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Housing prices to go up after recent rate hike


Housing prices to go up after recent rate hike
The Reserve Bank of India"s decision to raise key policy rates by 25 basis points has emerged as another setback for realty sector. One has to be far richer to afford a dream house.

Consecutive rate hikes by the RBI have also increased the borrowing cost for realty developers.


They are left with no choice but to transfer the burden to the consumers. And, that"s the poor consumer who is the ultimate sufferer for everything.

Most of the realty developers have views that the recent rate hike in policy rates may have a minimal impact over the taming inflation but could have a larger impact on all the major sectors.

Mr Pradeep Jain, Chairman, Confederation of Real Estate Developers' Association of India, said, “Time and again it has been expressed that until and unless steps are taken to improve supply system, this increase by RBI is going to have a minimal effect on inflation."

This was the 12th time in 18 months that the key policy rates have been increased. Housing prices had already gone up by 15-20% in the period of one year and this continuous rate hike will again put upward pressure on the prices.

Realty developers might increase prices to 30-40% more, depending on the location.

Developers are also concerned about the price rise. Interest rates have already gone up so as EMI on home loans so new buyers might postpone their buying decision.

“Housing prices might go up as cost of financing the project would rise. On the demand side, he said, the prospective buyers would be discouraged to buy property with rising EMI on home loans." Country's largest realty firm DLF Executive Director Rajeev Talwar said.


CREDAI (NCR) President Pankaj Bajaj is worried about the consecutive rate hike could affect demand.

“Whatever robust demand for housing in India might be, a point has to come when interest rate hikes will start affecting it. We are afraid that point has come,'' Mr. Bajaj said.

Read more about: realty rbi property housing
Story first published: Saturday, September 17, 2011, 15:14 [IST]
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