High rates and input costs add to real estate woes

MUMBAI: The decision by the Reserve Bank of India (RBI) on Thursday to raise key policy rates by 25 basis points can dent sales of homes in the country. Over the last 15 months, RBI has raised rates on 10 occasions, which in turn has raised home loan rates by about 25%, forcing several home buyers to go out of the market.

"The latest increase is likely to cause more pain to home loan clients," said Vipul Patel, director, Home Loan Advisors, an independent mortgage advisory firm. "The increase in rate is likely to compel clients to postpone or reconsider their proposition of investing in new homes," Patel added.

Over the last six months, builders have been witnessing a decline in registrations for homes and the latest round of hike is seen adding to their worries. Builders are, however, in a catch 22 situation. While they are not seeing any pick up in demand, but the higher rates are leading to increased costs for them through higher input costs. "The rate hike will increase the cost of properties as it increases cost of funds. We are already reeling under the high input costs and coupled with high sanction costs, we have to pass on the same to end user," said Pradeep Jain, chairman, Parsvnath Developers, and also the chief of Confederation of Real Estate Developers' Association of India.

source-http://timesofindia.indiatimes.com/business/india-business/High-rates-and-input-costs-add-to-real-estate-woes/articleshow/8882530.cms

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