RBI’s rate hike upsets realty developers

New Delhi: Real estate developers are disappointed over RBI’s call to hike the key policy rate. According to realty developers this could result in an increase within finance costs and conjointly have an effect on the demand for housing throughout the oncoming festive season. 

The RBI recently increased the short-term policy rate by 0.25 per cent in a bid to keep the existing levels of inflation under check, this move might increase the medium term EMIs for both home and auto loans.

Perception of developers:

As per leading developers, at this juncture there was absolutely no requirement for an increase in the repo rates. This would further hurt the growth sentiment. Real estate would be adversely impacted as the general sentiments would remain cautious. However, good products launched by credible developers at desirable locations would always be in demand.

Additionally, developers also feel that by raising the Repo might marginally curb inflation or sustain the Rupee value for a short while, however it would significantly impact market sentiments. Instead of bringing positivity within an otherwise sluggish economy RBI’s rate increase would affect growth prospects; which is not a desirable signal for the realty sector which does about one third of its total business during the festive season.

Perception of real estate analysts:

As per real estate analysts, generally during the festival season the demand for housing goes up and the major part of the developers sales take place during this period, however banks have already initiated increasing their rates for loans. The raise in repo rate would further lead to increase within the finance cost of developers which would affect their profit margins.

Another renowned analysts feel that as per the the present monetary policy, the increased repo rate would increase the borrowing cost. Howbeit, with the reduction of MSF by 0.75 per cent along with the reduction of minimum daily maintenance of CRR to 95 per cent from 99 per cent, would relax the tightening norms. Increase within finance costs in conjunction with the rising construction costs in the backdrop of the challenging economic scenario the developers profit margins is expected to be affected.

Although the realty segment has its reasons to be disappointed, provisions for increased liquidity within the system has been made by the RBI.