RBI rate hike: Builders feel home sales may drop

June 08, 2022 16:00

Housing demand is likely to be affected in short-term as home loans are set to become costlier following the RBI's decision to hike repo rate by 50 basis points, according to real estate developers.

The cost of borrowing for developers could also increase, impacting their profit margins, they said, while hoping that the move would control inflation thus bringing down the cost of construction raw materials like steel and cement.

Builders welcomed the RBI's decision to increase the existing limits on individual housing loans by co-operative banks.

According to property consultant Anarock, housing sales across seven cities increased 71 per cent in the January-March period to 99,550 units, the highest quarterly sales since 2015, on low interest rates on home loans.

CREDAI National President Harsh Vardhan Patodia said: "With consumer loans and home loans getting costlier, there may be an impact on demand in the short term."

He welcomed the 100 per cent increase in the limit for individual housing loans by urban cooperative banks and rural cooperative banks.

"The rate hike will impact the robust sales in the residential housing segment, although in the short term. So far, the post Covid recovery and the bullish sentiments were supported by the low interest rate to a great extent," Realtors body NAREDCO President Rajan Bandelkar said.

However, Boman Irani, President of CREDAI-MCHI, said, the impact on the consumers in MMR (Mumbai Metropolitan Region) would be near zero.

Hiranandani group MD Niranjan Hiranandani said that the home loan interest rate hike will "impair the home buying rally as pay out in terms of EMI is scheduled to rise".

"But according to me, this crater in demand sentiment is a makeshift move, as home loans are based on floating rate for a long tenure," he added. -- PTI

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