Home buyers to feel pinch, housing sales to be hit hard

Ahmedabad Mirror | 1 week ago | 06-08-2022 | 06:00 am

Home buyers to feel pinch, housing sales to be hit hard

The 50-basis point rate hike by the Reserve Bank of India (RBI) on Friday, taking the cumulative rate hike to 140 basis points in three months, will severely dent the housing sales in Ahmedabad, believe realty experts.Experts are also of the opinion that it will reduce the buying capacity of prospective home buyers, especially in the affordable housing followed by the luxury segment.Chairman of Anarock Group Anuj Puri said, “A rate hike was expected, but the expectation was for a maximum of 35 bps. The hike by 50 bps is definitely on the higher side, and home loan lending rates will now edge further into the red zone.”Puri added, “This is the third consecutive rate hike in the last two months and finally marks the end of the all-time low-interest rate regime — one of the major factors that drove housing sales across the country since the pandemic.”Puri said all these factors – rising home loan rates and construction costs – will impact residential sales that did reasonably well in the first half of 2022.The repo rate now stands at 5.4 percent, crossing the pre-pandemic levels. While inflation has partially eased, as compared to the surge in April, it continues to be above the RBI’s target.Industry experts said the rate hike comes at a time when inflationary trends have led to higher raw material costs including cement, steel and labour, to name a few, that have led to a rise in property prices.Chairman of National Real Estate Development Council (NAREDCO) Gujarat NK Patel told Mirror, “RBI has cumulatively increased repo rate by 140 bps in the past three months; this has sharply increased housing loan rates.”Patel added, “As a result, both affordable housing segment and luxury segment sales will see a slowdown. Along with it, price rise in construction cost and hike in GST (Goods and Services Tax) will also affect buyers’ budget.”Developers believe even the project loans will become costlier because of the third repo rate hike.Chairman and Managing Director of Knight Frank India Shishir Baijal said, “The Reserve Bank of India has been compelled to take steps to control India’s consumer inflation which has remained above the tolerance level of 6 per cent.”This is the third repo rate hike by RBI in three months. It will severely impact affordable housing while partially affecting the luxury segment. Prospective buyers will have to decide whether to wait longer before buying or face further price rise.–Hitesh Shah, MD of Space Management Ltd

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