Housing demand will continue even if lending rates increase, says HDFC's Deepak Parekh

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The HDFC boss pointed out tax incentives on home loans and repo-linked borrowing as an adequate reason for continued demand for home loans by prospective homebuyers: "The fact that there has been no upward revision in the repo, and since interest rates are at historic lows, a minor increase will not have an impact on home loans."

Parekh claimed that he believed the sweet spot for home prices in India remained in the Rs 50 lakh to Rs 1 crore range, irrespective of early signs of price rise in select high-end segments.

"In high-end premium projects, we have already seen a price-rise of 15 to 20 percent, but this is not the case across the board," he said, “But this is not the case across the board. The sweet spot for housing is still in the price range of Rs 5 million to Rs 10 million."

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While the big threat to stable real estate prices is the escalation of material costs, Parekh said it could be offset by a collection of other factors: "There are measures that can lessen the impact — faster approvals or enabling credit input for under-construction projects."

The HDFC chairman pointed out that more buyers are today opting to buy a home under-construction from a builder with a good track record for delivering projects on time, a sign that prices will not hit the roof anytime soon.

Two years ago, Parekh stirred a hornet’s nest when he claimed that builders should come down on their prices by 20 percent in order to offload unsold inventory. He referred to those remarks again, today.

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"Many developers refused to get a reality check and recognize that their housing prices were not viable, and that’s why they ended up with unduly large unsold inventories,” he said.

Parekh’s remarks today, on the robustness of Indian housing, comes on the back of demand for homes and launch pipelines seeing a pronounced spike in the post-COVID months. He acknowledged it.

"What is staying in India’s strong demand for housing," he said, adding that prop-tech is helping developers get an edge in their sales. "Real estate in India will see better days ahead,” Parekh said, before signing off, "There is no substitute for prudence and no allowance for excessive greed."