The Nifty Realty index declined 1.15 percent on December 7 after the Reserve Bank of India hiked the benchmark lending rate by 35 basis points to 6.25 percent. As the repo rate goes up, interest rates on loans will also rise thus reducing home affordability.
At noon, Oberoi Realty was down 3.07 percent, Brigade Enterprises 2.05 percent, while DLF and Godrej Properties shed over 1.5 percent. For the year, so far, the Nifty Realty is flat, up 0.09 percent.
Follow our live blog for all the market action
“Rate hikes taken since May have resulted in a loan tenor increase of almost 13 years for borrowers who had initially opted for 20 years loan period, assuming they had taken a home loan at 6 percent. "Alternatively, those borrowers who opted for an EMI increase instead of a loan tenor increase have seen their EMI go up by 20 percent already” Shrikant Shrivastava, Chief Risk Officer, IMGC (India Mortgage Guarantee Corporation) said.
Also read: RBI retains its consumer price inflation forecast at 6.7% for FY23
Several experts are of the view that as long as interest rates remain below 9.5 percent, the impact on housing will at best be moderate.
“If they breach this point, we will see some real pressure on residential sales volumes in the months to come – especially in the affordable and lower mid-range housing segments,” said Anuj Puri, Chairman, ANAROCK Group.
Also read: RBI lowers GDP growth forecast for FY23 to 6.8% from 7%
Foreign brokerage CLSA also said demand should remain resilient up to mortgage rates of 9.5 percent but beyond that, there could be pushback from buyers. Currently, mortgage rates are at 8.5 percent.
Simply based on the interest rate impact in this cycle, the Knight Frank Affordability Index has recorded a cumulative deterioration of an average of 3 percent across the country.
Foreign brokerages remain positive on India’s real estate sector. CLSA believes India is a bright spot in the global real estate market downturn. Its top picks are DLF, Prestige Estates and Sobha with target prices of Rs 396, Rs 460 and Rs 620, respectively.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
