Repo Rate Hike may Further Impact Affordable Housing Demand : Anuj Puri, Chairman, ANAROCK Group


Biznextindia : The 25 bps rate hike is much along the expected lines. With repo rates now at 6.5%, there could be some repercussions on housing uptake as home loan interest rates will head further north. The rates had already crept up after five consecutive rate hikes over the last one year. This will add to the financial burden on homebuyers as apart from home loan interest rates, property prices have also inched up in the recent past two to three quarters.

Given that interest rates may breach the 9.5% mark with today’s hike, we may see some pressure on sales volumes in the affordable and lower mid-range housing segments, which are more cost-conscious. The affordable segment has already been in the doldrums, and adding further to the cost of acquisition obviously does not help.

That said, the Indian housing market continues to be largely end-user driven – and end-users, unlike investors, focus less on ROI and more on the perceived value of homeownership. Furthermore, commodity prices are now falling and inflation is moderating. As such, we are unlikely to see any hikes in the near future, which will be positive for the housing sector in the times to come. 

The monetary policy impacts real estate demand in several ways. When the central bank raises interest rates, borrowing costs for buying real estate increase, which can reduce demand for housing. Conversely, when interest rates are low, borrowing costs are lower, and demand for real estate may increase. Also, an expansionary monetary policy, which increases the money supply, can lead to increased consumer spending and borrowing, potentially driving up demand for real estate.

Finally, confidence in the economy is closely tied to the monetary policy. When the central bank is seen as effectively managing the economy and maintaining stability, it can increase consumer confidence and demand for real estate.

Murali Ramakrishnan – MD and CEO of South Indian Bank

“We agree with the RBI’s continued withdrawal of accommodation measures to rein in inflation without denting the economy’s growth prospects. The revision of the repo rate by 25 basis points to 6.5 percent is a calibrated one as it further tries to control inflation while ushering overall growth. We anticipate that this will be the last of the announcements in the rate tightening cycle that began less than a year ago. Though inflation will remain above the targeted level for some time to come, it will not remain as big a threat. We look forward to a period of buoyant economic activity after a grim three-odd years.”

 George Alexander Muthoot, MD, Muthoot Finance

The RBI hiked repo rate by 25bps today and maintained its stance of ‘withdrawal of accommodation’, this was largely on expected lines and also in line with consensus expectations. The macro-economic challenges still continue and core inflation remains sticky. However, the resilience of the Indian economy, firming up of urban consumption demand and improving rural demand reinforce our optimism on the growth front and we expect steady demand for gold loans. Further, given the various measures announced in the Union Budget recently, including the rise in capex by 33 percent, demand is further expected to increase. RBI measures to expand the scope of TReDS will improve the cash flows to MSMEs, this coupled with recent announcement in the budget towards the MSMEs will surely give support to MSME sector which were most impacted during the pandemic. We do believe that the large part of the RBI rate hike cycle is behind us, unless inflation flares up unexpectedly. Our borrowing cost may rise slightly going ahead but we are confident of maintaining our margins at the current levels.



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