Interest rate hike to derail real estate investment

Reserve Bank of India announced changes in its credit policy by hiking its short term lending (repo) rate by 50 basis points to 8 per cent. The reverse repo, the rate at which banks park their funds with RBI, has also been raised by 50 basis points to 7 per cent. The cash reserve ratio (CRR) has however remained unchanged.The industry responds:
“RBI should give clear guidelines as this will probably be the last raise of this year. Within the last six months only the Repo rate has been increased over three times. The sentiments are already low in the real estate sector and this further increase in the rate will not boost the growth of this sector”- Lalit Kumar Jain, National President, CREDAI
“Residential buyers in cities with higher purchase rates and ticket sizes will be impacted the most. Blue-collar home loan borrowers who have extremely limited budgets and have already been struggling with the high cost of real estate will be hit severely because of this increase of interest rate” – Sanjay Dutt, CEO – Business, Jones Lang LaSalle India
“The real estate sector is reeling from high costs on the supply side and deceleration on the demand side as debt servicing becomes increasingly difficult. The least we expected was that the difficult ambient business environment is not accentuated. Perhaps it is too much to expect!!” – Sanjay Kabra, CFO, Sunil Mantri Group
“Monetary tightening beyond a point is bound to impact capital formation and investment. Interest cost in India is amongst the highest in the world. Further rise in the same is bound to have an impact on the real estate development as well as demand” – Harresh Mehta, CMD, Rohan Lifescapes
 

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