and experts are now worried.

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Anuj Puri, chairman of ANAROCK Group, says that this time the rate hike of 35 bps is the fifth consecutive hike this year. This has come as no surprise. Now the repo rate has become 6.25 percent, so it can have some effect on the purchase of houses. There is no doubt that there will be further increase in interest rates on home loans, which have already increased after 4 consecutive hikes.

Puri, however, says that since interest rates have remained in the single digits (below 9.5 per cent) for a long time, the impact on housing will be marginal. If the rate goes above this, there may be some impact on the sales volume of residential properties. This will especially affect the affordable housing ie lower mid range housing segment.

News Reels

Vishal Raheja, MD, InvestoExpert, says that the rate hike of 35 basis points by the Reserve Bank is as expected, so that inflation can be controlled. In the real estate sector, there is a gradual recovery in major property markets and low interest rates were a major reason for this, due to which the demand in the real estate sector increased in the last few years. Due to frequent rate hikes, there can be upheaval in the market in the short term. However, the earlier growth did not have any significant impact on real estate and demand remained strong across segments throughout the year. This indicates the strengthening of the fundamentals of this sector.

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End User Driven Real Assets

Most of the buyers of housing are end users. People have a dream to have their own house in India. And the affordability of such dreamers is limited. Unlike investors, end users pay less attention to interest and pay more attention to their dream home. But interest rates affect them. However, as long as the housing sector continues to be operated by end users instead of investors, the effect of increase in interest rate will be minor on this sector. End users want the ownership of the house, they do not pay attention to the earning from it and the cost incurred on it.

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Puri says, ‘As long as the number of end users in the housing sector remains high, the effect of interest rates on housing sales will not be very significant.’

Till now there is no effect of increase in interest rate

The impact of four consecutive rate hikes this year on housing sales has been marginal. The housing sector sales figures for the third quarter of 2022 clearly indicate this. According to Anarock Research, 88,230 units of houses have been sold in the top 5 cities of the country in the third quarter of 2022 after 3 consecutive rate hikes. Customer demand continues to be strong. The sale of houses has increased by 4 percent compared to the previous quarter and 41 percent compared to last year.

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RBI Monetary Policy: RBI increased repo rate by 0.35% to 6.25%, shock to common man, EMI will increase

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