New Delhi, June 6 (IANS): Housing and auto loans are set to become costlier with India’s central bank raising its key interest rate for the first time since January 2015, though industry stakeholders feel it will have limited impact on housing loans but in the automobile industry the cost of funds for manufacturers would go up along with loans for buyers.
The RBI on Wednesday raised its key interest rate for the first time by 25 basis points (bps) to 6.25 per cent.
“As buying decisions are generally not taken based on fluctuations in home loan rates, there will be very little effect on the real estate market. However, for some home buyers looking for making a very low-ticket size purchase decision, there may be some tentativeness in the decision making...,” said Ramesh Nair, CEO & Country Head, JLL India.
Overall, there would be minimal impact on the end-user in the housing sector, Nair added.
“The hike may seem to dampen sentiments in the market, but in terms of real estate, it may have little or no impact. As almost all home loans these days are on floating rates, the rise and fall in home loan rates does not impact the performance of residential real estate sector much and tends to balance each other in long term,” he said.
But Joe Verghese, Managing Director, Colliers International India, feels the potential increase in interest rates would impact the developers more than the home buyers.
“The potential increase in interest rates is unfortunately going to impact the developers more than the end-users (home buyers). Not only do their cost of funds increase, the rate increase can impact velocity of sales as fence-sitters will see this as another reason to postpone their home buying decision,” Verghese said.
“In the past, developers have tried to get sales boosted by throwing in more goodies and offers but these schemes have had limited success,” he added.
Khushru Jijina, MD, Piramal Finance & Piramal Housing Finance thinks the reform would give a boost to affordable housing, real estate sector and help in economic growth.
“Amongst the reforms announced, an important announcement was made regarding home loans upto Rs 35 lakh being considered as priority sector lending. This would give a boost to affordable housing real estate sector and help in economic growth,” said Jijina.
But the automobile industry feels the move would impact both manufacturers and buyers.
