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Increase in Repo Rate affected the Property Markets in Pune

No Comments Sub Category:Uncategorized Posted On: Jul 30, 2011

Real estate is the second largest employment generating sector, which will be hit by the decision to increase repo rate by the Reserve Bank of India for the third time since May this year. Out of total price of a flat, some 36% amount goes as tax to the government. Since March 2010, the RBI is increasing repo rates regularly which has badly affected property deals. The dip in the revenue in May this year indicates how it has affected the property markets in the state.

The increase in the repo rate has direct impact on flat buyers who are looking for flats with the size of one bedroom-hall-kitchen or two-BHK, but of a smaller size. Generally, these flats cost around Rs 50 lakh in Pune city. These are the customers, who are going to suffer a lot as their schedule of repayment will be affected. There are more customers in this category than the high-value flat category, who are anyway going to make their investments. So the rising repo rates does not have any bearing on them.

The government on one hand promotes affordable housing schemes and on the other hand increases interest on home loans. This shows the contradictory nature of the Union government’s stance. There are other ways to control the inflation, but neither the RBI nor union government are implementing them for some unknown reasons.

As per figures compiled by the office of the inspector-general of registrations (IGR), 1,98,206 property registration documents were processed in April 2011 which earned the state a revenue of Rs 985.47 crore. In contrast, the office processed 2,11,388 documents in May, but the revenue dipped to Rs 781.48 crore. This drop could be attributed to decrease in spending capacity of the buyer who has been forced to pay more interest following the Reserve Bank of India’s decision to revise repo rates on May 3.

June reported slight rise in revenue collection, but it was still lower than the April figures. The IGR processed 1,86,196 property documents adding Rs 846.25 crore to the exchequer. “These figures are still being verified,” said inspector general of registration and controller of stamps, S Chockalingam.

The target was achieved by December 2010 itself. The government has taken decisions to control inflation, but after a certain extent, property deals will take place,” said Chockalingam.

Times of India

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