Reserve Bank of India’s (RBI) measures to bring down inflation by increasing key interest rates, has not gone down well with the real estate industry
RBI, in its quarterly monetary policy last week, hiked the key repo and reverse repo rates by 50 basis points respectively. Banks are expected to follow the suit.
Banks used to charge developers 14.5-16 per cent, depending on the credibility of the borrower. The lending rates by some of the banks have moved up following the RBI actions, which is hurting the developers now.
SK Sayal, director and CEO, Alpha G:Corp said, “With the interest rates moving up, overall real estate volume (transactions) would come down. The real estate industry is in double whammy. While the higher interest rates are pinching the developers, it also impacts the buyers’ plans .
According to the spokesman of Tata Housing Development Corporation (THDC), “while on one hand, the developers are worried about the weakening demand, on the other hand, many developers are also facing liquidity problems coupled with higher construction costs. On the consumer front, many prospective consumers are adopting ‘wait and watch’ strategy, while investors are trying to get out from their realty investments. Higher interests will push up monthly installments for home loans for existing as well as new home buyers.”
Getamber Anand, vice president CREDAI (Confederation of Real Estate Developers’ Association of India) maintained the firming of key rates by RBI has upset the entire industry, including the real estate.
Realtors believe the current situation was uncalled for the builders.
THDC said the current situation is acting as a hurdle in the expansion and growth for many developers across India.
“Definitely the future expansion plans for developers would now need a second look,” added Anand.
