By Accommodation Times News Services
After Reserve Bank of India’s decision on revision in repo rates, has increased the pressure on housing finance companies and developers. Many developers are planning to offer discounts for the festival season and grab the opportunity to sell their inventories, assuming that this festival offer will encourage buyers to purchase property. Since, the RBI has tightened its liquidity in July, the real estate and its related sectors like housing finance are hugely affected. Now, RBI in it’s new mid-quarter monetary policy announced by new RBI governor Raghuram Rajan, has increased the short term lending rates (repo rate) by 0.25% to 7.50%. Developers are worried as this will decrease the demand for housing units.
“Developers will want to sell their unsold inventory instead by using innovative schemes and discounts. Rising interest rates, though, will lower sentiments and could impact sales,” said Credai chairman Lalit Kumar Jain.
But, rise in interest rates announced by housing finance companies may bring steep fall in the housing demands. State Bank of India announced a hike of 20% on their home loan interest rates, have also revised the base rates by 0.10%, in order to decrease its cost of funds, a day before the Prior to that HDFC, ICICI Bank and Axis Bank had already raised their rate of interest.
Usually festival season creates a good impact on the market and helps to gain good amount of profits, generally such seasons generates 15% to 20% of annual sales in real estate transactions, mainly in housing sales. But, the growing inflation, economic slowdown and rising interest rates on home loans have adversely reduced the percentage. “If interest rates go up, demand will be impacted slightly,” said National Housing Bank chairman RV Verma.
This year, according to an estimation done by Credai, there is a deep steep in the percentage of this year’s project launch in festival season. As compared to last year, this year it is tenth fraction of project launch.