While the Reserve Bank of India recently raised the interest rates by 90 basis points bringing it to 4.90 per cent, Ravi Subramanian, Managing Director & CEO, Shriram Housing Finance, said that interest rates will further go up. “Another 75 basis point hike over the next 60-75 days seems a possibility, which would mean that the housing finance rate will go up by another per cent and a half for consumers in the country,” Subramanian said in an interview with Shaleen Agrawal at the Financial Express Modern BFSI Summit. The interest rates are increasing courtesy the geopolitical unrest and inflationary pressure.
Subramanian maintained that the continuous rise in interest rates, however, will not have a major impact on the existing loans. “Interest rates have gone up, gone down and fluctuated and the world has gone on. These rate hikes will not impact the existing loan rates or EMIs in any drastic manner. Housing finance still remains the best performing asset in portfolios of most of the banks,” he said.
How’s the real estate sector doing?
While there was a free fall in real estate transactions as soon as the Covid struck, it came with a drop in prices which further resulted in an opportunity for home buyers towards the end of 2020 and early 2021. “Real estate has not seen a better 10-15 months that it has seen now. Now, inflation and rising interest rates is casting a shadow on the real estate segment and on housing finance sales, but that’s at a macro level. There is a possibility of a slowdown in the next 6-8 months across tier-I, -II and -III towns,” said Subramanian.
Further, talking about real estate as an asset class, he said that it will deliver returns for investors over an elongated time period. “It should give you inflation ++ kind of returns in years to come. One needs to stay invested and wait for the prices to go up,” he said. According to CBRE’s sector outlook report, investments in the real estate sector in India are bound to grow by 5-10 per cent in 2022.