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Conventional wisdom has it that when the interest rates go up, the housing market slows down. This thesis is being put to the test in India.
The Reserve Bank of India (RBI), the country’s central bank, has raised the key lending rate by 250
basis points
basis points
basis points
1 basis point is 1/100th of a percentage point. 250 basis points is 2.5%
basis points
basis points
1 basis point is 1/100th of a percentage point. 250 basis points is 2.5%
“From 6.9% two years back, the bank I borrowed from increased the interest rate on my home loan to 8.9%,” said 30-year-old Keerthi S, an investment analyst in Chennai.
Despite the rising interest rates, home sales in the country have been on a tear. At nearly 83,000 units in eight major cities, the number of residential units sold in the quarter ended September were at a six-year high, according to data from real estate consultancy Knight Frank India.
However, peek beneath the surface and a change emerges, led by two divergent trends. And it’s to do with the kind of houses being bought and sold since the Covid-19 pandemic.
The share of affordable homes—categorised by Knight Frank India as costing less than Rs 50 lakh ($60,000)—has shrunk in the sales mix, while that of luxury homes—costing more than Rs 1 crore ($120,000)—has shot through the roof.
From nearly 31,600 units in the June 2022 quarter, the number of affordable homes sold in the recent September quarter has consistently come down to about 24,000. The interest rate spike is
hurting
hurting
India Today
Affordable housing demand sees steep decline in India. What’s behind the dip?
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hurting
India Today
Affordable housing demand sees steep decline in India. What’s behind the dip?
In stark contrast, the number of high-end homes sold has steadily gone up from about 21,000 to nearly 29,000 over the same period.
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