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Rediff.com  » Business » 'High inflation to cast its spell on the economy in 2014'

'High inflation to cast its spell on the economy in 2014'

December 23, 2013 18:46 IST

Indian flagsRisks to economy will continue in 2014 because of high retail inflation and the Reserve Bank is likely to revise key policy rates upwards by up to 0.50 per cent to contain price rise, said RICS, a global body for setting standards in real estate.

"The risk to overall economy because of the high retail inflation and revision in key policy rates will continue to remain.

"It is likely that the RBI will revise key policy rates.

“Further revision by 25 to 50 basis points can be expected, as inflation control is the priority at this moment, even if the measure hinders growth in the short-term," Royal Institution of Chartered Surveyors said.

It said a revision of repo rate by 0.25 per cent in October by the Reserve Bank will help in reviving the economy in the long-term.

RICS, the UK-based self-regulatory body for qualification and standards in land, property and construction, said the upward revision in repo rate in October by RBI is likely to increase pressure on real estate developers.

"From the consumers' perspective, this revision will also affect the sentiment, as retail loans will become costlier.

“In recent times, some banks have already revised their lending rates," it said.

It said supply situation will remain subdued because of the deferred completion of a number of new projects and reduction in number of launches across both residential and commercial categories.

According to RICS, residential real estate prices will witness only marginal increase in 2014 due to costly loans.

However, the market is poised for growth in second half of the year after general elections in May 2014.

"Buyers can be cautiously optimistic of a healthy recovery in the real estate market, as existing conditions favour long term investment horizon. . .going forward the supply situation will remain subdued due to the deferred completion of a number of new projects and reduction in number of launches," it said.

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