Repo rate hike may weigh on festive housing sales, but demand remains strong: CREDAI, NAREDCO

Housing sales could face some pressure during the upcoming festive season as the RBI's 25-basis-point repo rate hike is expected to push up home-loan borrowing costs, real estate industry bodies CREDAI and NAREDCO said on Wednesday.

At the same time, the two bodies said the impact on the residential property market was likely to remain limited, citing strong underlying demand, buyer sentiment and the festive-season momentum.

CREDAI National President Shekhar Patel said the repo rate hike should be viewed against the backdrop of global uncertainties and inflation concerns, while noting that monetary policy decisions would affect the cost and availability of funds.

"We are also entering the festive season, which is an important period for the housing market, and the increase in borrowing costs could have some impact on sales during this period, although the underlying demand for housing remains strong," Patel said.

NAREDCO President Praveen Jain also acknowledged that home-loan rates were likely to rise following the RBI's decision but said housing demand remained robust.

"We expect the impact of this increase on the residential market to remain limited, supported by strong buyer sentiment, festive demand and the long-term need for homeownership," Jain said.

He added that the real estate sector was expected to maintain its current momentum despite the increase in borrowing costs.

Patel said homebuyers should consider interest rates as only one factor in what is generally a long-term financial decision.

"We should understand that for a homebuyer, the interest rate at any particular point is only one part of a much longer decision," he said.

"A home loan is generally a commitment of at least 15 years. During that period, there will be times when rates go up and times when they come down. We should not look at repo rate changes in isolation. What matters is the long term outlook for the economy & overall growth," he added.

The comments come ahead of the festive period, traditionally an important sales window for the housing sector, with developers and homebuyers closely watching borrowing costs.

CREDAI and NAREDCO are among the major industry bodies representing real estate developers and together have around 20,000 builders as members.