With the Reserve Bank of India (RBI) likely to increase its primary interest rate by 25 basis points on April 6, per a Reuters poll, realtors’ body Confederation of Real Estate Developers’ Association of India (CREDAI) on Thursday expressed concerns over the potential hike. CREDAI urged the RBI to not increase the repo rate further because of the financial challenges faced by developers and the potential impact on housing sales due to the consequential rise in prices and home loan rates. “In the past year, the repo rate has increased from 4-6.5 per cent, being solely absorbed by developers leading to added financial burden and burgeoning costs,” CREDAI said in a statement.
It stated that another hike by the RBI will lead to even higher borrowing costs for developers. This would further lead to even higher costs of projects and housing prices will rise too, with the prices already increasing by 5-6 per cent in the last one year. “Coupled with rising raw material costs, it would further reduce the wafer-thin margins that currently exist for real estate projects, making certain projects financially unfeasible for developers,” it added.
Besides higher project costs, homebuyers will also face almost double-digit home loan rates if the RBI
Patodia also said that a lower repo rate will help the country move towards strong GDP growth numbers. Pointing to the period from March 2021 to March 2022, he said that when the repo rate was hovering around 4-4.4 per cent, India had registered a GDP growth of 8.95 per cent during the period.
Earlier, the Reuters poll had said that while RBI will raise the interest rate by 25 basis points, it would still maintain its tightening stance. Meanwhile, inflation in India remains above the RBI’s tolerance limit of 6 per cent, reaching 6.52 per cent in January and easing only slightly to 6.44 per cent in February.