High Interest Rates May Affect the Real Estate Boom in India

By: addi vardhaman

Real estate as an investment option entered in the Indian mindset a little bit late. This popularity started granulating after foreign majors showed their interest. Morgan Stanley, one of the best banks in the world has invested about $152 million in Mumbai real estate. It is the single biggest investment by any foreign player in the Indian construction and development market.

Indian real estate market is improving in reality. The increased demand of residential and commercial sites among NRIs has pushed the price of real estate beyond actual limit. This trend, in turn, offers common platform for Indians and Foreigners to invest in Indian real estate for higher and definite returns.

The most credible factors in the prospects of the retail sector in India are the increase in the young working population and easy availability of home loans, hefty pay-packages, nuclear families in urban areas, along with increasing working-women population. The emerging opportunities in the services sector have simultaneously provoked banks to offer cheap loans.

The recent decision of the Reserve Bank of India's (RBI) not to cut interest rates has spooked real estate companies facing the brunt of a housing industry slowdown caused by the high cost of mortgage financing. RBI has recently decided to keep interest rates unchanged in its third-quarter monetary policy review. were expecting a cut, but RBI was in no mood.

The series of interest rates hikes last year put the brakes on home sales. Middle-class households put off purchases after observing prices breaking all records in most major metros. will help the real estate industry by spurring consumers into buying houses. Realty majors like DLF, Puravankara Projects, India bulls Real Estate are in favors of a rate cut. The finance ministry and RBI should take this issue seriously.

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