Click to play videoMumbai: The Reserve Bank of India’s (RBI) move to increase repo rate by 50 bps is likely to increase home loan rates across banks.
With home loans all set to go up, developers fear the demand will shrink this festive season.
In certain pockets of Delhi and Mumbai, sales in the residential segment have dropped by more than 40 per cent from last year. They were betting on the festive season to see them through. But the situation looks bleak now.
“We have been seeing a slump in the sales for the past four to five months. Just ahead of the festivals, when we were thinking of sales picking up, a move like this, would dent the pockets of the home buyers,” says Head - Finance, Orbit Corp, Ramashya Yadav.
Home loan rates have increased by more than 60 per cent in the past three years. For buyers, it has meant an EMI jump of over 70 per cent.
The RBI's Cash Reserve Ratio or CRR hike also means that banks will tighten cash flows to developers. Since last year, rates have increased from 11 per cent to 14 per cent. In addition to that, there is also a 20-25 per cent increase in input costs over the past one year.
It seems developers now have to look at the private equity route for funding more aggressively. With the developer cash starved and a crunch in demand, sources say, projects in tier II and tier III cities will be held back or delayed.
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