Banks raising interest rates could affect housing demand: real estate agents

Shortly after the central bank Reserve Bank of India (RBI) hiked the repo rate by 40 basis points, the banking industry mimicked the same by raising interest rates in lending and deposit schemes .

From big banks to small corporate banks, many have joined the movement to increase lending and deposit rates.

A number of banks raised their benchmark external lending rates following a 0.40% increase in the repo rate – at which the RBI lends money to banks at short notice.

This decision by the banks should have an impact on the growth of the real estate sector and could affect the demand for housing.

“The historically low interest rate regime on home loans has boosted housing demand and helped the economy return to pre-Covid levels. It has also enabled a robust recovery in the housing sector,” said Kaushal Agarwal, Chairman of The Real Estate Guardians Council.

From now on, the decision of banks to raise interest rates as well as the rise in the cost of construction inputs could temporarily limit the growth momentum of the real estate sector.

“Sharp interest rate acceleration by banks will hurt home buyers concerned about EMIs on home loans. The state government, which is the biggest beneficiary of housing demand, is expected to come forward to support homebuyers by reducing the stamp duty rate to 3 percent,” said Pritam Chivukula, co-founder and director of Tridhaatu Realty and treasurer of CREDAI MCHI.

Estate agents believe there could be a short-term impact on sales as rising house prices further dampen aggregate demand.

“We have already started to see a vertical movement in house prices due to rising construction input costs and rising stamp duties. affect homebuyer sentiment, which will impact overall demand,” said Shraddha Kedia-Agarwal, Principal, Transcon Developers.

Bhushan Nemlekar, Director of Sumit Woods, believes that rising property prices would be a huge setback for the property sector, disrupting the continued growth momentum of the industry.

Echoing Nemlekar’s view, Sachin Chopda, Managing Director of Pushpam Group, said the upward revision in interest rates creates a huge impact on investors’ long-term goals.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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