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Hike In Interest Rates: Housing Sector May Get Hit In Short Term
NEW DELHI: The hike in interest rates will likely dent the home buying rally in the short term. The RBI's decision to hike the repo rate by half a percentage point on Wednesday would lead to an increase in interest rate by the same amount on all existing home loans taken on floating rates.
But for new home buyers, the condition would further worsen as the RBI has decided to move away from an accommodative monetary stance. If the liquidity condition is tightened to contain inflationary pressures, the resultant rise in interest rates would be higher than policy rate hikes.
Rising interest rates along with elevated property construction costs and product price pressures could adversely impact real estate buyer's sentiment, said Shishir Baijal, CMD, Knight Frank India.
"What needs to be watched out for is inflation trajectory, because the input cost for supply is on the higher side, and when combined with the loan rates, it will cause mild discomfort for home buyers," Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure, said.
Samantak Das, chief economist, JLL, said in spite of the rise, resultant home loan rates are still likely to remain at decadal lows and it is critical to understand that affordability remains high and buying momentum is expected to remain largely intact.
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