There is a possibility of correction in realty prices, judging by the decision of the Reserve Bank of
India, to hike repo and reverse repo by 25 basis points each. The already
flagging demand is likely to fall further due to higher home loan rates. Pranay
Vakil, Chairman of Knight Frank India said that despite that there being no
specific mention of the realty sector (in RBI policy review), they continue to
believe that the prices will soften by 10-15% before the end to this financial
year. This is mainly due to volumes being low and liquidity being tight with
developer. Also, the interest rates on housing loan continue to be high
affecting volume of transactions in the industry.
The Central Bank in its quarterly monetary policy review meet,
had hiked repo rate- at which RBI lends to Banks - to 6.50%; and reverse repo -
the rate banks receive for depositing funds with RBI - to 5.50%. Interest rates
that have started moving higher are impacting affordability and delaying decision
making. Because of all these factors, the demand is not getting converted into
sales since past two quarters. A further hike in lending rates is expected to
expedite the correction process, the analysts said.
Most of the realty industry experts had already forecast
that fall in number of transactions, which started in October, is expected to be
followed by a correction of around 15% in key markets of Mumbai and National
Capital Region.After gaining nearly 40% in the past one year, residential
realty prices in Mumbai had already surpassed their last peak witnessed in
2007. These high prices fall in affordability and rising home loan rates are
pushing customers back. But a sharper rise, as sections of the market had expected, would have impacted prices
and home loan growth severely.
Deepak Parekh, Chairman,
Housing Development Finance Corporation said that everybody is relieved that
the rates have been hiked by only 25 basis points. The way inflation was going up;
here was a justification for even a higher rate hike. The liquidity still
remains tight. The banks and financial institutions will have to raise the
lending rates as the margins are squeezing. And eventually all retail loans
rates will go up.
More,
No comments:
Post a Comment