The real estate sector has again given a thumbs-down to the latest 25 basis points increase in the policy rates, announced by Reserve Bank of India (RBI) on Thursday.
“This will have a cascading effect on home loans and stifle growth since it will scare away home buyers,” said Lalit Kumar Jain, national president, Confederation of Real Estate Developers’ Associations of India (Credai). He is also the chairman and managing director of Kumar Urban Development Limited.
He added that even the cost of funding from the developers point of view would also shoot up. “This will be passed on to the customer who is already under stress,” said Jain.
This is the 10th time that the policy rates have been increased by the RBI in around 16 months. “Property sales are already down and this increase means home loans becoming more costly, which is bound to have a further impact on the purchasing sentiment of the customer,” said Paras Gundecha, president, Maharashtra Chamber of Housing Industry.
The developers, too, do not seem optimistic about the home loan scenario. “The home loan rates have already gone to10%-11%. If they go above 11%, then there will be a complete freeze on home loan offtake. Even at the existing levels, it is having a negative impact,” said Pujit Aggarwal, managing director, Orbit Corporation.
However, he added that with good monsoons expected this year, a number of economic factors driving the high interest rate scenario should ease and come festive season in September-October, the demand is expected to bounce back.?Just increasing the key policy rates is not going to tame inflation,” said Pradeep Jain, chairman, Parsvnath Developers. He said the policy rate hike will increase the cost of properties and cost of funds. ?We are already reeling under the high input costs and coupled with high sanction costs, we have to pass it to the end user,? he added.