Despite the Reserve Bank of India hiking key policy rates three times in the last three months, some of the prominent real estate companies are not in a mood to revisit their sales volume projections this fiscal. Rather, they expect inflation rate falling in the next six months which will eventually ease the interest rate regime in the second half of the present financial year.
“It’s too early to revisit our sales volume target for this fiscal as the hardening interest rate regime is expected to ease in the next six months with the fall in inflation rate. Also, economic growth is sound as indicated by the double digit growth in exports, imports, customs duty among others in the recent months, which will help us achieve our sales target,” J C Sharma, managing director of Sobha Developers, said. Sobha, which has a sales target of around 3.5 million sq ft for FY12, is also hopeful of maintaining the operating margin this year despite an inflationary environment.
RBI has raised key policy rates 10 times in last 15 months to contain rising inflation rates, which stood at 9.06 per cent in May. As a result, cost of borrowing has increased for home buyers due to rise in home loan rates, prompting drop in home sales in the recent past.
However, publicly-held realtors like Puravankara Projects is of the opinion that South India would not witness a drop in sales volumes despite rate hikes.
“Though policy rates have been hiked, the increase in salary of IT professionals is driving sales volumes in Bangalore. We don’t see buyers deferring their decision to own a home due to rate hike and we will be able to sell around 3.5 million sq ft in the current fiscal,” Jackbastian K Nazareth, chief executive officer of Puravankara Projects, said. Even, the company doesn’t see any drop in demand in its affordable housing space which is widely seen as a rate sensitive segment, he added.
Referring to this matter, Brigade Enterprises said it would take a view on sales volume projection by the end of the second quarter. “It’s too early to revise sales volume target as of now as we are only in the first quarter. We hope that our target to sell 2.5 million sq ft to 3 million sq ft will be achieved in the current fiscal,” Shama Sunder, chief financial officer of Brigade Enterprises, said.
He also said that banks were least expected to pass on the hike in policy rates to consumers in recent times. Even, some of the developers are devising innovative ways to avoid any possible drop in sales volume.
“Rate hike has a negative sentimental impact on home sales as buyers defer their decision to own homes. So, we are looking at high-end projects like villas or entering locations with higher sales demand to offset possible drop in sales volume,” L S Vaidyanathan, executive director of Nitesh Estates said.
The company is optimistic about selling 1.6 million sq ft of space in the current fiscal, he added. On about impact on commercial and retail space, he said overall economic growth would have more influence on selling of commercial space than rate hikes.
“Supply issues along with other factors will determine demand for commercial and retail space in near future than present inflationary environment,” he added.
