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The real estate sector heaved a collective sigh of relief as the Reserve Bank of India took its foot off the rate hike pedal, providing a breather to the sector which has been fearfully tracking interest rate movements over the past one year.
The 250-basis point hike in the repo rate from May last year has nudged home loan rates close to the double-digit mark, affecting home affordability. It has also hit real estate developers as their borrowing and construction costs have gone up.
The pause in the rate hike cycle — at least until the next policy in June — was greeted by enthusiasm and real estate stocks rose and ended the day with strong gains ranging from 1 per cent to 6.7 per cent. The biggest gainer was Shriram Properties, which ended 6.7 per cent higher at ₹63.85, followed by Godrej Properties, which ended up 6.5 per cent at ₹1,125.35 on the NSE. Both Oberoi Realty and DLF ended with gains of over 4 per cent.
Boost home-buyer sentiment
Hiranandani Group’s founder Niranjan Hiranandani, who has been critical of the relentless rate hikes, said, “This act of relief will restore confidence in home-buyers’ sentiment and boost demand rally in the real estate.” He also asked for government intervention for real estate developers hit by rising construction costs and flexible payment schemes for home-buyers.
Ram Raheja, MD, S Raheja Realty, said that though demand in the housing sector had sustained, “further hike in rates could dampen the deal within few segments.” He said that luxury homes would see even better demand with this move as it would give high-ticket buyers and investors increased confidence and incentive to buy.”
While luxury home sales are generally impervious to interest rate hikes, India Sotheby’s International Realty’s CEO, Amit Goyal, said that further rate hikes could affect this segment as well.
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