We offer the most complete house renovating services in the country
Constructing Houses Since 1993.
The second consecutive increase in the repo rate from 6.25 percent to 6.50 percent is anticipated to impact the real estate sector. Spiralling the cost of home loans, the move not only hampers the purchasing power of a homebuyer but slackens the realty growth, too.
A steady increase in the repo rates by 0.25 basis points (BPS) for a second time in a row in the last two months has sent shockwaves across sectors. Although the recent hike from 6.25 percent to 6.5 percent is in the light of growing inflation, it is likely to take a toll on consumers, particularly in the real estate sector
Since commercial banks take cues from the Reserve Bank of India (RBI), a hike in the repo rate implies a rise in the lending/interest rates of commercial banks, too, making the Equated Monthly Instalments (EMIs) costlier for masses. For instance, after the RBI announced changes in the monetary policy in June 2018, many banks such as SBI and HDFC increased the benchmark lending rates or Marginal Cost of Lending Rate (MCLR) by 0.1 percent.
Commenting on the decision Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani says, “The hike will certainly impact the credit growth and defer the revival of the real estate sector. As construction activity picked up pace after the implementation of policy reforms, a rise in repo rate has hurt the consumer sentiment. The sector was looking for some encouragement after Real Estate (Regulation and Development) Act 2016 and Goods and Services Tax (GST), however, incessant roadblocks in the growth leaves it long-term success story only to destiny.”
Concurring a similar sentiment, Rajeev Jain, Director, NIRMAL, asserts, “The hike will not be lucrative for the consumers as it is likely to increase the cost of the home loan. Overall, considering the torpid real estate growth, the adjustments in the repo rate would further dampen the buyer sentiment.”
The onset of 2018 has been smooth as realtors were switching to multiple strategies varying from lower ticket sizes to discounts and freebies to lure buyers back into the market. However, a steady rise in the repo rates has challenged the recouping realty market and seems to hold back the buyers for a few more months, until the RBI reviews the monetary policy next and contemplates to ease the repo rates. For existing homebuyers, industry stalwarts also recommend an extensive comparison of home loan interest rates as they vary widely across various lending institutions and financing companies.
Overall, taking cognizance of the situation, housing demand is anticipated to remain weak until monetary policy relaxations. However, as new strategies and offers set in around the festive season, the market is bound to see growth towards the end of Q3, 2018.