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RBI’s decision to hike policy rates will affect the sentiment of the property market

No Comments Sub Category:Realty News Posted On: Feb 01, 2011

RBI’s decision to hike policy rates will affect the sentiment of the property market, but will not have any major impact on demand

The hike in repo and reverse repo rates by 25 basis points will have a sentimental impact on demand. Real estate developers and consultants on Tuesday said RBI’s decision to hike policy rates by 25 basis points will affect the sentiment of the property market, but they do not foresee any major impact on housing demand and prices.



The Reserve Bank of India (RBI) has again hiked the rates in its quarterly monetary policy review. This is mainly in response to the growing inflation. The RBI has raised the repo and reverse repo rates by 25 basis points each.The RBI said demand-supply mismatch and rising global commodity prices will continue to put pressure on inflation, which could hurt economic growth.It further said the upside risk to inflation has increased, and supply side constraints and high global commodity prices could dampen the impact of a tight monetary policy.

“The hike in repo and reverse repo rates by 25 basis points will have a sentimental impact on demand, but it may not slowdown the demand in its actuality,” Jones Lang LaSalle India Chairman and Country Head Anuj Puri said.



Commenting on the RBI’s policy, DLF Group executive director Rajeev Talwar said: “The growth of economy is strong, so we do not expect any negative impact on the property demand and prices”.

Talwar said he did not forsee any rise in interest rates. Parsvnath Developer chairman Pradeep Jain said that there could be a short-term impact because of rate hikes but would not have major affect on demand, which is directly related to growth in the economy which is firm.

Assotech managing director Sanjeev Srivastava said: “It was expected. This will hurt the sentiments of the property market, but will not have any major impact on demand as housing prices are competitive in many markets including Noida.”

On housing prices, Puri said it would remain stable in the metro cities. Home buyers might delay their decision to own property, which would prolong the completion of the transaction, Puri pointed out.

Source: Economic Times


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