Rate hikes unlikely to hurt housing demand in India, with Bengaluru leading price rise

Trucks are parked at the site of a blocked residential building project under construction in Mumbai March 19, 2015. REUTERS/Danish Siddiqui

BENGALURU, Sept 5 (Reuters) – The buoyant outlook for India’s property market has changed little over the past three months, despite the Reserve Bank of India’s launch of its most aggressive tightening cycle in a decade, according to a Reuters survey of housing market analysts.

Relatively behind other central banks in raising interest rates, the RBI has raised the repo rate from a record high of 4.00% to 5.40% over the past four months. It is expected to add another 60 basis points by the end of March, raising borrowing costs for potential buyers.

But the main problem, in a country where almost a quarter of the population earns less than 15,000 rupees a month, is the price.

With interest rates slightly above pre-pandemic levels, combined with a lack of supply and rising input costs, house prices are expected to rise another 7.5% this year and 6. 0% the next according to a survey of 15 real estate market experts conducted between August 16 and September 2.

These remained unchanged from the May survey and beat consumer inflation projections of 6.5% and 5.2% for this year and next, respectively, according to another Reuters poll.

The housing market outlook for a country of more than 1.3 billion people is an anomaly, as house prices in most major economies polled by Reuters are expected to fall or grow at a much slower pace this year. next. This means home ownership will remain out of reach for many potential buyers.

“With input costs and interest payments being passed on to homebuyers by developers, prices have already moved north in major cities, narrowing the window of affordability,” Rohan said. Sharma, director of JLL Research.

“There has been no significant change over the past three months as demand exists largely due to the pandemic-induced desire for homeownership.”

A regional breakdown of the latest Reuters poll data showed that Bengaluru, India’s “Silicon Valley”, will lead major cities with property price growth of 6.0% for 2022 and 7.0 % for the next two years, roughly similar to projections from the May poll.

House prices in Mumbai are expected to increase by 5.0% for this year and next, unchanged from May, and by 5.8% in 2024.

Real estate prices in Delhi, including those in the surrounding National Capital Region, will rise 4% to 5.5% this year and next, roughly in line with the southern coastal city from Chennai.

Asked about the value of national house prices on a scale of 1 to 10 ranging from extremely cheap to extremely expensive, the median response was 5, matching the May estimate.

Analysts have given an overall rating of 7 to properties in Mumbai and Delhi, India’s two largest cities, calling them the most overrated cities in India.

(For more stories from Reuters Quarterly Housing Market Surveys:)

($1 = 79.8430 Indian rupees)

Reporting and polling by Arsh Tushar Mogre; Editing by Hari Kishan, Ross Finley and Tomasz Janowski

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