Indian Real Estate: Where is it Heading?

Yet another hike in the lending rates by the Reserve Bank of India (RBI) has caused an unprecedented hike in the home loan rates also. Buying a home has just got costlier. Private banks HDFC and ICICI have hike the rates by 75 basis points (100 basis points=1%). This is the third consecutive hike in interest rates this year. On an average, home loans have got costlier by 2% this year as compared to 2007.

The real estate in India has been hit by many reasons. The global recession had hit the real estate segment hard. The property Rates all over the country have stagnated. This is the first such instance in the last five year when property rates have stabalised. Otherwise, the rates for property in all segments were rising without any halt. The demand for property had taken off like never before. Besides, property seekers and investors were keenly investing in real estate segment. Anybody who had little funds to spare found it conducive and profitable to invest in property. At that time, other investment instruments like mutual funds, securities and shares were being neglected by investors.

Home loan rates were affordable and easy payment options like Equated Monthly Installments (EMI) had attracted many house buyers to consider borrowing from banks and financial institutions.

The scenario has changed now. Borrowing funds from banks has become a costly preposition. The costs for constructions material are rising. As a result, private property developers have hinted at hiking the rates of property projects. These market conditions are dissuading investors from investing in the property segment. Home seekers too are waiting for the market conditions to improve. As a result, the number of property transactions has dwindled. Property brokers, builders and home seekers are hoping for better times to come.