Wednesday, February 6, 2019

What is the impact of Interest (Repo) rates on Housing & Housing Prices Appreciation in various cities in India? Is there any direct relationship?

Author: Sachin Gupta | Find me on Twitter

Ok, everyone including the real estate developers, builders’ apex bodies such as CREDAI, brokerage houses, and other related industries are shouting from the roof tops for interest rate cuts to revive the demand in realty sector. Every time there is a review of monetary policy by RBI, numerous articles in leading newspapers are published on how the rate cuts can boost demand and bring back fence sitting customers in investing in real estate in India. However, RBI has resisted such calls and instead has focused on bringing down the inflation. Now that, inflation has come down, can we expect rate cuts? Mr. Raghuram Rajan knows it best. Let’s leave it to him and his team at RBI.

But, let’s explore, is there any merit in the builder’s argument for reducing the interest rates? Will rate cuts boost demand?

For that, we need to examine the housing price appreciation in various cities across India and the impact of repo rates on housing price appreciation.

Let’s go one by one.


  • Appreciation in Housing prices across India

As can be seen from below graph, the pace of housing price appreciation has slowed down since 2010. What does it suggest? Well, it suggests, that demand has been falling gradually since 2010. End-users or investors are postponing their decision to invest in real estate. Assuming influx of new housing supply to be constant from 2010 to 2014.




  • Increase in repo rates

Repo rates have increased from 5% in March 2010 to 8% now. Repo rates are rates at which RBI (central bank) lends money to banks or housing finance companies.




  • Impact of increase in repo rates on housing price appreciation

This graph tells the whole story. As the repo rates started moving up from 2010 to 2014, the housing price appreciation started to come down. In 2010, most cities witnessed substantial appreciation in housing prices with Bangalore, Ahmadabad, Kolkata, Mumbai, and Chennai appreciated upwards of 30%. Whereas in 2014, the highest price appreciation was witnessed in Pune at mere 3.88%.




  • Conclusion

While rate cuts will certainly bring back customers to market and we may see improved activity in real estate investment. However, just like demand waned gradually from 2010 to 2014, similarly, demand will pick up gradually and we may see the full potential somewhere in 2017.



Have any Questions?

37 comments:

  1. Thanks for the information you have provided. In present time, the demand for Residential Plots For Sale In Varanasi has increased and it is the best place for the investors to invest in real estate.

    ReplyDelete
  2. This comment has been removed by the author.

    ReplyDelete
  3. Nice and informative post… Post your real estate ads on Bisell.in.. and get quick response from buyers
    Thanks,
    Bisell.in

    ReplyDelete
  4. This comment has been removed by the author.

    ReplyDelete
  5. This comment has been removed by the author.

    ReplyDelete
  6. Good Post, thanks for sharing a Post. Property is one of the most expensive resources for someone. We have extensive range of office commercial space for rent for all size organizations. wardhaitpark is one of the biggest IT office In India.

    ReplyDelete
  7. This comment has been removed by the author.

    ReplyDelete
  8. This comment has been removed by the author.

    ReplyDelete
  9. I recently found many useful information in your website especially this blog page. Among the lots of comments on your articles. Thanks for sharing.
    rafleys.com

    ReplyDelete
  10. I think, this is really very well and informative content given about 4 BHK HOUSE FOR SALE IN THIRUVANMIYUR CHENNAI. Thanks for given this information here about this blog.
    Flats in Ullal

    ReplyDelete
  11. The Information is really helpful. If you are looking for Villas On Rent Near Mumbai pls Click on the Link. Thank You

    ReplyDelete
  12. Very much-needed information. Never read these types of info graphics.

    ReplyDelete
  13. Great post... you have shared. thanks for sharing.
    high-quality apartments

    ReplyDelete
  14. Your article is so amazing.

    Investing in real estate is always considered as a risky decision.
    But, to turn this risky decision into a beneficial one, is in the hands of home buyers.

    TRZAMEEN.com

    You can buy and sell properties all over in Pakistan

    ReplyDelete
  15. Nice Post!! Thanks for sharing the nice information.Bramahacorp provide the best upcoming projects in Pune well known for their unique Best Builders in Pune

    ReplyDelete
  16. Thank you so much for this kind of great article eaadhar

    ReplyDelete
  17. Hey Nice Blog!!! Thank you for sharing information. Wonderful blog & good post.Its really helpful for me, waiting for a more new post. Keep Blogging!

    Buying Plots in Gorakhpur
    Residential plots for sale in Gorakhpur
    Low Price Plots in Gorakhpur

    ReplyDelete
  18. Thanks for sharing the information,
    Best 2 & 3 BHK flats in NIBM Pune , Developed by BramhaCorp with all the amenities and on best Natural location with ease of conveniences flats in NIBM.

    ReplyDelete
  19. Thanks For Sharing This Nice Information.
    Boulevard by Bramhacorp Builders provides the pune properties new projects with Premium office spaces now for sale!

    ReplyDelete
  20. Thanks for sharing the informative post. This is very useful to buy a dream house in Chennai.
    Budget flats in Chennai
    Studio apartments in Chennai

    ReplyDelete
  21. Excellent post.. Thank you for sharing this informative....

    Project finance consultants in india

    ReplyDelete
  22. Are you interested to buy new residential projects in trichy coma and grab at lowest prices.

    ReplyDelete
  23. Hey Nice Blog!!! Thank you for sharing information. Wonderful blog & good post.Its really helpful for me, waiting for a more new post. Keep Blogging!

    https://goo.gl/posts/mkean

    ReplyDelete
  24. Hey Nice Blog!!! Thank you for sharing information. Wonderful blog & good post.Its really helpful for me, waiting for a more new post. Keep Blogging!

    Land in gorakhpur
    plots in gorakhpur
    Residential Plot Gorakhpur

    ReplyDelete

  25. Very Nice Post. I really appreciate with your blog.Thanks for sharing.

    waterfront lots
    buying land
    Lucas Properties

    ReplyDelete
  26. Firstly I would like to thank you before commenting on your marvelous and very useful blog.
    Get all the information about the real estate in just a one click @
    flats in chennai
    Flats For Sale in Avadi
    Flats for sale near avadi
    apartments for sale in avadi
    apartments for sale near avadi
    apartments in chennai
    flats for sales near me
    flats for sales in chennai

    ReplyDelete