Home loan interest must drop to 6% to revive sales: NAREDCO president

G Hari Babu attributed the fall in housing sales to excess supply, sharp rises in prices of residential properties and global economic uncertainties

Realtors' body NAREDCO president G Hari Babu on Friday demanded that interest on home loans should come down to around 6 per cent to boost sales that have fallen during the first six months of this year across the top seven cities.

He attributed the fall in housing sales to excess supply, sharp rises in prices of residential properties and global economic uncertainties.

Real estate data analytics firm PropEquity has reported a 19 per cent drop in sales during the current April-June period and a 23 per cent fall in the preceding quarter across 9 major cities. Property consultant Anarock has estimated a 20 per cent fall in the latest June quarter in the top 7 cities.

When asked about the reason for this fall, Hari Babu said, "Housing prices have increased significantly in the last three years, affecting the affordability of prospective customers."  Salaries have not increased so much that it can match the appreciation in the housing prices, Hari Babu said on the sidelines of a conference organised by the association's women wing, NAREDCO-MAHI.

That apart, the NAREDCO president said there is an excess supply in many cities, including Hyderabad.

He pointed out that homebuyers' sentiments have been affected due to global political and economic uncertainties.

Hari Babu said the demand is likely to remain subdued even in the July-September quarter.

Asked about the impact of the RBI decision to reduce repo rate by 100 basis points since February, the Naredco president said it has definitely provided some relief to customers as EMIs (Equated Monthly Installments) would come down to 7.5-8 per cent.

"Interest rates on home loans should come down to around 6 per cent to boost demand," he said.

The NAREDCO president also pitched for a new policy for the redevelopment of slums across Tier I-II cities to bring more land in the market for building housing projects.

"Land cost has gone up sharply post-COVID pandemic," he said, adding that high land cost has made it difficult for developers to build affordable homes.

As per PropEquity data, housing sales are expected to decline by 19 per cent to 94,864 units in the second quarter of this calendar year from 1,16,432 units in the year-ago period.

According to Anarock, housing prices rose 11 per cent annually in the April-June quarter across the top seven cities, leading to a 20 per cent fall in sales.