The passenger vehicle (PV) segment may not get impacted much by the rate hike because of high demand, but the move is likely to be detrimental for the two-wheeler segment as there is already stress in terms of demand, industry executives said. Meanwhile, real estate developers said while residential sales are likely to be affected as home loans will become costlier, pent-up and festive demand may negate any major impact on the buying sentiment.
RC Bhargava, chairman, Maruti Suzuki said, “So far, the increase in interest rates has not had any real impact on sales, and this festive season we don’t see demand getting impacted at all. I don’t think the hike in interest rate makes too much of a difference to the customer. It increases the EMIs slightly but not by much. Maruti Suzuki has a healthy booking order.”
While the passenger vehicle segment has a total pending booking orders in excess of 700,000, demand for trucks and two-wheelers has gathered steam in the last few months, signalling revival.
Whenever vehicle loans get expensive, it is usually the price-sensitive, entry level two-wheeler segment that gets impacted the most. The rate hike may hurt consumer sentiments for the two-wheeler industry overall while putting strain on the entry-level segment.
Mahantesh Sabarad, an independent analyst, said, “Most two-wheelers are bought on finance. Coming in just when the festival season has begun burdens the manufacturer to keep the EMI the same.”
Automotive dealers also echo the same sentiment. They feel while the mid- and high-segment buyers will remain unaffected, the entry-level segment could feel the pinch.
Manish Raj Singhania, president of the Federation of Automobile Dealers Association, said, “The rate hike is definitely a big dampener for the auto industry, especially for entry level two-wheeler and the entry-level car segment where customers are extremely sensitive to any hikes.”
Real estate developers, who are offering price discounts and freebies to boost sales during the festival season, may further sweeten deals to attract fence sitters.
“We expect the rise in repo rate not to impact the positive consumer sentiment significantly. Developers are also running multiple festive offers which will aid overall demand,” Credai president Harsh Vardhan Patodia said in a statement.
“We welcome RBI’s prudent decision to hike rates, as it will help keeping the rising inflation in check. The recent correction in global commodity prices, if sustained, may ease cost pressures in coming months. This will eventually benefit developers and the advantage will be passed on to homebuyers. Going forward, India’s real estate will witness more high-ticket purchases with consistent demand from wealthy buyers,” Ram Raheja, director, S Raheja Realty, said.
Naredco vice chairman Niranjan Hiranandani said any further hike in interest rate, compounded with commodity inflation, would act as a market dampener. He said the government should make fiscal interventions to check inflation.