RATE HIKE UNLIKELY TO DERAIL FESTIVE HOUSING DEMAND: SHEKHAR PATEL, CREDAI PRESIDENT

CREDAI National President Shekhar Patel says the RBI's repo rate hike to 5.50% could affect festive-season housing sales as higher borrowing costs influence homebuyer decisions. However, urbanisation, economic growth and long-term housing demand are expected to support the residential market.

Higher borrowing costs come as housing demand remains supported by urbanisation and economic growth

Property Pulse

The Reserve Bank of India’s 25-basis-point increase in the repo rate to 5.50 per cent could have some impact on housing sales during the festive season, even as underlying demand for homes remains strong, said Shekhar Patel, president, Credai National.

The latest hike, the first since February 2023, comes alongside a shift in the RBI’s policy stance to calibrated tightening. The standing deposit facility (SDF) rate now stands at 5.25 per cent, while the marginal standing facility (MSF) rate and bank rate have been raised to 5.75 per cent. Together, these measures could influence the cost and availability of funds, with the impact on liquidity needing to be watched, Patel said.

According to Patel, the RBI’s concerns around inflation, crude oil prices and the wider global economic environment need to be viewed alongside India’s robust growth trajectory. Housing demand, he said, would continue to be supported by urbanisation and the expansion of cities.

The timing of the rate increase is significant for the housing market as the festive season typically sees heightened buying activity. Higher borrowing costs could affect some purchase decisions during this period, although Patel expects the underlying requirement for housing to remain intact.

For homebuyers, Patel said, the interest rate at any particular point should be viewed in the context of the much longer tenure of a home loan. A typical home loan is a commitment of at least 15 years, during which interest rates can move both upwards and downwards.

“We should not look at repo rate changes in isolation. What matters is the long-term outlook for the economy and overall growth,” Patel said.

Higher impact

Demand for housing remains strong.

Urbanisation to support expansion of cities.

Higher borrowing costs could affect some purchase decisions.

Home loan is a long commitment, interest rates can go up or down.