7 hrs ago
RBI Rate Hike May Gradually Pressure Affordable Housing
India’s central bank raised a key interest rate by a small amount.
This may eventually make some home loans more expensive, depending on when banks change their rates.
JLL’s Rohan Sharma says the housing market is unlikely to feel a big effect right away.
People buying less expensive homes may feel the change more because their budgets are tighter.
Buyers of premium homes may be better able to manage higher loan costs.
Builders are also facing higher construction and borrowing costs.
They may pass some of those costs on to homebuyers.
Sharma says the effects should become clearer over the next few months.
JLL’s Rohan Sharma says the RBI’s 25-basis-point repo rate hike is unlikely to significantly affect housing immediately.
The impact on borrowers will depend on how quickly banks pass the increase on to lending rates.
Affordable and lower-priced homes may face more pressure than premium housing, where demand remains resilient.
Higher financing and construction costs could lead developers to pass more costs on to buyers.
Sharma expects the effects to become clearer over the coming months, while the RBI could pause depending on global conditions.
- Who
- The Reserve Bank of India, banks, homebuyers and developers; JLL’s Rohan Sharma assessed the likely effects.
- What
- The RBI raised its repo rate by 25 basis points, with a limited immediate impact on housing expected.
- Where
- India
- When
- The rate hike was announced; its effects are expected to emerge over the coming months.
- Why
- The article discusses how the rate increase may affect borrowing costs, housing affordability and developers’ expenses.
Key facts
- Rate change
- 25-basis-point repo rate hike
- Analyst
- Rohan Sharma, Senior Director, Research & REIS, India, at JLL
- Near-term outlook
- No significant immediate impact on the residential real estate market is expected
- More exposed segment
- Affordable and lower-priced homes
- More resilient segment
- Premium housing
- Borrower impact
- Depends largely on how quickly banks pass the rate increase on to lending rates
- Other cost pressures
- Developers face higher construction costs and financing costs
Quotes
Rohan Sharma
JLL Senior Director, Research & REIS, India
“Most definitely, you are going to see impact on the lower priced home segments, which are more cost and interest rate sensitive”
CNBC TV 18
“25 basis points ideally should not move the needle too much”
CNBC TV 18
Sources
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