The Reserve Bank of India’s decision of hiking the key policy rate has taken the realtors by surprise. Realtors, especially in the residential segment are finding the going tough for them with unsold housing stock going up and demand drying up. For them, RBI chief Raghuram Rajan’s New Year gift has really come as a shocker. As Simon Rubinsohn, Chief Economist, RICS put it “the decision by the RBI to lift the repo rate to 8% this morning was clearly a surprise for markets which had drawn some comfort from signals following the previous central bank meeting that the improving trend in inflation could justify, at the very least, a pause in the tightening cycle”.
Most of the realtors feel RBI’s repo rate hike has come at a wrong time. “The RBI’s hike in lending rates has come at a time when real estate industry is passing through a challenging phase”, says Shailesh Puranik, Managing Director, Puranik Builders Pvt Ltd. According to him, RBI should have reduced the rate as it would have encouraged the home buyers to purchase home. Manju Yagnik, Vice Chairperson, Nahar Group is also is of the same opinion. “This is a time when we have to instill confidence among home buyers about their decision to purchase homes” she says.
Brotin Banerjee, MD & CEO, Tata Housing, feels that higher interest rates would affect investment in the realty sector. According to him higher rates would make it difficult to meet the objective of low-cost and affordable housing for the poor sections of society and for the middle class, respectively.
However, some experts draw comfort from RBI’s guidance that if retail inflation eased as projected, further near-term monetary tightening was not anticipated. “We can expect the interest rates to remain stable for some time and for the markets to absorb the current impact” hopes Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield. At last, some silver lining among dark clouds!