The real estate industry relies heavily on bank funding for both builders and clients, that’s why higher interest rates were expected to influence post-pandemic recovery and impede sales.
According to real estate specialists, the demand for residences would not be significantly affected.
-Interest rates significantly impact the value of residential real estate.
-This rate increase has a minimal influence on home sales.
NCR: The introduction of COVID-19 and the following lockdown paralysed the Indian economy, with real estate suffering the brunt of the damage. The real estate business in India has suffered severe damage, as seen by the unsold inventory list throughout the time mentioned above.
However, the country's real estate industry appears to be reviving with the economic recovery. It has been rising since the second part of the previous year.
Because the real estate industry relies heavily on bank funding for both builders and clients, higher interest rates were expected to influence post-pandemic recovery and impede sales.
A social media influencer covering real estate had stated many important things.
According to an expert, the RBI's recent decision to raise the repo rate would make home loans more costly. However, real estate professionals believe that demand for properties will not be affected significantly.
Interest rates significantly impact the value of residential properties since they affect the cost of a loan. They compel banks and other lenders to charge a higher interest rate on loan principal, including mortgages.
Simply put, when interest rates are low, it is excellent news for home purchasers since credit is cheaper and mortgage rates are lower. According to an expert, a rise in interest rates has the reverse impact since as loan rates rise, properties become less affordable.
This time, though, the scenario is different. This rate increase has a minimal influence on home sales. The real estate market goes through a cycle. After a lengthy period of decline due to Demonetisation, GST, and Covid, its long-term rising cycle has now begun, according to the influencer.
The RBI has raised interest rates by 50 basis points to pre-pandemic levels. The current house loan interest rate is roughly 8% per annum. Nonetheless, despite high loan rates, demand for residential real estate continues to rise.
While examining the current health of the real estate industry, An expert mentioned that according to real estate consultancy data, roughly 1.85 lakh units were sold in the top seven cities in the first half of 2022. Given the favourable forecast for the real estate sector, it looks likely that India's residential sector will perform extraordinarily well in 2022. An expert noted that home sales would increase this year due to a growing preference for larger homes with more amenities.
Some of the reasons for this high demand, according to an Expert, are:
1. First-time homebuyers are millennials. Millennials' desire for home properties is increasing.
2. Many individuals assume that real estate is a more secure investment.
3. The purchasing power of NRIs has grown as the value of the rupee has fallen. NRIs are purchasing homes in their native country of India.
4. As the bulk of working professionals return to the office, the demand for the residential segment will increase.
5. Most rating agencies forecast India's growth to be 8-9%. Because of this solid economic growth, there will be an increase in job opportunities, which will result in increased home demand.
So, we can predict that 2022 will be the year of residential real estate, led by millennial homebuyers who are investing in real estate in more significant numbers than ever before, she added.
It is noted that sales in the first quarter of 2022 exceeded 99,550 units while deciphering certain data. The Delhi NCR experienced the largest ever surge in new home sales, at 123%. Because of the increased demand, the market saw an increase in the capital values of residential properties.
The influencer stated that the increase will continue in FY 2023. Real estate in tier two and three markets will also rise rapidly as infrastructure expenditures, enhanced connectivity, and better employment prospects continue.
According to the "India Brand Equity Foundation" research, the Indian real estate sector is predicted to reach US$ 1 trillion in market size by 2030, up from US$ 200 billion in 2021, and contribute 13% to the country's GDP by 2025. This time, the market is driven by primary demand rather than sentiment. If you are looking to buy a home, home loan rates have been progressively rising, indicating that housing values may climb as well. The Expert also remarked that it is always best to buy a property when the market conditions are favourable.