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As RBI raises repo rates, builders get a realty check: Who said what

The RBI’s decision to increase repo rates by 25 bps to 6.25% after 4 years of keeping them stable has got mixed reactions from the real estate industry. While most of them say that it was expected, but they all were hoping for reduction. 

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The RBI’s decision to increase repo rates by 25 bps to 6.25% after 4 years of keeping them stable has got mixed reactions from the real estate industry. While most of them say that it was expected, but they all were hoping for reduction. 

Real estate market is going through a slowdown and home loan interest rates are vital aspect that a homebuyer looks up before purchasing a property. Developers and experts expect a lowering in the repo rates in future. 

Below are the reactions from the developers and housing industry experts on the RBI's decision

 

Jaxay Shah, President, CREDAI National: “The Real Estate Industry was expecting a reduction in Repo rate by RBI. This decision to hike the Repo rate by 25 basis points may lead to suppressed growth in the Indian real estate sector which has shown substantial resilience over the last 18 months. We hope that this move will not have any negative implications for the beneficiaries under PMAY in the form of increased borrowing costs.  Indian realty requires lower rates to provide further thrust to ‘Housing for all by 2022’ which will also enable the sector to spearhead the growth of the Indian economy.” 

 

Dr Niranjan Hiranandani, founder & CMD, Hiranandani Communities and President (Nation) NAREDCO, termed the rate hike as ‘justified’ on account of inflationary trends, global hardening of interest rates as also petroleum prices moving upwards. He said the hike of 0.25 basis points in the repo rate would not make a major difference to real estate. In the long run, we would prefer rates coming down”.

 

Joe Verghese, Managing Director, Colliers International India: “The potential increase in interest rates is unfortunately going to impact the developers more than the end user (homebuyer). Not only do their cost of funds increase, the rate increase can impact velocity of sales as fence sitters will see this as another reason to postpone their home buying decision. In the past developers have tried to get sales boosted by throwing in more goodies/ offers but these schemes have had limited success”.

 

Shishir Baijal, Chairman & Managing Director, Knight Frank India: "The move to keep the repo rate unchanged by the Reserve Bank of India’s monetary policy committee comes as no surprise. The industry was not expecting a rate cut amid the current macro-economic scenario with inflation touching a 6-month high in October and more importantly the uncertainty staring the economy in the near future. However, the want of a growth-inducing monetary policy would continue to have its imprints on the slowdown-hit real estate sector. A cut in the policy rate could have helped stimulate growth and demand particularly in the wake of the recent Moody’s India upgrade.”

 

Ramesh Nair, CEO & Country Head, JLL India: "The hike may seem to dampen sentiments in the market but in terms of real estate may have little or no impact. As almost all home loans these days are on floating rates, the rise and fall in home loan rates does not impact the performance of residential real estate sector much and tends to balance each other out over long term. As buying decisions are generally not taken based on fluctuations in home loan rates, there will be very little effect on the real estate market. Though for some home buyers looking towards making a very low ticket size purchase decision, there may be some tentativeness in the decision making, overall we will see minimal impact on the end-user in the housing sector.

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