RBI MPC: Affordable housing to get hit in near term, say experts; disposable income, pent-up demand to drive sector

Reserve Bank of India’s (RBI) decision to increase repo rate by 50 basis points to 5.4 per cent could have an impact on affordable housing, opines Lincoln Bennet Rodrigues, Chairman & Founder at The Bennet and Bernard Company. He however, did not see a lasting impact of the rate hike.

“The impact of rate hike will be predominantly on the affordable housing side, which is primarily driven by sentiments and especially first-time home buyers who are heavily reliant on home loans,” Rodrigues said.

“The current environment of repo rate hikes is not expected to last forever, and eventually, the rates are likely to come down again,” he added.

“This decision will not make much difference in the luxury segment as the demand of home buyers in this segment is beyond these considerations. We believe the positive sentiment will continue in the luxury segment driven by changes in buying patterns post the pandemic,” he further said.

“The affordability and the disposable incomes of new-age homebuyers are much better today than few years ago due to the increased job and wage growth in most sectors in the country and this is a silver lining for the sector,” The Bennet and Bernard Company founder said.

Echoing similar sentiments, Ramani Sastri - Chairman & Managing Director at Sterling Developers Pvt. Ltd said that the RBI move might have an immediate impact on home buying on a short-term basis.

The recent consecutive repo rate hikes have already added to buyers’ overall acquisition cost, he added.

“Rising interest rates along with elevated property construction cost and product price pressures could adversely impact the real estate sentiment when buyers are likely to invest in their dream homes foreseeing the festive season. The real estate sector had just started seeing gradual recovery across key property markets, driven primarily by end-users and this decision will have adverse impact for the interest rate-sensitive Indian real estate sector,” Sastri said.

“However, despite the odds, we’re still hopeful as there is significant pent-up demand from a very large population base and first-time homebuyers. Many high-frequency indicators are also suggesting that the economy has been recovering in a robust way and this will influence real estate positively,” he further said.

Also Read: How RBI repo rate hike will affect your EMIs and loan tenure - Experts decode