Higher rates to hit real estate and infrastructure projects, say experts

The CEOs of the Indian infrastructure and real estate are worried that the rising rates will hit demand for new loans this hitting their businesses.
 

Venkatesh Gopalkrishnan, CEO, Shapoorji Pallonji Real Estate, said though the RBI increasing the interest rate by 50 basis points was an expected move to combat the inflationary growth in the country. This move might impact the home loan category, which may influence the buying sentiments of affordable to mid-segment home buyers.
 

Echoing a similar view, Niranjan Hiranandani, MD of Hiranandani Group, said the sharp dichotomy between growth - inflation sentiment is getting trickier globally. "The Reserve Bank of India is challenged to strike an equilibrium between spurring progressive GDP growth and docile inflation pressure out of tolerance limit. The persistent hike in the repo rates from past few subsequent quarters was along the line of market expectations amidst geo-political humdrum," he said.
 

Any further repo rate hike will lead to an enhanced inflationary situation with a counter -impact on the growth rate as well as consumption sentiment. Markets are now succumbing to the rising interest rate curve with the undesired ramifications on the currency trade, consumer spending, and investment cycle. It is now imperative to preempt fiscal intervention by the Government to stabilize the catastrophic inflation”, he said.
 

Worried that the rising rates will hit new projects, CEOs said new loans will cost more this increasing the cost of projects. Infrastructure being capital intensive it has direct impact upon increase in interest rates, they said.

"Indian economy is in good shape however considering global situation and increase in rates some increase in rates is required to contain outward flow of capital to steady the Rupee. We hope for no further increase in rates," said Rajiv Agarwal, MD of Essar Ports.