Policy Rates Unchanged, Reverberations For Real Estate Sector
Monetary Policy Committee(MPC) has decided to keep the benchmark lending rate or the repo rate unchanged at 6.5 per cent, following the conclusion of the three-day meeting. Most of the banks have linked their lending rates to the repo rate. As a result, the continued withdrawal of accommodation has made real estate experts opine about a prolonged higher constant rate of interest on home loans.
“The market has realised that the current repo rate is the new normal. With no change in the repo rate, there will be no changes in floating-rate home loans and other advances which are linked to an external rate such as the repo rate,” said Himanshu Panchmatiya, Cofounder, Switch My Loan.
He further added that the affordable housing market has already taken some beating due to the prolonged higher repo rate.
Further, the experts in the luxury segment remain optimistic about the recent development, highlighting that the MPC’s stance is going to increase non-residential Indians(NRI) and high-net-worth individual’s property purchases.
“Buyers in the luxury segment often have stronger financial stability and prioritise factors such as location, exclusivity and lifestyle amenities over the cost of borrowing. The significant insight from the decision to keep interest rates steady is the continuation of positive sentiment, especially in the luxury segment. This is attributed to an extraordinary surge in demand for upscale properties from Non-Resident Indians (NRIs), High Net Worth Individuals (HNIs), millennials and the middle class, who have redefined their expectations of upscale living,” said Lincoln Bennet Rodrigues, Chairman and founder, The Bennet and Bernard Company.
He further emphasised that however, a reduction in key rates would have been beneficial, ensuring increased market liquidity and facilitating those on the fence to confidently decide on luxury property purchases. “Overall, the real estate landscape remains robust and we anticipate a dynamic and flourishing year ahead,” he added.
Experts also propound that the sustained higher policy interest rates have had an adverse impact on property purchases as far as lower economic strata of society are concerned.
“The affordability of house loans has been adversely affected by inflationary pressure, unaffordability and a lack of new development, all of which have contributed to historically high-interest rates. As a result, demand for affordable housing, a substantial portion of the housing structure, has decreased,” stated Nahar Group.
They further highlighted that to encourage small urban housing, the Indian government has granted an additional interest subsidy of Rs 60,000 crore for residences up to Rs 40 lakh. “Furthermore, with the festive tailwind, demand for house loans is anticipated to continue to be strong, indicating a robust increase in property sales,” they added.
The policy rate stagnancy can also provide a robust environment for stable real estate growth in both urban and rural areas.
"The emphasis on supporting housing consumption via urban and rural demand augurs well, providing a boost to the real estate segment. The focus on data security through the proposed cloud facility for financial institutions is also laudable, and will help strengthen consumer trust and confidence. Further, the regulatory framework for web aggregation will create a more level playing field for all entities vis-à-vis loan processes, thereby ensuring an unwavering focus on customer centricity," said Girish Kousgi, MD&CEO PNB Housing Finance.
