RBI Hikes Repo Rate By 40bps: Impact On The Real Estate Sector

The Indian central bank, the RBI has hiked the repo rate intending to restrict the hiking inflation rate in the country. With the inflation edging higher in the aftermath of the Russia-Ukraine war and the hiking crude oil rates in the global markets, RBI Governor has decided to increase the repo rates by 40 bps, bringing them to 4.40%.

Commenting on the decision about the repo rate and its impact on the real estate sector, Anuj Puri, Chairman - ANAROCK Group told the media, "Unfortunately, for home buyers, this hike signals an imminent end to the all-time low-interest regime, which has been one of the major drivers behind home sales across the country since the pandemic began."

Puri added, "Moreover, rising interest rates and inflationary trends in basic raw materials in construction including cement, steel, labor cost etc. will add to the burden of the residential sector, which did significantly well in the previous quarter - Q1 2022. This rise in interest rates will ultimately impact overall acquisition cost for homebuyers - and may dampen residential sales to some extent. The possibility of an overall price hike was also highlighted in ANAROCK's recent consumer survey wherein at least 56% of the respondents felt that property prices will increase in 2022. A deep dive revealed that a price rise of >10% will have a 'high impact' on residential sales and 10% in overall acquisition costs."