Tuesday, 25 October 2011
Home loans may get costlier:(RBI) repo rate hike by 25 basis points
The Reserve Bank of India’s (RBI) repo rate hike by 25 basis points has put a damper on the real estate sector’s Diwali celebrations. Repo rate is the rate at which banks borrow money from the RBI.
Paras Gundecha, president of the Maharashtra Chamber of Housing Industry, said the fresh hike would cripple the real estate industry.
“Real estate contributes to hundreds of other industries; it serves as a backbone of the economy,” he said. “The hike will impact this core industry negatively.”
Nowadays, the demand is sluggish because of inflation and high interest rates on home loans, Gundecha said. “This hike will affect the end-user — the customer who is already burdened with high interest rates.”
Industry experts feel the recent spate of hikes has proved to be counterproductive. “This move will have a cost-push impact rather than acting as an inflation-control measure,” Lalit Kumar Jain, national president of the Confederation of Real Estate Developers Associations of India (CREDAI), said. The interest rates are bound to go up and demands will further slip, Jain said.
There is a deceleration in economic growth and inflation has constantly been on the rise despite increasing the interest rates over the past couple of months. “Developers are deeply in debt.
They were looking forward to the festive season for sales to improve,” Anuj Puri, chairman and country head of Jones Lang LaSalle India, said. “This hike will lead to an increase in the home loan interest rates. Sales will naturally go down even further. Puri said the absorption rate in residential market would remain low and there would be few new launches. Capital values too would decline. “In fact, the RBI should rethink this strategy to combat inflation,” he said.
Paras Gundecha, president of the Maharashtra Chamber of Housing Industry, said the fresh hike would cripple the real estate industry.
Nowadays, the demand is sluggish because of inflation and high interest rates on home loans, Gundecha said. “This hike will affect the end-user — the customer who is already burdened with high interest rates.”
Industry experts feel the recent spate of hikes has proved to be counterproductive. “This move will have a cost-push impact rather than acting as an inflation-control measure,” Lalit Kumar Jain, national president of the Confederation of Real Estate Developers Associations of India (CREDAI), said. The interest rates are bound to go up and demands will further slip, Jain said.
There is a deceleration in economic growth and inflation has constantly been on the rise despite increasing the interest rates over the past couple of months. “Developers are deeply in debt.
They were looking forward to the festive season for sales to improve,” Anuj Puri, chairman and country head of Jones Lang LaSalle India, said. “This hike will lead to an increase in the home loan interest rates. Sales will naturally go down even further. Puri said the absorption rate in residential market would remain low and there would be few new launches. Capital values too would decline. “In fact, the RBI should rethink this strategy to combat inflation,” he said.
