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RBI's policy rate hike to pinch realty sector

January 25, 2011 17:11 IST
Real estate developers and consultants on Tuesday said RBI's decision to hike policy rates by 25 basis points will affect the sentiment of the property market, but they do not foresee any major impact on housing demand and prices.

"The hike in repo and reverse repo rates by 25 basis points will have a sentimental impact on demand, but it may not slowdown the demand in its actuality," Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India told PTI.

Home buyers might delay their decision to own property, which would prolong the completion of the transaction, Puri pointed out. On housing prices, Puri said it would remain stable in the metro cities.

Commenting on the RBI's policy, DLF Group Executive Director Rajeev Talwar said: "The growth of economy is strong, so we do not expect any negative impact on the property demand and prices".

Talwar said he did not forsee any rise in interest rates. Parsvnath Developer Chairman Pradeep Jain said that there could be a short-term impact because of rate hikes but would not have major affect on demand, which is directly related to growth in the economy which is firm.

"As far as rate hike impact on real estate sector is concerned, I see a short-term impact initially which is a normal and routine phenomenon. In fact since March 2010, rates have been increased six times but it has not impacted the demand and growth in the sector significantly," Jain said. Assotech Managing Director Sanjeev Srivastava said: "It was expected.

This will hurt the sentiments of the property market, but will not have any major impact on demand as housing prices are competitive in many markets including Noida."

Talwar of DLF noted that the government needs to do much more on the supply side to contain inflation. "The more you try to curb demand and not increase housing supply, the prices would rise in long term".

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