Further interest rate hike could push realty prices up: DLF

The largest real estate company DLF today said any further increase in interest rates by the Reserve Bank in the forthcoming annual monetary policy review could put upward pressure on prices.

 "The Reserve Bank increased the rates to ensure that a bubble does not get created in the market. There is no bubble today. It was a precautionary step by the RBI. But, I do hope there is no more surprises from the RBI," DLF chairman KP Singh said when sought his reaction on the recent hikes in the short-term lending and borrowing rates by 25 basis points to rein in runaway inflation.

The RBI will announce its annual monetary policy on April 20.

 Singh pointed out that the property demand is still restricted and the sector needs continuous support to recover from the slowdown. Though the rate hike was on expected lines, Singh said any further hike would put upward pressure on the prices. "The more you tweak, the more the market will get disturbed and the more price will go up," he said.

 Pointing out that the mortgage loan to GDP ratio in the country is very low at 6-7 per cent as against 45 per cent in Thailand and Malaysia, the DLF chairman said interest rates should be kept low to encourage more people to buy homes.

 "The monetary policy, in my view, should facilitate growth of this important sector of the economy and not stifle it," Singh said, and observed that with hike in interest rates, it would become difficult for homeowners to service their loans.