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February 19, 2007 14:53 IST
Housing Development Finance Corporation, a key home loan lender, on Monday said it is likely to increase interest rates by up to 100 basis points (bps) - 1% later this week.
"We will be taking a call on our interest rates this week, taking into account the impact of a higher cost of borrowing," Deepak Parekh, chairman, HDFC, said on the sidelines of a CII-organised conference.
There could possibly be a hike of 50 to 100 basis points, he said. On whether existing borrowers will continue to enjoy prevailing rates, he said this too would be decided this week.
Parekh said a slight dip in demand in the real estate sector was already visible, especially in some areas such as Ghaziabad and Gurgaon near Delhi and Whitefield in Bangalore.
A combination of prevailing high prices in real estate sector and rising interest rates will see some investors exit the market, he noted.
There were attractive alternative investment options like mutual funds, which offer better tax-free returns. Besides, bank deposit rates had also gone up, he said.
However, genuine investors will continue to remain in the booming realty sector, he added. Parekh said prices in the real estate sector were peaking.
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