India a bright spot in shaky global realty market but may see pushback if home loan rates cross 9.5%: CLSA

High interest rates and inflation are hurting the global property boom but India remains a bright spot.

Despite a rise in mortgage rates and property prices, housing demand remains steady in India, according to foreign brokerage firm CLSA’s channel checks.

“Most developers and property brokers indicated footfalls and conversion remain steady despite a 150 basis points increase in mortgage rates over the past six months and a 6 percent increase in property prices over the past 12 months,” CLSA said in a recent report.

To fight inflation, the Reserve Bank of India has increased its benchmark repo rate by 190 basis points since May. As a result, home loan rates also rose but banks are now slashing them to sustain the strong demand momentum.

Housing Development Finance Corporation, State Bank of India, Bank of Baroda and Bank of Maharashtra have cut  rate on home loans by 15-30 basis points since October.

Demand should remain resilient up to mortgage rates of 9.5 percent but beyond that, there could be pushback from buyers, believes CLSA. Currently, mortgage rates are at 8.5 percent.

The global picture

While India stands out, the global picture looks gloomy. According to the investment banking firm UBS, housing prices in several cities are “out of sync” with rising interest rates. Toronto, Frankfurt, Zurich, Munich, Hong Kong, Vancouver and Amsterdam are in the bubble risk zone now, it added.

In Hong Kong, property prices have fallen 13 percent since the August 2021 peak. According to reports, the slump is now affecting the city’s luxury home sales, which are the lowest in nine years.

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