Are rising prices and higher interest rates failing to slow down property sales…

Are rising prices and higher interest rates failing to slow down property sales…

Views: 500 8

-Harshvardhan Tibrewala, Director, Roha Realty

Owning a home is a universal trait among all Indians, and it is a crucial ambition for every person. Most Indians are passionate and focused on achieving it. Even if their homes are small, most Indians prefer to stay in them. They get a feeling of safety while they are at home. We all want to be proud owners of our house. Additionally, societal mores support property ownership. Homeownership is an emotional investment for most Indian families.

The aftermath of the COVID-19 outbreak has shown that owning an apartment is far preferable to coping with the uncertainties of living in rented housing. People are also increasingly more aware of the value of including real estate as an asset class in their portfolio because it is a more stable choice that offers consistent returns than the highly volatile stock market, which entails higher risks.

But the real estate industry is a challenging task. Many local, regional, national, and international variables influence prices. Along with fundamental principles like demand and supply, the housing market is affected by factors like inflation, mortgage rates, and even global economic situations.

Given that India’s central bank raised repo rates by an additional 50 basis points, the Christmas season’s real estate demand might be slightly affected. The cost of purchasing real estate has increased due to rising inflation and interest rates.

The Reserve Bank of India raised repo rates by 190 basis points during the previous five months, raising borrowing costs for anyone looking to buy a property.

Rising labour and raw material cost Another critical factor affecting the availability of real estate is the cost of constructing a home or piece of land. Construction companies frequently have to pay high prices for labour, insurance, land purchase, raw materials, architecture, and engineering.

Interest Rates

Any change in interest rates impacts the seller seeking a mortgage loan and the builder’s ability to repay debts. Lower housing demand is a direct result of high loan rates. Selling real estate becomes difficult for the builder when interest rates rise for two reasons:
-they must recoup the additional building cost and
-to entice the customer at high mortgage interest rates.

Factors of the local housing market

Prices in a given location do get influenced by the area’s degree of supply and demand.
Local variables affect property demand, which controls housing costs. It also affects who has more negotiation power—buyers or sellers. Lower-middle-class borrowers are affected by higher rates because of the higher payments.

GDP and foreign direct investments are propelling Indian real estate

Foreign investors’ involvement has increased real estate availability to varying degrees. The government has approved 100% FDI in India’s real estate sector to develop townships and construct hospitals, hotels, and educational institutions. This investment’s capital has come from domestic and foreign sources, including NRI and FDI funding.

Additionally, the IMF forecasted India’s GDP to expand by 6.8% in 2022, contributing to the market’s upbeat attitude and improved real estate investment ecosystem. Similarly, strong GDP growth prospects in the foreseeable future will continue to support the rising demand
for real estate properties. All these factors will boost interest in real estate and accelerate urbanization across the nation.

Real estate in India will continue to have high demand

Even for experts, predicting the direction of the real estate market is challenging. People are still determining how the trends will change in the future.

Despite all of these challenges, real estate sales are still skyrocketing. For most Indians, owning a home is a passion. With the implementation of important legislation like the RERA Act, the Benami Properties Transaction Act, and the demonetization of currency, the
government has already begun to make positive steps to support the real estate industry.

These actions have increased market regulation and safeguarded consumers’ interests. It will boost investor confidence as well as transparency in real estate transactions. Real estate demand is still very high, and the positive macro indicators state that India will continue to observe positive sentiments in the real estate Industry.

Leave a Reply