The BSE Realty Index has corrected 16% in the last six months owing to concerns over residential demand being impacted by rise in housing mortgage rates in India which have risen by 240-250bps in YTDFY23 to ~9.2-9.3% implying an 18-22% increase in home loan EMIs.
Surplus liquidity and subdued credit growth during the covid phase provided cushion to lenders (banks, SFBs) to calibrate deposit mobilisation and rationalise deposit rates as per their internal credit growth assumptions. However, with the regulator hiking repo rate to combat rising inflation and spur in credit demand since Mar’22, banks and SFBs have started reacting to rising policy rates.