Financial aid for homebuyers can spur home-buying experience

Shishir Baijal, CMD, Knight Frank India called the RBI’s decision as “extremely judicious”.
Shishir Baijal
Shishir Baijal

NEW DELHI: In the wake of repeated rate hikes, the industry experts said real estate developers can provide appropriate financial assistance for homebuyers to enable a smoother home-buying experience that would minimise the overall financial burden.

Sanjay Dutt, MD-CEO, Tata Realty & Infrastructure said the Indian economy has shown resilience and up to a certain point will continue to grow strongly even amidst the ongoing global economic slowdown.

“The rate hike was on the expected lines. Although it will push the interest rates on home loans, and overall strong talent driven job markets, the coming quarter of 2022-23 remains the best time to invest in all segments of real estate,” he said.

“We believe it is important for real estate developers to provide appropriate financial assistance for homebuyers to enable a smoother home-buying experience that would minimise the overall financial burden. The goal here should be of achieving collective growth, keeping consumers at the centre,” Dutt added.

Shishir Baijal, CMD, Knight Frank India called the RBI’s decision as “extremely judicious”. The move is a balanced approach towards continued economic growth despite the higher than tolerance level of inflation. This hike in the repo was within expectation as the inflation has reduced and is expected to further reduce in the next few quarters, while the concern around domestic economic growth emerges amidst the current global vulnerabilities.

“Since the rate hike cycle in May 2022, home loan products have become expensive by around 150 bps before today’s hike. The lending rates have risen significantly, especially for the loans linked to External Benchmark based Lending Rate (EBLR) where there has been a 100% transmission of repo rate. Loan products linked to MCLR rate are also up by around 108 bps during this period,” he added.

This hike will further impact EMIs and reduce home affordability. Simply based on the interest rate impact in this rate cycle, the Knight Frank Affordability index has recorded a cumulative deterioration of an average of 3% across the country.

“However, as we have seen since the beginning of the rate hike cycle, latent demand has sustained, albeit with some moderation, in cumulative housing sales since the beginning of the rate hike cycle. The hike by RBI may be considered moderate in the current context and therefore considered a welcome move,” Baijal noted.

Amit Goyal, CEO, India Sotheby’s International Reality, said “we hope strong GDP growth, a steady jobs scenario and an elevated capex investment cycle will keep demand for real estate intact.”

Piyush Gupta, MD, capital markets and investment services, Colliers India, said “We can expect the banks to continue to increase housing loan rates mirroring the trend in repo rates. Affordable and mid-housing are the most sensitive to prices, and we might see some slowdown in the short term, with an increase in housing loan rates. We do not expect a significant impact on the high-end and luxury housing demand.”

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