Realty stocks took a beating on the bourses on Monday. Most of the BSE sectoral indices slipped in the red, but the BSE Realty index dipped the most by 3.88% or 129.6 points, to close at 3,211.2. This follows the RBI?s announcement on Friday to hike repo and reverse repo rates by 25 basis points each with immediate effect. The BSE Sensex closed down 167.6 points or 0.95%, to close at 17,410.5.

All the 14 scrips in the realty index saw a decline. Indiabulls Real Estate fell the most by 6.7%, while HDIL dipped 5.8%. DLF, India?s largest real estate developer by market capitalisation, and Unitech went down by more than 3% to close at Rs 301.4 and Rs 71.4, respectively.

The BSE realty index has fallen 16.7% for the year till-date which is the worst sectoral performance. During the same period, Sensex slipped 0.3%. This does not augur well for forthcoming public issue of Oberoi Realty, a Mumbai-based real estate development company. The IPO has been assigned a rating of 4 by Crisil.

A real estate analyst from a leading brokerage house believes the rate hike of 25 basis points will not have much impact unless the home loan players follow suit and hike interest rates. ?But the fact that rate hike has come at this juncture means there might be more hikes in the near future. That will definitely impact volumes (of flat sales),? he said, speaking on condition of anonymity.

His views are echoed by Param Desai, a real estate analyst at Angel Broking, who feels that the fall in the BSE realty index is mostly sentimental and that most banks had already acted in anticipation of the rate hike by putting an end to their teaser rate regime.

According to Dharmesh Jain, CMD of Nirmal Lifestyle, there will be no impact on the property prices unless there is further increase in interest rates. ?Housing financial institutions have already indicated that they are not going to increase rates,? he said.

However, Desai of Angel Broking, feels the borrowing costs for developers will go up. ?Companies like DLF, Unitech and HDIL that have a high exposure to residential segment will get impacted,? he said, adding that commercial and retail property may see a correction of 5-10% in the next six months.

The RBI?s move to increase interest rates on Friday has taken the market by surprise. It raised the repo rate and the reverse repo rates by 25 basis points each to 5% and 3.5%, respectively.