Further hike may hit real estate

A view of Mumbai’s infrastructure. File Pic/Pradeep Dhivar

Days after the US Fed raised the interest rate, the RBI may go in for its third consecutive policy rate hike by 25-35 basis points to check high retail inflation, experts said. The Reserve Bank of India's rate-setting panel - Monetary Policy Committee - will meet from August 3-5 to deliberate on the prevailing economic situation and announce its bi-monthly review on Friday. It is expected to be a decisive event for the interest rate-sensitive real estate sector. The RBI has so far hiked the key interest rates by 90 basis points to 4.90 per cent.

"If another repo rate hike takes place, home loan interest rates will enter the red zone, and we can expect at least short-term repercussions on overall housing demand. Inflation is now one of the significant risks in real estate, and increased input costs have already compelled many developers to hike property prices in the first half of 2022," said Anuj Puri, chairman of real estate consultant ANAROCK Group.

"Developers have had no recourse but to increase property prices, as input costs have been growing constantly. Repo rate hikes are a major concern as the real estate sector treads cautiously in the current uncertain times," Puri said adding there was an 8 per cent quarterly decline in new housing launches across the top 7 Indian cities during April-June.

"...higher home loans could dent consumer sentiment, thereby impacting demand, especially in the affordable to the mid category in the coming quarter," said Ramesh Nair, CEO-India & MD-Market Development (Asia) at global real estate advisory firm Colliers. V Swaminathan, Executive Chairman, Andromeda loans and Apnapaisa.com said buyer apprehension could set in quickly and the consumers might adopt the wait-and-watch sentiment.

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