RBI's hike in key interest rate to hit property market

The Reserve Bank's hiking the key policy rate today will hit property sales, particularly in the residential segment, real estate developers said while expressing disappointment at the move.

Realty firms and consultants hoped however that this would be the last round of monetary tightening by the central bank.

"We are very very disappointed. This will bring more suffering to developers community," Confederation of Real Estate Developers Association of India (CREDAI) Chairman Lalit Kumar Jain told PTI.

"It seems that market will see its bottom in terms of sales and liquidity, and then there may be an effort to revive the economy and market in an intense manner," he said, adding that the developers would look forward to the March review.

RBI raised the key policy rate by 0.25 per cent to 8 per cent in a bid to curb inflation, a move that may translate into higher EMIs and push up the cost of borrowing for the corporate.

Parsvnath Developers Chairman Pradeep Jain said: "It is a highly disappointing step by RBI to raise repo rate. It is not going to help RBI curb inflation any more.

"This move by RBI would encourage banks to increase their lending rates which is already beyond reach. I am afraid this rate hike will demoralise home buyers."

In its fight with inflation, RBI governor Raghuram Rajan is completely ignoring the IIP data which is diving into the negative territory, he noted.

CREDAI-NCR President Anil Sharma, who also heads Amrapali group, said: "There is already a slowdown in the property market and the overall economy. So, there would not be much adverse impact on sales".

Stating that the hike in policy rate was "contrary to the expectations", consultant Knight Frank said rate hike would show an adverse signal to the realty market in the short term.

"Although the latest inflation figures have shown a downward trend, the consumer inflation is still at a much higher level, and is exerting pressure on our currency. In fact, the CPI, without food and fuel, has gone up.

"Keeping inflation as a focus, the Central Bank has taken this dis-inflationary pressure. And in all likelihood, this may be the end of the monetary tightening process by the central bank in this fiscal year," Knight Frank India Chief Economist and Director Research Samantak Das said.

Brys Group CMD Rahul Gaur said the repo rate hike is not just disappointing but also surprising and it would further hammer the buyers' sentiments.

TDI Infracorp Managing Director Kamal Taneja said the hike in repo rate by RBI would hit already weak investment momentum and impact Indian economic growth. "This step will make corporate and retail loan more expensive. It may increase EMI burden on common man".

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