Hike in interest rates, registration costs discourage homebuyers

Hyderabad: As the Reserve Bank of India (RBI) has hiked repo-rate, all the banks and non-banking financial companies (NBFCs) would soon surge up their interest rates on home loans. This is a bad news for not only the new home buyers but also the existing borrowers.

The latest policy decision of the central bank would impact badly on home loan customers. With the rise in lending rate, the banks and NBCFs would be increasing the interest rates on home loans, resulting in higher monthly EMIs (equated monthly instalments).

Gulam Zia, Senior Executive Director at Knight Frank India, said, "With the rapidly changing geopolitical scenario that continues to pressurise the global supply chain and commodity prices, domestic policy rates were expected to be realigned to the changing scenario."

"It is not unexpected, as the RBI Governor had already shared concerns over rising inflation. The interest rate hike amidst rising input costs is expected to have an impact on real estate. The sector has vastly benefited from the low-interest rates in the last two years," he said.

"This policy rate hike will translate into higher EMIs for home loans. However, we believe that improved homebuyer attitude, preference for owning a house, and strong wage growth will continue to support the housing market," Zia opined.

He further said, "The monetary policy stance is still accommodative and with the receding pandemic and economic growth, we expect that consumer demand will remain buoyant in the near term".

In the last one year, Telangana government has revised the registration costs two times. This has already discouraged the homebuyers in Hyderabad and slowed down the property sales. Hyderabad posted a 25 per cent drop in the registration of apartments in February 2022.

The rising cost of construction raw materials has been delaying the real estate projects. With this, the first-time homebuyers in the city are forced to pay the monthly EMIs as well as rentals. Now, the upward revision of lending rates would put further burden on them.

According to a report by 99acres.com, Hyderabad has shown neutral trends in terms of new launches and sales in January-March (Q1) 2022. In January 2022, more than 5,500 home sales were registered, with maximum transactions for properties priced within Rs 50 lakh. The city recorded 57 new housing societies getting launched and adding more than 21,000 housing units in the studied quarter. Maximum supply was added in the price range of Rs 70 lakh to Rs 2.5 crore. Most of these projects are expected to be completed by 2027-28.

Maneesh Upadhyaya, Chief Business Officer, 99acres.com, said, "Homebuyers were seen visiting sites and closing deals in new homes and resale markets despite initial lockdowns due to rising virus load in January 2022." Nevertheless, increasing raw material costs due to the Ukraine-Russia conflict kept the builder fraternity worried. Developer bodies threatened to halt construction activities in the absence of government intervention, he informed.

Average weighted property prices in Hyderabad grew in Q1 of 2022 against the previous quarter, albeit minimal. The buying rates for apartments in the city averaged at Rs 6,500 – 7,500 per sq ft.

Areas such as Narsingi, Miyapur, Bachupally, LB Nagar, Pocharam, Patancheru, Tellapur, Gopanpally led the pack in terms of new launches, home enquiries and sales. Hyderabad's unsold housing stock will take approximately 36 months to sell completely. With demand overweighing supply, the inventory is expected to stabilise in the coming quarters. Noticeably, 3 BHK homes form the bulk of this unsold inventory. Residential pockets in West Hyderabad continue to be in demand with new buyers. Peripheral areas of Shankarpally, Ghatkesar and Medchal witnessed a steady appreciation in property rates. Puppalguda clocked a steep hike in average 'asks', with land prices hovering over Rs 2 lakh per sq yard.