Rate hikes unlikely to hurt housing demand, says Deepak Parekh

Mumbai: Housing demand is unlikely to be affected by the current round of interest rate hikes and long-term lending like a mortgage is going through cycles of rising and falling interest rates, it said on Thursday Deepak Parekh, chairman of mortgage lender HDFC Ltd. .

Speaking at the lender’s 45th annual general meeting, Parekh said despite the rate hikes, current interest rates on home loans are still below pre-pandemic levels. To cushion the effects of the covid-19 pandemic, the Reserve Bank of India (RBI) had cut the repo rate by 115 basis points (bps) in 2020. As inflationary pressures began to build and worsened Following the Russia-Ukraine war, the central bank raised rates by 90 basis points and further rate hikes are expected in the coming months.

“It was unrealistic to believe that such low interest rates and high levels of excess liquidity would continue. Variable repo rates have started to align with repo rates,” Parekh said.

Meanwhile, data from property services firm Anarock showed on Thursday that due to rising property prices and rising lending rates, India’s seven major cities saw sales of housing moderate by 15%, from around 99,550 units in the first quarter of 2022 to around 84,930 units in the second quarter of 2022.

As for home loans, Parekh said, HDFC has had an exceptionally good run with the strong demand for housing coupled with interest rates at historically low levels. In March, HDFC recorded its highest number of individual loan receipts at over 86,000.

“I continue to argue that despite the changes in the macroeconomic environment, the potential for housing growth in India remains immense,” he said.

According to Parekh, real estate prices are seeing measured increases, commensurate with rising input costs. Still, developers are unlikely to opt for big increases, as they recognize that overvaluing homebuyers and having large unsold inventory is counterproductive for them, he said. declared.

“There has been a consolidation and a clean-up so to speak, in the Indian real estate space. strong and reputable, meaning homebuyers also have the confidence to opt for properties under construction again, rather than playing it safe and only preferring completed projects.

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