Repo rate hike: What do real estate experts have to say

The second repo rate hike will help to stabilise inflation and economic growth, but it may have an immediate impact on real estate demand

Repo rate hike impact on real estate

The Reserve Bank of India has raised the repo rate by 50 basis points (bps) to 4.90 per cent, effective immediately. On June 8th, 2022, RBI Governor Shaktikanta Das announced the repo rate hike for the second time in five weeks following the policy changes in May.

The Monetary Policy Committee (MPC) met on June 6th, 7th, and 8th, 2022, and unanimously voted to raise the policy repo rate to 4.90 per cent, up from 4.40 per cent last month, with immediate effect. Das also stated that inflation would most likely remain above the upper tolerance level for the first three quarters of this fiscal year.

Furthermore, the RBI has maintained its GDP forecast of 7.2 per cent for FY2023, while CPI inflation is expected to be 6.7 per cent in FY2023.

Speaking with SME Futures, industry experts from the real estate sector discussed Governor Das’ recent announcement.

Also Read: Credit cards linked to UPI: All you need to know about RBI’s move

What do experts think 

Few experts have already predicted a rise in the repo rate. Commenting on today’s announcement, Equity Research Analyst at Angel One Ltd, Yash Gupta says, “RBI MPC meeting is not expected to add any surprises if rate hikes are in the range of 25-50 bps, but if the hike have had gone beyond 50 bps, it would have had a negative impact,” he said.  

“After the commentary of the RBI governor last month, the market has already expected a rate hike of 50 bps in the June meeting. We believe that this rate hike is already priced in the market,” he adds.

Talking about the impact of the repo rate hike on the real estate sector Gupta says that the most important thing for real-estate companies is that RBI has doubled the limit of loans from cooperative banks. “In this view, this will help the cooperative banks to give more housing loans,” he said.

However, in response to the repo rate hike announcement, real estate industry stakeholders have a mixed reaction.

Sector expects bullish growth

As real estate stakeholders believe that the RBI’s move will help to stabilise the country’s inflation and economic growth, they appear to be supportive of the repo rate hike. At the same time, RBI’s Repo Rate hike by 50 bps may have a short-term impact on real estate demand.

Kaushal Agarwal, Chairman, Guardian Real Estate Advisory says, “The RBI’s decision to hike the repo rate was aimed at re-anchoring inflation expectation and will eventually result in the strengthening of the economy. I believe, the RBI’s approach so far has enabled a robust recovery in the real estate sector. The move to hike the repo rate might temporarily limit the growth momentum of the sector but the demand will continue to sustain,” he said.

Supporting the hike, Jitesh Lalwani, President at HomeSync Real Estate Advisory, stated, “RBI’s decision to hike in policy rates will lead to an increase in housing loan interest rates impacting on the EMIs but we are still bullish about the real estate sector. 

“We are still optimistic about the current growth run for housing demand since we believe that this move may push homebuyers who are still deliberating to seal the deal,” Lalwani added. 

Weighing in, Ashish Narain Agarwal, founder and CEO at says, that the sector is witnessing new project launches, growing demand from home buyers, opening new locations in tier 2 and 3 cities through institutional funding, boosting NRI’s confidence, and has an overall optimistic environment.

“Hence, considering these several factors that make the Indian real estate market bullish, the current repo rate hike may not have a long-term impact,”  he said.

Hike likely to hurt homebuyers’ sentiments

Despite viewing the repo rate hike as a short term impact on the housing demand, real estate experts are concerned that the move will hurt the sentiments of homebuyers as well as impact developers too.

Bhushan Nemlekar, Director, Sumit Woods comments, “Due to geopolitical conflict, the input costs were already high and now this rate hike will only dampen the spirit of the entire real estate value chain. The cost of borrowing for both developers and buyers will be impacted, and this will result in undesired rate hikes across the spectrum,”

Another real estate stakeholder, the Himanshu Jain, Vice President- Sales, Marketing and CRM at Satellite Developers Pvt. Ltd., “The prices of construction materials are already high and the decision of increasing the repo rate will somewhat dent the current demand momentum and add to the woes of developers. For first-time buyers, acquiring a home is considered as the biggest asset and these short-term decisions are unlikely to have a major impact on a buyer’s decision.”

Adding his comments, Rohan Pawar, CEO at Pinnacle Group says, “The increase of rates could adversely affect housing demand because of increased EMIs and lower eligibility on home loans. This will create an impact on the ongoing growth momentum in the sector in addition to increasing input costs. However, we still believe that the preference of homebuyers for owning a home will continue to boost demand,”

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Other sectors welcome the hike

Commenting positively on the policy change, Ridhima Kansal, Director at Rosemoore, a fragrance brand says, “The rate of inflation has been beyond the safe limit of 6 per cent over the past few months and such a step was needed. A low-interest regime had to be altered toward a more holistic growth paradigm. Meanwhile, an overall robust economy will continue to drive retail sales in India.” 

Another expert welcoming the step says, “We welcome the step of the apex body, this will help in clamping down inflation and smoothen economic growth,” said Suren Goyal, Partner at RPS Group, an environmental consulting company.

He further advised the government to make concentrated efforts to reduce the spike in prices of raw materials such as cement, bricks, steel, etc.  

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