Your dream home will become a distant reality now!

Your dream home will become a distant reality now because of the constant rise in repo rate by the Reserve Bank of India (RBI).
With home loans getting costlier, people are being dissuading from buying houses.

To tame the rising inflation, the RBI on Friday raised its key interest rates by 25 basis points, its 12th hike since March 2010.

"The latest hike will decrease construction activity and the real estate sector will be forced into an even more defensive position,” predicted Sanjay Dutt, CEO-business, Jones Lang LaSalle India.

 “It is conceivable that a few smaller builders will find themselves edged out of the business by the combined onslaught of increased production costs and reduced demand for their offerings. To own home in Mumbai will be mirage now,” he said.

Due to the exorbitant property prices, the demand for houses has shrunk drastically.

Now, this constant rise in home loan interest rate will discourage genuine home buyers from taking loans too.

“It will have a huge impact on the real estate sector as well as on sales. The latest hike in petrol prices will have a cascading effect on real estate too. Developers will not have an option but to reduce property rates to repay the loan and dispose of the unsold inventory,” said a real estate expert.

Paras Gundecha, president of the Maharashtra Chambers of Housing Industry, said: “The government needs to think afresh on inflationary control measures rather than punishing consumers with rate hikes.”

Boman Irani, managing director of Rustomajee Group observed that the state government’s commitment to “homes for all” and “affordable housing” has been taking a hit with the rate hikes.

“Home loan borrowers will pay higher EMIs and have longer loan tenures while dealing with daily inflationary pressures. Property developers, on the other hand, will be more affected as borrowing rates increase with every instance of tightening money supply,” Irani said.

Pranab Datta, vice-chairman and MD of Knight Frank India, said the fallout of the weakening rupee has been the recent petrol price hike. “The rising inflation rate made a case for further tightening of the key policy rates. On one hand this will put a stress on the leveraged balance sheet of the developers and on another it will burden home loan customers who are already troubled with rising household budgets,” he said.

Niranjan Hiranandani, MD of Hiranandani group, said despite the RBI hiking key rates 12th times since March, 2010, inflation shot up from 9.2% in July to 9.8% in August.

“Increasing bank interest rate will increase the cost of living and create more unemployment. The government should understand that the rising rate will not solve the problem, but create more trouble for the common man.”