Leading industry players in the real estate sector have expressed concern over the 25 basis point hike in the repo rate and 50 basis point increase in reverse repo rate announced earlier this week by the RBI. While the hikes in rates were expected, the general feeling is one of worry on the anticipated hike in home loan rates, which developers feel could dampen market sentiments.
In reactions e-mailed to Business Line, real estate developers expressed their concern. Mr Rohtas Goel, CMD, Omaxe Ltd, said the increase in the repo and reverse repo rates is a welcome step and is much in line with expectations. Given the inflationary pressures, it becomes imperative to take such monetary measures but the RBI has been generous in keeping the CRR rate constant, which will help maintain a favourable volume of liquidity in the system.
However, it will help the realty sector only if the current interest rates for retail loans are maintained. This is the fourth time that apex bank has increased the repo rate and subsequently each time, the interest rates have also been increased. The realty sector is reeling under paucity of funds, and prices have been showing an upward trend. We believe that any further increase in the interest rates may lead to a downtrend in the overall demand.
According to Mr Brijesh Bhanote, Sr. VP-Sales and Marketing, The 3C Company, the repo and reverse repo rate hikes are almost in line with expectations. The public and private sector banks will increase the rates of interest at which they lend money which will result in a hike in the borrowing cost for real-estate developers, building material providers and accessories industries and will further burden the home buyers.
Mr Om Chaudhry, CEO, FIRE Capital Fund Private Ltd, says that “with GDP poised to grow at 8-8.5 per cent and there being a need to control inflation it was expected that interest rates would be hiked and these rates will continue to move up for the rest of this fiscal.
The realty sector will face increasing home loan and construction finance rates even if commercial banks decide not to effect a rate increase at this point. With the growth momentum building up again in the sector, I expect the industry to be able to take this in its stride.”
Mr Manoj Goyal, VP, Raheja Developers Ltd, says the hike in rates was expected. This will soak the cash in the banks which will result into squeezing of liquidity in the market. But at the same time, this will help in controlling inflation. On the other hand, the interest rates will also go up. Sectors such as real estate, which is already struggling to get the cheaper finance, will be affected.
According to Mr Amit Goenka, National Director - Capital Transactions, Knight Frank India, to anchor inflation, the RBI increased the repo and reverse repo rates. This continues to signal the positive bias in the yield curve. This coupled with the introduction of the base rate system will influence upward movement in mortgage rates in a gradual manner.
While some banks may absorb this increase in the short term, there will be a move to pass this on to new customers. Existing home loan customers may feel the impact immediately to the extent of 25 bps…
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