EXPLAINED | Here’s why RBI’s 25 bps rate hike won’t impact luxury real estate market

The current RBI hike of 25 basis points will not significantly affect the luxury segment, which is at present Indian real estate’s growth engine. But it may put some pressure on affordable property sales.

No impact on luxury real estate
Nayan Raheja, Raheja Developers says, “In the luxury realty sphere, where our group has significant exposure, the current RBI hike of 25 basis points will not significantly affect the overall housing sale.”

Lincoln Bennet Rodrigues, Chairman and Founder, The Bennet and Bernard Company too thinks that the impact will be negligible on the luxury property segment.

He says, "While interest in homeownership has increased in recent times, the luxury segment was the real estate sector’s growth engine, and this trend is expected to continue in 2023 given the change in lifestyles. The hike will not have a significant impact on luxury housing as the demand of home buyers in this segment is beyond these considerations. In India, luxury real estate has in recent years emerged as the preferred choice of property of NRIs, HNIs, and the uber-rich. As buyers become progressively more discerning in their choices for a signature style of living, they will be more willing than ever before to take the leap and purchase luxurious homes. However, a cut in the key rates going forward would be widely appreciated as low-interest rates have played a crucial role in the revival of overall real estate demand and improvement in the liquidity situation, which is vital for the sector."

Affordable real estate may come under pressure
However, the rate hike may put some pressure on the affordable segment which is already showing sluggish sales.
“The segments that are likely to get most impacted are the affordable and mid-range ones which are most cost-conscious. The affordable segment has already been in the doldrums, and adding further to the cost of acquisition obviously does not help,” says Anuj Puri, Chairman, Anarock group.

Time to re-strategise property sales?
It could now be a time to re-strategise sales says Rajeev Dhall, President, Sales and Marketing at Saya Group. “As a developer, it is important to be mindful of the impact this will have on the borrowing costs for both customers and developers, which will ultimately influence the demand for housing. However, it also presents an opportunity to re-evaluate our business strategies and focus on delivering quality and sustainable developments that meet the evolving needs of the market. We must embrace change and strive to maintain stability in this dynamic industry."