Rising residential rents pose a new challenge to RBI's fight against inflation

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- 10.07 percent weightage in calculating inflation of rentals and related expenses

- Increase in residential rents in urban areas by more than twenty percent

Mumbai: High housing prices and rising rents in the country's major cities are posing a challenge to the Reserve Bank of India's (RBI) fight against inflation. Housing rents in urban areas have increased by more than twenty percent in recent times.

While retail inflation has peaked and is on the downside, higher housing prices could create headwinds.

Housing rentals and related expenses have a weightage of 10.07 percent in the calculation of retail inflation. These costs are currently at a three-year high, becoming a fresh concern for the Reserve Bank.

The Reserve Bank had to conduct a comprehensive exercise throughout the year 2022 to bring down food prices. The housing sector has become complicated and is being closely watched, said a Reserve Bank official.

Urban housing inflation rose to 4.47 percent in December 2022, as against 3.61 percent in December 2021 and 3.21 percent in December 2020. Urban housing inflation was as high as 4.58 percent in October last year.

In December, retail inflation stood at 5.72 percent, within the Reserve Bank's range of 2 to 6 percent. Inflation remained consistently above 6 percent for the first ten months of last year.

Residential rents in the country's seven major cities of Delhi-NCR, Mumbai Metropolitan Region, Kolkata, Pune, Hyderabad, Chennai and Bengaluru are expected to increase by an average of 20 to 22 per cent in 2022 over pre-corona levels, a consultancy firm said recently.


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