Hike in interest rates by banks may hit housing demand: Realtors

New Delhi, May 13 (IANS) Soon after the central bank Reserve Bank of India (RBI) raised the repo rate by 40 basis points, the banking sector imitated the same by increasing interest rates in lending and deposit schemes.

From major banks to even small finance banks, several joined the bandwagon of raising lending and deposits rate.

A number of banks raised their external benchmark based lending rates following an increase of 0.40 per cent in the repo rate -- at which the RBI lends short term money to banks.

This move by the banks is expected to impact the growth of the real estate industry and may hit the housing demand.

"The all-time low home loan interest regime had boosted the housing demand and helped the economy to get back to the pre-Covid levels. It also enabled a robust recovery in the real estate sector," said Kaushal Agarwal -- Chairman, The Guardians Real Estate Advisory.

Now, the move by the banks to hike the interest rates along with the rise in input cost on construction might temporarily limit the growth momentum of the real estate sector.

"The sharp acceleration of interest rates by the banks will affect the homebuyers with concerns of EMI on home loans. The state government, which is the largest beneficiary of housing demand, should come forward to support the home buyers by reducing stamp duty rate to 3 per cent," said Pritam Chivukula -- Co-Founder & Director, Tridhaatu Realty and Treasurer, CREDAI MCHI.

Realtors feel that there might be a short-term impact on sales due to the rising property prices further putting the brakes on the overall demand.

"We have already started seeing a vertical movement in the home prices due to higher input costs on construction and increased stamp duty. The move by the banks to hike the interest rates will further put a dent on the homebuyer's sentiments impacting the overall demand," said Shraddha Kedia-Agarwal, Director, Transcon Developers.

Bhushan Nemlekar, Director, Sumit Woods feels with the increasing prices of property would be a huge setback for the real estate industry disrupting the ongoing growth momentum in the sector.

Echoing Nemlekar's point of view, Sachin Chopda, Managing Director, Pushpam Group said the upperward revision in interest rates create a huge impact on the long-term goals by the investors.