Apex realty body Credai today said the RBI's decision to hike key policy rates.
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The Confederation of Real Estate Developers' Association of India (Credai) said the RBI's move to tighten liquidity to control inflation was "not appropriate" and the apex bank should rather take measures to address supply side constraints.
"The move has come as a surprise to us. We were expecting a moderate hike of 25 basis points, but hiking rates by 50 basis points is going to dampen the growth," Credai Chairman Pradeep Jain said. He is also Chairman of Parsvnath Developers.
"This will make cost of funds expensive for both developers and buyers... As a real estate developer, we are not left with any choice but to pass on the same to our buyers, resulting in an increase in property prices, he added.
On housing prices, Jain said, "It is bound to go up," but refrained from providing an estimate of the expected rise.
When asked about the impact on housing demand, he said demand would not be impacted much, as prospective home buyers would purchase flats of lesser value than what they earlier had planned.
Jain pointed out that business environment across industries has become complex because of hardening of interest costs, coupled with constant increases in input costs.
"We request the RBI not to increase the rate to any further extent. Instead, we appeal to RBI to stimulate measures for an improved supply chain management," he said.
Echoing similar views, Credai President Lalit Kumar Jain said: "The cost of funding is going be higher as banks are bound to increase their lending rates."
Jain said the housing shortage is estimated to rise to 37 million in the 12th Five-Year Plan from the current 24.6 million and the country would need $3.2 trillion to meet this shortfall.
"The funding gap in housing will be around $70 billion in the next five years among the existing developers alone," said Jain, who heads Mumbai-based Kumar Urban Development.
Pointing out that the material costs have already gone up by over 35 per cent and wages have doubled over the past three years, Jain said: "Any increase in the rate of interest will, thus, be counterproductive and my fear is that it will give rise to inflation instead of curbing it.
