How Rising Interest Rates Are Affecting
Home Prices and Affordability in Pune?

India’s real estate market, particularly in urban hubs like Pune, is highly sensitive to interest rate fluctuations. As home loan rates rise, buyers, sellers, and investors experience significant shifts in affordability and pricing. This blog delves into how rising interest rates are shaping Pune’s real estate landscape, providing actionable insights for stakeholders.

Interest Rates in India: A Quick Overview

In India, home loans are closely tied to the Reserve Bank of India’s (RBI) repo rate, which serves as the benchmark for lending rates. In 2023-24, the RBI hiked the repo rate multiple times to combat inflation, pushing home loan interest rates upward—from around 6.5% in early 2022 to nearly 9% in 2024 for most lenders.

These rate hikes have directly impacted Pune’s homebuyers, where affordable housing and mid-segment properties dominate demand.

Source: RBI Website

Impact of Rising Interest Rates on Home Prices in Pune

1. Slower Price Growth in Pune's Real Estate Market

Pune has historically been a resilient real estate market due to its IT hubs, educational institutions, and growing infrastructure. However, higher interest rates have tempered price growth. Properties in peripheral areas like Wagholi, Hinjewadi, and Ravet have seen slower appreciation as buyers become cautious about affordability.

2. Price Adjustment in the Luxury Segment

While the affordable housing and mid-range segments dominate Pune’s market, luxury properties in areas like Koregaon Park and Kalyani Nagar have faced slower demand. Developers are offering discounts and incentives to maintain sales in this high-ticket segment.

3. Increased Competition Among Developers

With reduced buyer enthusiasm, developers are focusing on pricing strategies, offering subvention schemes, and competitive EMI options to attract buyers.

 

Affordability Challenges for Pune’s Homebuyers

1. Higher Monthly EMIs

The rise in home loan interest rates has increased the cost of borrowing. For a loan amount of ₹50 lakhs over 20 years:

  • At 7% interest, the EMI is approximately ₹38,765.
  • At 9%, the EMI jumps to ₹44,986—a ₹6,221 increase per month.

For Pune’s salaried middle-class buyers, this significantly impacts affordability, especially in emerging areas like Tathawade and Undri.

Source: SBI Home Loan Calculator

2. Delayed Decision-Making Among Buyers

First-time homebuyers, a significant portion of Pune’s real estate market, are postponing their purchases, hoping for interest rates or property prices to stabilize.

3. Shift Toward Smaller Units and Suburban Areas

Buyers are increasingly opting for compact 1BHK or 2BHK homes in peripheral areas to manage costs. Suburban locales like Talegaon and Moshi have witnessed rising demand due to their relative affordability.

 

Effect on Developers in Pune

1. Pressure on New Launches

Rising interest rates have dampened the appetite for new project launches. Developers are focusing on completing under-construction projects to regain buyer confidence.

2. Rise in Affordable Housing Projects

With demand shifting toward budget-friendly homes, developers are launching projects priced below ₹50 lakhs in areas like Dhanori, Wagholi, and Ravet.

Source: Knight Frank India

Impact on Pune’s Rental Market

When buying becomes less affordable, more people turn to renting, leading to increased rental demand. Pune’s IT corridors like Hinjewadi, Kharadi, and Baner have seen rental rates rise by 10-15% in 2023-24 due to high demand from professionals unable to buy homes.

 

Strategies for Pune’s Buyers and Sellers

For Buyers

  1. Explore Ready-to-Move Properties: Avoid GST and save on pre-EMIs by opting for completed projects.
  2. Negotiate with Developers: Use the slower market to negotiate better pricing or ask for perks like waived maintenance charges.
  3. Consider Peripheral Locations: Areas like Wagholi, Pirangut, and Moshi offer affordable options with good future growth potential.

For Sellers

  1. Price Competitively: Overpricing can lead to extended listing times in a cautious market.
  2. Offer Flexible Payment Plans: EMI subvention schemes or shared cost of registration can attract buyers.

Future Outlook for Pune’s Real Estate

Experts predict that interest rates may stabilize by mid-2025, but affordability will remain a concern in the near term. Infrastructure developments like the Pune Metro and IT expansions are expected to bolster demand, particularly in suburban areas.

Source: JLL India

Conclusion

Rising interest rates have undoubtedly made homeownership more challenging in Pune. However, the city’s strong economic fundamentals and infrastructural growth ensure its real estate market remains resilient. By understanding the trends and adopting strategic approaches, both buyers and sellers can navigate the challenges of this high-rate environment.