Housing sector

Rising interest rates: the housing sector could be hit in the short term

NEW DELHI: Rising interest rates will likely dampen the recovery in home purchases in the near term. The RBI’s decision to raise the repo rate by half a percentage point on Wednesday would see the interest rate increase by the same amount on all existing floating rate home loans.
But for new home buyers, the situation would worsen further as the RBI decided to move away from an accommodative monetary policy. If liquidity conditions are tightened to contain inflationary pressures, the resulting rise in interest rates would exceed the increases in key rates.
Rising interest rates along with high property construction costs and commodity price pressures could negatively impact property buyer sentiment, said Shishir Baijal, CMD, Knight Frank India.
“What needs to be watched is the path of inflation, as the cost of inputs for procurement is higher, and when combined with lending rates, this will cause some slight discomfort for buyers. homes,” said Sanjay Dutt, MD and CEO, Tata. Real estate and infrastructure, said.
Samantak Das, Chief Economist, JLL, said that despite the rise, resulting home loan rates are likely to remain at their 10-year lows and that it is essential to understand that affordability remains high and that the buying momentum should remain largely intact.