Developers’ body Confederation of Real Estate Developers’ Association of India (Credai) has urged the RBI (Reserve Bank of India) to maintain a status quo on the benchmark lending rate, citing financial challenges faced by developers and the potential impact on housing sales due to the consequential rise in prices and home loan interest.
“In the last 1 year, the repo rate has increased from 4% to 6.5%. This burden is being solely absorbed by developers, leading to added financial burden and burgeoning costs,” it said in a statement issued on March 30, 2023.
The RBI will announce its decision on the repo rate on April 6, 2023.
“Another hike in the repo rate would lead to even higher borrowing costs for developers and make it a more challenging lending environment. This would ultimately lead to even higher project costs and housing prices, on the back of prices already increasing by 5-6% in the last one year. Coupled with rising raw material costs, it would further reduce the wafer-thin margins that currently exist for real estate projects, making certain projects financially unfeasible for developers,” it said.
The organisation emphasised the direct correlation between the repo rate and the country’s GDP growth. It said that from March 2021 to March 2022, when the repo rate was hovering at around 4-4.4%, GDP growth of 8.95% was reported.
“Homebuyers, too, will face higher, almost double-digit home loan rates, with a potential repo rate hike, which could further deter them from purchasing a property, especially in Tier-1 cities. This could lead to a slowdown in the real estate market and result in homebuyers postponing their purchase plans, reversing a trend in the post covid era wherein homebuying was on the rise,” it said.
“In the last one year, the cost of construction has risen rapidly due to the gradual increase in the repo rates by the RBI, which has adversely impacted many developers as they struggle to cope up financially. Another repo rate hike would not only make certain projects financially unfeasible, but it would also deter homebuyers as home loan rates will be at an all-time high,” said Harsh Vardhan Patodia, president, Credai.
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An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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