#NIFTYREALTY : Macroeconomic View🏡
• The global and domestic macroeconomic circumstances have shifted dramatically in the last six months.
• The geopolitical issue of Russia-Ukraine, oil price shocks, supply chain disruptions, rising commodity prices, food inflation, and other factors required Central Banks to take early action to tame the inflation monster.
• India faces numerous supply-side issues, and rising inflation is harmful to GDP development. Monetary policy instruments are one strategy to addressing the problem.
• During an unplanned off-cycle Reserve Bank of India (RBI) meeting, RBI announced 40 basis point increases in repo rates and a 50 basis point increase in the cash reserve ratio (CRR). Though the timing of the announcement was unexpected, it was a long-awaited move.
• RBI highlighted that monetary policy will remain supportive while focused on minimising inflation spikes and re-anchoring inflation expectations in order to maintain demand..
• However, developers experienced margin challenges as commodity prices, construction materials, and labour expenses rose. Most developers did not pass on the higher cost to purchasers.
• Because the sector was still attempting to get back on its feet following the pandemic shock, developers had little or no increase in property prices, which was the key reason for margin compression.
• Following the current news, EMIs for consumers will climb. The sector also expects a couple more rate hikes in the coming quarters, resulting in higher EMIs and increasing pressure on homeowners. However, this will not immediately diminish demand.
• In contrast, rising interest rates will result in larger returns on funds stored in fixed deposits, improving consumers' spending power
• Absolute home prices rise throughout time as housing demand rises since it is a necessity rather than a luxury item. Buyers would rather buy now than face the double whammy of rising house prices and interest rates in the future.
• With increasing affordability and disposable income in the hands of new-age investors, the picture for India Inc appears favourable.
The real estate sector is predicted to gain traction from both the demand and supply sides, with increased government and private investment in infrastructure development. What do you think? Drop in your views!