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Deepak Parekh: Rate hikes not to impact demand for housing

The RBI had raised the policy Repo rate by 90 basis points to 4.90 per cent since May this year to tame inflation.

By: ENS Economic Bureau | Mumbai |
July 1, 2022 4:19:12 am
HDFC Chairman Deepak Parekh (File)

HDFC chairman Deepak Parekh on Thursday said the demand for housing is unlikely to be impacted by interest rate increases in the financial system.

“In fact, current interest rates on home loans are still below pre-pandemic levels. Further, a home loan is for a long tenor and during this period there are bound to be both, upward and downward interest rate cycles,” Parekh said while addressing the annual general meeting of HDFC.

During the peak of the pandemic, the RBI reduced the repo rate by 115 basis points in quick succession, besides other liquidity measures to support the economy, he said.

“This position is now being unwound. It was unrealistic to believe that such low interest rates and high levels of surplus liquidity would sustain,” the HDFC chairman said.

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The RBI had raised the policy Repo rate by 90 basis points to 4.90 per cent since May this year to tame inflation.

While growth expectations in India too have been tempered, India is still expected to be amongst the fastest growing major economies with gross domestic product (GDP) growth estimated at above 7 per cent for the current year, Parekh said.

According to Parekh, the mood is somewhat sombre largely because of the volatility seen in the stock markets.

“In India, foreign portfolio investors have been risk-averse and selling aggressively, largely to cover losses made in other emerging markets. Fortunately, in India, domestic institutional investors and increased retail participation has helped support the equity markets.

“It is also important to recognise that unusual measures were taken for unusual times during the pandemic and these measures are now being withdrawn in a calibrated manner,” he noted.

While inflationary expectations are likely to remain above the RBI’s comfort zone of 6 per cent over the next 3 quarters, India’s increase in inflation rates is not because of excess demand. “The root of India’s current inflation is the supply side — largely driven by higher oil and commodity prices, which in turn is amplified due to geo-political tensions. Once supply chain disruptions ease, India’s inflation rate is also likely to temper downwards,” Parekh observed.

“Now as far as home loans are concerned, we have had an exceptionally good run with the strong demand for housing, coupled with interest rates at an all-time low. The month of March 2022, HDFC had recorded its highest number of Individual loan receipts at over 86,000.

“I continue to maintain that despite changes in the macro environment, the growth potential for housing in India remains immense,” Parekh said.

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First published on: 01-07-2022 at 04:19:12 am

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