Thaindian News

Mumbai, Oct 25 (IANS) Top players from the realty sector have reacted sharply to the fresh hike in repo rates announced by the Reserve Bank of India Tuesday.

The Maharashtra Chamber of Housing Industry feels it will “cripple the real estate industry” which serves as the backbone of the economy by contributing to the survival of hundreds of other industries, said its president Paras Gundecha.

“It is capital-intensive and an employment generator. But unfortunately the latest RBI hike in repo rate will impact negatively. As it is, the demand in the sector is not encouraging due to high cost of home loans. The genuine customer who is already burdened with high rates of interest will be further discouraged,” Gundecha added.

Echoing similar sentiments, Babulal Varma, managing director, Omkar Realtors & Developers Pvt. Ltd, said that rising inflation, the rise in interest rates and the global economy slowdown has already taken a toll on the real-estate sector.

“Any further rise in interest rate will further cripple the sector. As per urbanization report, there is a major shortage of apartments which are required in urban areas in India. Still one can notice that there has been a 20-25 percent decline in registration in Mumbai alone,” Varma said.

Varma added that the rise in interest rates increases the cost of capital for the developer and for the buyer, making it a double burden on the end user as the developer also has to pass on the cost to the end user.

“When transactions slow down and the cost of capital increases the developers also have no choice but to defer plans to launch new projects. As real-estate projects have a two to three years construction cycle, the impact of such policies have not just a short term but a long term impact on the overall market scenario,” he explained.

The Confederation of Real Estate Developers Associations of India president Lalit Kumar Jain termed the repo rate hike as “a dampener of the Diwali festive spirit” and the frequent hikes would prove to be counter-productive in inflation control measures.

“The rates of interest are bound to zoom and this will further weaken the sluggish demand in real estate sector,” Jain pointed out.

He sought immediate steps for initiating reforms in real estate like transparency, quick clearances, single window system for clearing building permissions and rationalization of land and even registration policy for which CREDAI has been campaigning.

Hoping that the rate hike cycle has peaked, Hemant Kanoria Chairman and Managing Director, Srei Infrastructure Finance Limited, said the industry is truly concerned about the policy rate hikes and their adverse impact on the investment sentiments.

Kanoria said India needs huge investments in infrastructure and half of that is expected to come from the private sector and it is difficult to mobilize resources from domestic sources in such a scenario.

“We expect this to be the final rate hike in this cycle. Keeping in mind how stressed industry is, we sincerely hope that this is not the final straw that broke the
camel?s back,? Kanoria said.