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MPC: Experts react to 35-bps hike in repo rate

Manoj Gaur, CMD Gaurs Group & President CREDAI NCR The current repo rate hike by 35 basis points is not encouraging for the real estate sector. This is the fifth increase since May this year, and in these eight months, the hike’s quantum is already 2.25%. This continuous increase will surely dent the sector. Coupled with rising input costs, the cumulative impact on the sector will be huge. We sincerely hope that this would be RBI’s last rate hike in recent times, or else the buoyancy in the real estate sector which is majorly driving the economy is going to vanish.

Ashwinder R Singh, CEO Residential Bhartiya Urban
The RBI has raised interest rates and shown that it can’t be “dovish” as long as inflation is at or above 6%. Retail mortgage borrowers will be hardest hit. Increasing construction and developer financing rates may have an impact on home prices. Now, more than ever, it is imperative that developers prioritise profitability and shift their focus away from discounts and freebies in order to concentrate on creating a superior product, which should result in sustainable sales numbers.

Nayan Raheja, Raheja Developers  The RBI’s decision to raise the Repo rate for the fifth consecutive time further demonstrates its decision to tackle inflation across the world by announcing minor hikes in repo rates. This is encouraging news for industries like real estate, which are closely tied to the macroeconomic environment. In 2022, Indian real estate quickly recovered, and the upward trend will continue in the upcoming years. The step will bring an increase in home prices, however, it can be dealt with by offering efficient projects, keeping the trust of buyers intact .

Amit Jain, Director, Mahagun Group The RBI decision depicts its resolve to control the tight inflationary challenges which have seen a plummet owing to its concerted measures but still remain beyond the comfort level. There is no surprise that the repo rate raise has a corollary impact on the home loan lending rates of banks which sees unprecedented growth in percentage points. It renders itself out of the affordability levels of the common masses and home buyers who specifically are looking to invest in affordable housing projects. Buyers who buy homes from their savings and income reserves or familial wealth will not be impacted that much but buyers who were relying majorly on loans to invest in homes will have to bear the burdens of increased interest rates and home prices.

Uddhav Poddar, MD, Bhumika Group
With inflation taming down, we were hopeful of no more rate hikes. The present hike in repo rate is beyond the comfort level of the real estate sector. The 0.35% hike will take the repo rate from 5.9% to 6.25% taking the home loan interest rates upwards of 9%. It will increase the cost of servicing loans and for new buyers also increase the cost of real estate. We can only hope that the situation improves and that it turns out to be the last hike.

Salil Kumar, Director Marketing & Business Management, CRC Group RBI’s step to increase the repo rates by 35 basis points has created a little tough situation for investors as it will bring a hike in loan interest rates. Though it can be dealt with after some time as residential projects have been in massive demand for quite some time now, housing prices will undergo a hike as a result of this announcement. This will somehow be helpful for the realtors to deal with the rising input costs but cost adversely to the homebuyers. The effort by the RBI to reduce inflation is entirely reasonable, but prices for real estate developments will undoubtedly rise in the near future.

Yash Miglani, MD, Migsun Group
The RBI decision seems justified as India stands on the brink of approaching stagflation. The decision to increase the repo rate by 35 bps will lead to an imminent rise in home prices and home loan interest rates. But it will simultaneously pay dividends for the realty sector which has gathered great momentum after a stable market performance this year. There is a windfall in housing demand which will continue to peak higher in 2023. The repo rate hike will not have prominent ramifications on the real estate demand but will help curb inflation which also affects the realty sector. But the alarming consequence of constant repo rate hikes is that it will further dilute the affordability factor in homes for mid-income groups and families.

Ankit Kansal, MD, 360 Realtors
RBI’s increase of the Repo rate for 5th time in a row further reflects its policy of withdrawal from the accommodative stance, it has been following in the face of the pandemic. Inflation is high not just in India but also globally and it is imperative for the leadership to take steps to plug in the rise in prices. However, the overall economy is on a strong footing and the RBI has estimated a GDP growth of 6.8% for FY 23. This is a healthy sign for sectors such as real estate, which are greatly correlated with the general health of the macro economy. Indian real estate has recovered fast in 2022 and the positive momentum will continue in the coming years. This will be pinned on healthy underlying structures such as organic demand, a rise in disposable income, massive investments in infrastructure, and attractive demographic dividend

Ansh Batra, Director, Buniyad Group
The repo rate hike was inevitable but this time RBI has taken a relatively moderate approach by raising it by 35bps which now stands at 6.25 per cent. Earlier, there was an upsurge of 50 basis points in the preceding RBI MPC meetings. Though the approaching intention is correct to ease the inflationary effects which continues to stifle the economy,  a proper mechanism needs to be developed to oversee the aftereffects of the hikes, has it been able to achieve the end goals, and how is it impacting the real estate markets. The luxury won’t be affected that much. But the mid-housing markets can be seriously impacted as buyers of the segment would again see increased costs of borrowings and loans. It can further diminish the affordability levels of affordable housing homes.

Surendra Hiranandani,  Chairman and Managing Director, House of Hiranandani  The rate hikes by RBI won’t have a significant impact on the homebuying sentiment. However, the central bank has been on a rate-hiking journey in order to tame the rising inflationary pressures. Understanding this even homebuyers are aware of the fact that these rates were transient and unsustainable. They were expecting the hike and are thus prepared for it. Several banks have already started passing the burden to home loan borrowers. However, we have seen significant demand from homebuyers despite the increased interest rates. We expect the demand to sustain, considering the necessity to own a home is of profound importance today. 2022 has favored the luxury housing segment, the homebuyers deliberately grabbed the opportunity of festive offers and sealed the deal. Similarly, with the consumers being confident about the economy, the real estate sector will register a remarkable year end, setting an example for 2023.”

Avneesh Sood, Director, Eros Group  The Reserve Bank of India (RBI) has increased the bank’s base rate by 35 basis points. This is the fifth consecutive rate hike this year, and there could be some repercussions on home sales. The constant rate hikes may result in some house-buying delays and this may add to the acquisition cost of the home. With repo rates now at 6.25%, there may be some pressure on mortgage interest rates to rise as well. Real estate has seen a gradual recovery recently, thanks to consumers’ optimism about buying homes. However, the recent rate hikes may impact the end-user segment. 

Amit Goyal, CEO, India Sotheby’s International Reality
With global and domestic inflationary pressures continuing to drive central bankers,  the rate hike by RBI is on expected lines. So far, despite home loan interest rates increasing by 150 basis points demand for residential across top seven cities has been very strong.  We believe this momentum should continue till home loan rate remains in single digit.  We just hope that strong GDP growth, a steady jobs scenario and an elevated capex investment cycle will keep demand for real estate intact.

Piyush Bothra, Co-founder and CFO, Square Yards
The Reserve Bank of India’s decision to recalibrate the repo rate by a moderate 35 basis points sounds reasonable. The Central Bank followed a two-pronged objective with this hike-firstly to keep the inflationary pressures under check without curtailing growth and secondly to lower the impact on mortgage rates so that residential demand remains promising in the months to come. The affordability of home loan is still good despite consecutive hikes and with the buoyant homeownership sentiment reigning across the nation, the feel-good vibe about homebuying will still continue and property markets will witness optimistic housing sales in 2023.

Saransh Trehan, Managing Director, Trehan Group
RBI has done a fine balancing act as the central bank continued with its efforts to tame inflation and at the same time prioritising growth. No body, may it be industry or consumers, want high-interest rate regime. We are hopefull and expect that going forward as inflation situation improves the rates will definitely taper.

Dr. Niranjan Hiranandani, Vice Chairman, NAREDCO The prolonged rate hike by 35bps to 6.25% still remains in the low regime of interest rate zone. The floating home loan interest rate due to rate hike may hurt temporary EMI payouts, but in the long tenure it averages out positively. Today, the growth impetus in the housing sector prevails on the back of real demand translating into the actual transactions exhibited by incremental sales registered in the market. The demand for residential real estate has expanded multifold across segments and geographies corroborating the improved bank credit figures in the retail home loan segment.”

Pradeep Aggarwal, Founder & Chairman, Signature Global
The apex bank’s decision to hike rates is very much on the expected lines considering the inflationary scenario. It may result in hardening of home loan rates. The demand for housing has remained strong despite successive hikes over the last one year or so, and we hope it will continue to remain so. We also expect the latest hike to be the last of rate hikes as any further in.