An increase in lending rates is almost inevitable, considering the high need to curb inflation. On its own, an increase in lending rates would probably not have a very significant effect on the market. However, the fact is that there are already a number of negatives such as overpricing at play in the residential real estate sectors of large cities like Mumbai and Delhi.
Also, while there is a high projected supply, there is a distinct dearth of appropriately priced projects in the low-to-mid income segments.
The RBI’s raising its lending rates will add to the stress already building up, and hasten the inevitable correction of at least 15-20% in the pricing of residential properties in the overheated central areas of these cities. This correction was previously expected to happen in 6-8 months.
