RBI MPC: No material impact on housing sector, despite repo rate hike as affordability still high: Experts

RBI MPC: While the Reserve Bank of India (RBI) has increased the repo rate by 50 bps to 4.9 per cent that will make home loans dearer, the move may not have a material impact on the real estate sector, experts opined. The reason behind this optimism is the affordability factor which still remains high.  

Ramani Sastri, Chairman and Managing Director at Sterling Developers Pvt. Ltd said that there has been a fundamental change in buyers expectations and attitude towards homeownership and this will largely withstand marginal fluctuations in lending rates.

"There is still pent-up demand and even after the repo rate hike, affordability is still high and the home buyer needs to take advantage of that in the short term," the Chairman said.

"Going forward, we hope that the government continues to pay attention to the requirements of the sector, which is one of the largest employers in the country. We believe the long-term structural growth story of India is intact and will continue to drive overall demand and consumption for key sectors of the economy," Sastri said.

He however was of the view that real estate industry's perennial hope was fixed on lower interest rates as it improves affordability.

He sees the current rate hike as "hurdle", though adding that home loan rates will increase, putting a dent on the homebuyer's sentiments.

He said that the rate hike will further impact the costs of doing business.

The rate hike wiil not have significant impact as home loan interest rates have already gone down substantially in the recent past and buying decisions may not be altered by these marginal changes, Lincoln Bennet Rodrigues, Chairman and Founder of The Bennet and Bernard Company said. 

Continued wage and job growth in varied sectors will provide a cushion in the short term for the purchasing decisions, he opined.

"Today, people feel the inherent need to make progressive lifestyle changes to lead a more balanced and healthy life. We are hopeful that an improved homebuyer attitude and preference for owning a house will support the housing market and we expect that consumer demand will remain buoyant in the near term," Rodrigues added. 

The outlook for India Inc looks positive with higher affordability and disposable income in the hands of new-age investors, he further said. 

The Reserve Bank on Wednesday doubled the maximum loan amount that a cooperative bank can lend to an individual to up to Rs 1.40 crore in view of the surge in housing prices. The RBI Governor Shaktikanta Das announced this today after the consclusion of the three-day Monetary Policy Committee (MPC) meeting.  

See Zee Business Live TV Streaming Below:

"The limits for individual housing loans being extended by Urban Cooperative Banks (UCBs) and Rural Cooperative Banks (RCBs- State Cooperative Banks and District Central Cooperative Banks) which were last fixed in 2011 and 2009 respectively are being revised upwards by over 100 per cent taking into account increase in house prices. This will facilitate better flow of credit to the housing sector," Das said in third scheduled monetary policy announcements.

Das announced that urban cooperative banks will now be allowed to lend up to Rs 1.40 crore as against the previous cap of Rs 70 lakh, while rural cooperative banks can now lend up to Rs 75 lakh as against earlier cap of Rs 30 lakh, a PTI report said.

Taking into account the increase in housing prices since the limits were last revised and considering the customer needs, it has been decided to increase the existing limits on individual housing loans by cooperative banks, Das said.

In what can get a cheer to the developers, Das also announced that rural cooperative banks will now be permitted to lend to builders who have launched residential projects, which they are currently prohibited from.

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)