The real Estate market is knotty. There are a lot of factors that drive the prices like domestic, regional, national, and international. Majorly supply and demand come into play, other factors namely rise in interest rates, inflation, and remunerative conditions in other countries can also clout the real estate market. The loan tends to become unattractive if there is a major increase in interest rates making the loan costlier and hiking the EMIs. This may broadly affect the real estate market. This sector is highly rate sensitive and requires the constant support of low reasonable interest rates.
Rising home prices and rising interest rates are reducing buyers' purchasing power, leading to a slump in demand for real estate. Post-pandemic, home buyers had it good. Currently, mortgage rates are being influenced by federal funds rates and other market rates. The floatable outlook for India’s housing market is the RBI plunging in the most aggressive close-knit cycle in 10 years. It is quite late as compared to other central banks in hiking interest rates, RBI has raised repo rates post-pandemic era from 4% to 5.40%. A hike in interest rates directly affects the buyers as well as the sellers. The property value and housing prices
directly resonate with mortgage rates but what controls both cases is the health of the current economy. A fast-growing economy helps employers to increase salaries enough to help accommodate the rising interest rates. With a steadily growing economy, with new job opportunities and wage hikes, a rise in interest rates will not paralyze the real estate market.
There will be incremental growth in rental prices as well due to the rise in property prices still that the real estate market will do well in 2023 as the economy is moving towards growth, local activities have resumed and the government has taken steps to help tier-2 cities in expanding more. Tier-2 cities have been anticipated to gain more residents as a result of the government's intervention in economic activity and employment prospects.
Purchaser morale is still high and it can be anticipated that governments proposed sector-specific initiatives will benefit all market participants like the buyers, developers, land owners as well as tenants. As per Anarock, 2.73 lakh units were sold from January to September 2022. This is 87% growth as compared to the corresponding period in 2021. With the onset of work-from-home culture, people are now preferring to buy 2bhk to 3bhk homes.
If we go by the CRISIL report, the rhythm in housing demands across India is expected to be stable in this fiscal year and even expected to grow by 5 to 10%. Demand for housing was subdued even when the interest rates were historically low over the last 2 years as income did not rise. Now affordability has increased and home prices are suppressed hence the total demand for real estate will start showing a rise irrespective of all price hikes.
People in India today have high aspiration level and confidence towards real estate investments than prior hence the rising interest rates and property prices are not going to dent the desire to own a house for the people.
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