Prices in Mumbai have increased by 5-30% in the last five months; registrations have been highest in two years. By Livemint.com
The real estate sector has underperformed the Sensex by 16% in the past one month on concerns of the Reserve Bank of India’s (RBI) hawkish stance towards the sector and likely increases in mortgage rates. Our analysis of Mumbai’s apartment registrations data reveals that demand remains strong despite 5-30% rise in prices in the past five months. Thus, while prices in many pockets in the city are at their lifetime highs, registrations in October were the highest in almost two years. This leads us to believe that residential demand in metros has strong tailwinds and is unlikely to be affected materially by a small increase in mortgage rates. Our top picks are DLF Ltd and Housing Development and Infrastructure Ltd.
RBI increased the risk weightage on commercial real estate lending by 100 basis points (bps), which is likely to result in a 50-100bps increase in borrowing costs. Mortgage rates could also come under pressure, owing to inflation-related concerns. Headwinds of higher prices and mortgage rates are likely to weigh on real estate demand.
Kolkata is also coming on real estate Blooming