Impact of Rising Home Loan Interest Rates on Real Estate Companies

Recently, we observed that following the Reserve Bank's increase in the repo rate, almost all banks have raised the interest rates for home loans.

In this context, let’s examine whether the increase in home loan interest rates has affected the real estate sector.

Expert Opinions in Real Estate

Experts in the real estate sector believe that the hike in home loan interest rates has not significantly impacted the industry. Despite banks raising the interest rates, they state that the effect on the real estate sector has been minimal. New residential project bookings have increased, and it is anticipated that these projects will sell out within a few days.

Impact on Home Loan Interest Rates

The increase in home loan interest rates has not deterred customers in the real estate sector from purchasing homes. Experts suggest that extending the loan tenure and reducing the loan-to-value ratio can mitigate the impact of the increased interest rates.

EMI Tenure

Aravind Subramanian, Managing Director and CEO of Mahindra, stated that homebuyers are now opting for longer home loan tenures. By extending the EMI tenure, the impact of the higher home loan interest rates has been minimized.

Rising Costs

Due to the continuous rise in the prices of raw materials such as steel, cement, aluminum, and plastic, real estate companies increased home prices by 10-15% in the past year. Developers believe that these price hikes may continue due to the current inflation trends. Nevertheless, the real estate sector is always seen as a lucrative industry.

Conclusion

In conclusion, the real estate industry has shown resilience despite the rise in home loan interest rates. While there are challenges due to rising material costs and interest rates, the demand for new residential projects remains strong, indicating a robust outlook for the sector.