Rate Hike Puts Festive Housing Demand on Watch
Anuj Puri, Chairman - ANAROCK Group:
The RBI’s 25 bps increase in the repo rate was expected because of the
prevailing inflationary pressures and geopolitical uncertainty brought on by
the Gulf conflict. The rate hike will put pressure on consumer sentiment and
discretionary spending – this has a direct correlation to housing demand. The
festive season is a key period for housing demand, and an increase in borrowing
costs will affect buyer sentiment.
It is worth noting that residential prices in the top 7 cities have
already risen significantly, stretching affordability. As per Anarock Research
data, average residential prices increased 7% y-o-y. With the rate hike, dearer
home loans will make buyers more selective and cause decision timelines to
extend, particularly in the price-sensitive segments.
As per Anarock data, Q3 2026 recorded approx. 1,00,220 housing sales
across the top 7 cities, up 3% y-o-y and 10% q-o-q. Affordable housing
comprised a 16% share of these sales. This momentum will now be tested because
even a modest increase in EMIs will result in deferred purchase decisions or
budget recalculations among affordable housing buyers.
The rate hike is unlikely to have a direct impact on commercial real
estate, which continues to be driven by structural demand from GCCs,
technology, BFSI and other occupier segments. However, retail real estate may
see some near-term impact. Higher financing costs coupled with the possibility
of softer festive consumption could make developers and investors more
cautious. Some new mall projects could potentially be deferred until there is
greater clarity on demand.
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