Further interest rate hike to hit real estate sector badly: Credai

A realtors' body said the rate increase was steeper than expected, but if any further rate hike is passed on to the home buyers, the employment-intensive real-estate sector will get adversely impacted

A realtors' body on Sunday said the rate increase was steeper than expected, but if any further rate hike is passed on to the home buyers, the employment-intensive real-estate sector will get adversely impacted.

Reserve Bank of India raised the repo rate by 50 basis points to 5.9 per cent on Friday, in a bid to tame inflation.

"We had expected a rate hike by two per cent by December but with the latest round of hike of 50 basis points, the cumulative interest rate rise is 1.9 per cent. It has come 2-3 months earlier than our expectations," Credai West Bengal president Sushil Mohta told PTI.

With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank is now close to 6 per cent.

"Any further rate hike in the near term will put a brake on the revival of the real estate sector, which has a huge contribution to the economy," he said.

The sale of residential flats in Kolkata in the July-September 2022 period has slumped by 73 per cent to 1,843 units compared to the corresponding period of 2021, according to Knight Frank India.

New launches slid by 51 per cent to 1531 units during the period over the same quarter of 2021.

A host of lenders such as State bank of India and Bank of India hiked lending rates following RBI's move.

Mortgage lender HDFC Ltd hiked the lending rate by 50 basis points effective Saturday. This is the seventh rate increase undertaken by HDFC in the last five months with an aggregate hike of 1.90 per cent in line with the RBI.

"The real estate sector's contribution to the country's GDP was 7 per cent in 2019-2020 and it will be 10 per cent by 2030, contributing about USD 1 trillion to the economy, as per government projection. But the interest rate scenario will be a key factor in this journey," Mohta said.