REPO RATE HIKE DETRIMENTAL TO REVIVING REAL ESTATE: EXPERTS

MUMBAI: The Reserve Bank of India’s (RBI) decision to increase the repo rate was met with disappointment from the real estate sector which was on the verge of reviving from a slowdown.

The repo rate hike to 6.25% (or 25 basis points) means that interests on home loans and equated monthly instalments (EMIS) will be higher.

Real estate experts and builders considered this policy move to be bad news.

“This rate increase will delay the revival of the country’s housing market, which after suffering a prolonged period of slump has just begun to show early signs of improvement on account of uptick in affordable housing,” said Shishir Baijal, chairman and managing director, Knight Frank India, a real estate consultancy firm.

“Banks may further hike the borrowing rates for home loans, further pushing the homebuyers to fence,” Mr. Samir Jasuja, CEO and founder, Propequity, a realestate data and analytics research firm.

Repo rate is the interest rate at which RBI lends to the banks. Any increase in its value trickles down to the end consumer.

Builders have called it a dampening effect on the realty sector. “It will affect people looking to buy homes in the affordable and mid-segment range,” said Mr Ashwin Sheth, chairman and managing director, Sheth Group.

Similarly Amit Ruparel, managing director of Ruparel Realty said, “The increased cost of commodities, labour along with cost of funding from commercial banks will be an additional burden on new project launches and also delay the completion process.”

In the last few years, the RBI also imposed stringent lending conditions such as allowing only 80% disbursal of home loans.

In addition, there has been constant hike in interest rates which forced many homebuyers to postpone their purchase plans.