Housing sector

Housing sector gets a boost from RBI

What is happening?

At today’s Reserve Bank of India (RBI) policy meeting, the central bank raised interest rates by 50 basis points to 4.9%. This has been another problem for the real estate sector, but the RBI has also given relief to the industry. The central bank increased existing limits on individual housing loans by urban and rural cooperative banks. In addition, rural cooperative banks are now allowed to provide finance for commercial real estate projects. This will help both cooperative banks and the real estate space.

RBI says such measures will improve the flow of credit to the housing sector. This means customers can now get more home loans from a co-operative bank near them. The home loan limit at Tier I was Rs 30 lakh and Tier II was Rs 70 lakh. Now, it has risen to Rs 60 lakh at Tier I and Rs 1.4 crore at Tier II. This will boost the real estate market which was down this year due to global inflationary pressures, supply chain disruptions and rising commodity prices.

Should investors be worried?

The real estate market will not reach the bottom because it has already increased real estate prices due to the continuous rise in commodity prices. The housing market recovery is said to continue, albeit at a relatively slower pace. Also, RBI’s decision to increase home loan limits for co-operative banks will help the real estate space.

Main positives

Sanjay Dutt, MD and CEO of Tata Realty and Infrastructure, says input costs for procurement are higher and combined with lending rates, this will cause homebuyers mild discomfort as prices will rise and quickly return to low levels. pre-COVID . Additionally, real estate sales are robust in Tier II and Tier III cities.

What awaits us?

The announcement of the cooperative banks was a welcome relief. Home loan limits were last revised nearly a decade ago and with the rise in house prices, raising the limit was a much needed decision. There would be an improvement in the affordable housing segment.

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