Moneycontrol Pro Panorama | Rising rates? But home sales tell you a different story

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The real estate sector has proved experts wrong. Many experts expected that in a rising interest rates scenario, consumption will come down, especially in the rate-sensitive home loan segment. However, with the rate at which real estate is getting registered, one gets the impression that interest rate hikes no longer matter to home buyers.

Four years of consecutive good monsoon have had an impact on home buying, especially in rural India and smaller cities. However, Mumbai city, the costliest housing market in the country, continues to show robust growth.

For August, the property market in Mumbai city witnessed sale registrations of 8,149 units. More importantly, unlike previous data, 60 percent of all registrations were in the price band of over Rs 1 crore. Most parts of the last two years had seen affordable housing leading the rally. This time around, the apartment size ranged between 500-1000 square feet as compared to sub-500 square feet earlier.

These growth numbers are despite a 140 basis points increase in repo rates and an increase in property tax.

The first half of calendar 2022 was driven by growth from home buyers rushing to book their houses to take benefit of lower taxes. However, the buying has continued in the third quarter as well reflecting the strength in the housing sector, which has defied interest rate hikes. However, affordable housing continues to be in a sweet spot, writes Khushboo Rai.

Though there was a YoY growth of 20 percent, sequentially housing sales in Mumbai in August saw a 28 percent drop over July 2022. Before you start selling real estate stocks, note that August generally records a drop in property registrations over July historically, recording a month-on-month decline in eight out of the last 10 years. But August 2022 was the best performing August month in the past 10 years.

The growth in the Mumbai market has been in residential units, with 85 percent of all registrations coming from that segment.

Registration around the Ganesh festival and a pick-up in infrastructure projects, especially Metro lines, are being cited for the increased demand in real estate registration, a trend that most real estate observers feel will continue for the rest of the year despite increasing interest rates.

The optimism of the real estate sector has rubbed off on the rest of the economy. Manas Chakravarty writes on how low inventory and high new orders are boosting business optimism.

For the equity markets, however, volatility is expected to increase in September. The US Fed’s quantitative tightening is set to accelerate in the current month, writes Ajay Bagga. ​

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Technical Picks: BHEL, USD-INR, ICICI Bank, Infosys, VA Tech Wabag and Aluminium (These are published every trading day before markets open and can be read on the app).

Shishir Asthana
Moneycontrol Pro