Industry stakeholders say the move to increase rates by 25 basis points will negatively impact buyer sentiment.
The decision of the Reserve Bank of India (RBI) to increase the repo and reverse repo rates by 25 basis points each will make home loan costlier and negatively impact buyer sentiment at a time the industry is struggling to recover from sluggish sales, the real estate industry said on Wednesday.
Repo rate is the rate at which the RBI lends short-term money to commercial banks, while reverse repo rate is the rate at which the central bank borrows money from commercial banks. The banking regulator hiked the repo rate by 25 basis points in June and increased it further to 6.50 per cent while the reverse repo rate was also hiked by 25 basis points to 6.25 per cent on Wednesday.
“From a real estate perspective, this hike will negatively impact buyer sentiment with the logical result on quantum of sales,’’ said Niranjan Hiranandani, national president, National Real Estate Development Council (NAREDCO). He said the rate hike came on the heels of a meeting with Union Housing and Urban Affairs Minister Hardeep Puri to discuss measures to put real estate sector “back on track”. Developers had discussed lowering GST and setting up a `Stressed Assets Fund’ to complete stalled projects by providing lastmile funding, he said adding that the government should take decisions to enhance buyer sentiment.
National president of Confederation of Real Estate Developers Associations of India’(CREDA) Jaxay Shah, who was also part of the meeting, said, “Two consecutive hikes in the repo rate partially undo the policies for promoting affordable housing. We urge the government to expedite lowering effective GST on all housing to 8 per cent so as to preserve the growth impulses in real estate.’’
Anuj Puri, chairman, Anarock Property Consultants, said the march-June quarter had recorded a 24 per cent increase in housing sales and 50 per cent increase in new launches. “These numbers clearly indicate that the markets are now recovering from the shocks of structural changes and policy reforms. Serious end-user demand is back on the market and marginal hikes in home loan rates are unlikely to deter buyers,” Puri said.
Dhaval Ajmera, director, Ajmera Group said, “On one hand where the government is gunning big for ‘Housing for All’ and affordable housing, such moves are totally out of sync with the vision at the Centre.”
Rohit Poddar , managing director, Poddar Housing and Development Ltd, said, “I personally believe that the home buyers should not worry as it will be difficult for many banks to increase the interest rate.”
Ashwin Sheth, chairman and managing director, Ashwin Sheth Group said, “While this decision was taken to contain inflation, a rate cut at this stage would have offered some respite. We hope the RBI addresses this concern in the next announcement scheduled for October.’’