No interval from rising realty prices, even though rate hikes

- Tuesday, February 14, 2012 11:23:52 PM

According to the latest data released by the National Housing Bank (NHB), barring Hyderabad and Kochi where there was a sharp decrease in the NHB Residex, the housing price index went up in most metros. Higher home loan rates seem to have had a marginal impact on the interest in buying property.

For example, housing prices went up in Delhi, Bangalore, Chennai, Ahmedabad and Pune during October-December when the industry was complaining of higher interest rates affecting demand.

"Property prices have not witnessed significant fluctuations or corrections due to moderation in demand, real estate firms/construction agencies holding land banks and slow down of launching of new residential projects and/or progress of the existing projects," the NHB said.

RBI increased interest rates 13 times from 2010, to slow down the growth momentum and check the undue price rise. In fact, one of the key reasons for the repeated rate hikes was to ensure that speculation in the real estate sector went away and prices cooled. While the demand has slowed down as the participation of investors and speculators came down.

The tenure of a home loan is 15-20 years and there are bound to be different rate cycles which will result in interest rates going up and down. But over the tenure of the loan the overall effect is not much.

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