No impact of repo rate hike on home sales

The recent surge in property prices due to the increase in cost of raw materials and the Reserve Bank of India's decision to increase the repo rate twice during the quarter has had little impact on residential sales, which continue to witness month-on-month growth, according to leading real estate developers and brokerage firms.

Experts said following the outbreak of the Covid-19 pandemic, the perception of real estate investing changed, especially in light of hybrid work models or work-from-home opportunities, and that marginal changes may not have an impact on buying decisions.

"Despite the increase in repo rate, affordability is at an all-time high. The real estate industry was in a downturn for a long time but now the cycle has turned. We believe the positive sentiment will continue as all segments are performing well," said Mohit Malhotra, managing director, Godrej Properties.

According to Motilal Oswal Financial Services, despite a sharp recovery in demand in the past two years, prices have remained broadly flat this time, thereby limiting the impact on affordability.

"We continue to witness month-on-month increase in sales volume, prices and registration. The recent hike in interest rates has not deterred the end-use buyer. One can attribute this to Covid-19. It has amplified the significance of buying a home, which gives financial and emotional security," said Sanjay Dutt, managing director, Tata Realty & Infrastructure.

The decline in ready-to-move-in inventory and inventory of developers and as a consequence less number of launches have left limited choice for the customers. The setting up of the Real Estate Regulatory Authority (Rera) has also improved builder-buyer sentiment, which is now on the positive side, as well as easing the overall loan process and buying journey.

Experts said companies will see an impact once mortgage rates cross 8-8.5%. The sharp rise in mortgage rates and higher inflation can lead to a "marginal push-out" in demand in the near term and also developers' inability to raise prices further, said a Motilal Oswal report.