The forthcoming monetary policy announcement will be a decisive event for the Indian housing sector. If another repo rate hike takes place, home loan interest rates will enter the red zone, and we can expect at least short-term repercussions on overall housing demand. Inflation is now one of the significant risks in real estate, and increased input costs have already compelled many developers to hike property prices in the first half of 2022.
The RBI’s two consecutive repo rate hikes in the recent past, meant to tackle inflation, have added to buyers’ overall acquisition cost. Together, these two factors can dent demand, at least over the short term.
Developers have had no recourse but to increase property prices, as input costs have been growing constantly. Repo rate hikes are a major concern as the real estate sector treads cautiously in the currently uncertain times. As per ANAROCK Research, there was a 8% quarterly decline in new housing launches across the top 7 cities in Q2 2022. 82,150 units were launched in Q2 2022 against 89,150 units in Q1 2022. One of the main reasons for the reduced new launch rate is that developers have consciously throttled back fresh supply.
“As for the declining new launches, developers would have held back fresh supply while they sought clarity on the unfolding market sentiments amid increased housing purchase costs,” says Puri. “Given that we saw two back-to-back quarters of robust housing sales and new launches (Q4 2021 and Q1 2022), a dip was to be expected.”
Despite the global headwinds, geopolitical tensions, and supply chain issues, Indian real estate sales remain healthy. Housing demand is still robust across the top cities, driven primarily by end-users. This trend will continue into the upcoming festive quarter, provided that inflation remains in check – and there are no further rate hikes.
See Also: Housing Sales Moderate in Q2 2022, MMR and NCR Outperform Other Cities