It is reported that housing prices may rise by 5% to 10% in the next 3 to 6 months as the cost of funds for developers is expected to increase following the Reserve Bank of India's decision to raise key policy rates by 25 basis points.

Mr Pradeep Jain chairman of Confederation of Real Estate Developers' Associations of India said that "Property prices are bound to go up in next 3 to 6 months by 5 to 10% across the country.”

Mr Jain who is also the Chairman of Parsvnath Developers said that the hike in repo and reverse repo rates would result in an increase in interest rates for builders and the same would be passed on to home buyers. He however said that demand would not be hit despite the expected rise in interest rates on home loans. He added that "People will continue to buy knowing that housing prices would go up further.”

Instead of demand, Jain said supply would be affected, as the increase in interest rates would impact the liquidity situation of small developers.

Asked about impact of the hike in repo and reverse repo rates on the realty sector, Mr Rajeev Talwar DLF Group executive director said that "The constant increase in interest rates over the last one year would definitely have an impact and suggested that the government initiate reforms to boost the supply of housing.”

The Reserve Bank, for the tenth time since March, 2010, raised the repo rate by 25 basis points to 7.5% and the reverse repo rate by a similar margin to 6.5%.

Echoing similar views, Credai President Lalit Kumar Jain said that "Any increase in the rate of interest will be counter productive and my fear is that it will give rise to inflation instead of curbing it."

(Soured from FE)