Housing sales may reduce due to home loan interest rates

On Wednesday the RBI hiked the key benchmark rate by 50 basis points. The decision of the RBI to hike the benchmark interest rate to make home loans costlier and might affect housing sales, in affordable and mid-income segments.

Property consultancy firms such as India Sotheby's International Realty, Anarock, JLL India, Knight Frank India, Colliers India, and Investors Clinic said that this move was on the expected line to curb inflation and would result in a hike in interest rates on home loans.

Anarock Chairman, Anuj Puri said that the rate hike will increase the home loan interest rates, which were already increasing after the surprise monetary policy announcement in May.

Interest rates will remain lower than those in the global financial crisis of 2008, which were 12% and above.

The current increase will reflect on residential sales volumes in the upcoming months, with the affordable and mid-segments.

The housing market persists to be largely end-user driven. According to Puri the hike in repo rate was inevitable. They are now entering the red zone and any future hikes will affect the housing sales.

Colliers India CEO Ramesh Nair expects banks to pass on this rise in repo rate in the form of higher home loan rates in the upcoming months.

He advised homebuyers to make the best out of the prevailing home loan rates, as the housing prices are expected to rise.

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