Shares of real estate majors declined sharply in Wednesday’s morning trade on Wednesday after the Reserve Bank of India (RBI) raised its key repo rate by 35 basis points to 6.25 per cent to curb lingering inflation pressures. As many as 8 components of the BSE Realty index traded in the red at around 11.20 am.
With a fall of 3.07 per cent, Oberoi Realty declined the most. It was followed by Brigade Enterprises (down 2.25 per cent), Godrej Properties (down 2.15 per cent), DLF (down 1.76 per cent) and Sobha (down 1.75 per cent). Macrotech Developers, Indiabulls Real Estate and Sunteck Realty also retreated somewhere between 0.35 per cent and 1.50 per cent. On the other hand, the BSE Realty index was down 1.46 per cent at 3636.76 at around the same time.
Sharing his view on the impact of rising interest rates on the real estate sector, Shishir Baijal, Chairman and Managing Director, Knight Frank India said, “The lending rates have risen significantly, especially for the loans linked to External Benchmark based Lending Rate (EBLR) where there has been a 100 per cent transmission of repo rate. Loan products linked to MCLR rate are also up by around 108 basis points during this period.”
He further added that this hike will further impact EMIs and reduce home affordability. “Simply based on the interest rate impact in this rate cycle, the Knight Frank Affordability Index has recorded a cumulative deterioration of an average of 3 per cent across the country.”
Shares of Prestige Estates and Phoenix Mills were up 0.97 per cent and 0.41 per cent, respectively.
Anuj Puri, Chairman, ANAROCK Group said, “The 35-basis points rate hike by the RBI – the fifth consecutive rate hike this year – comes as no surprise. With repo rates now at 6.25 per cent, there may be some repercussions on housing uptake. This hike will undoubtedly push up home loan interest rates, which had already crept up after four consecutive rate hikes this year. However, as long as interest rates remain in single digits (mainly within 9.5 per cent) the impact on housing will at best be moderate. If they breach this point, we will see some real pressure on residential sales volumes in the months to come – especially in the affordable and lower mid-range housing segments.”
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