Indian real estate: where is it headed?

Yet another increase in lending rates by the Reserve Bank of India (RBI) has also led to an unprecedented rise in home loan rates. Buying a house has become more expensive. Private banks HDFC and ICICI have raised rates by 75 basis points (100 basis points = 1%). This is the third consecutive interest rate hike this year. On average, home loans have become 2% more expensive this year compared to 2007.

Properties in India have been affected by many factors. The global recession had hit the real estate segment hard. Property prices across the country have stagnated. This is the first case of its kind in the last five years when property prices have stabilized. Otherwise, property prices in all segments soared. Demand for property had taken off like never before. Also, property seekers and investors were investing heavily in the real estate segment. Anyone with few funds to spare found investing in property auspicious and profitable. At the time, investors were neglecting other investment instruments like mutual funds, stocks, and stocks.

Affordable home loan rates and easy payment options, such as EMI, have attracted many homebuyers to consider borrowing from banks and financial institutions.

The scenario has now changed. Borrowing funds from banks has become an expensive proposition. The costs of construction materials are increasing. As a result, private property developers have hinted that they will raise prices for real estate projects. These market conditions are dissuading investors from investing in the real estate segment. Home seekers also expect market conditions to improve. As a result, the number of real estate transactions has decreased. Realtors, builders, and home seekers await better times to come.

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