With the central bank raising repo and reverse repo rates by 25 basis points to 6.25 per cent and 5.25 per cent, respectively, borrowing rates will go up for consumers as well as for developers. However, the move is in line with expectations. Inflation remains a matter of concern for the federal bank and it was obvious that it would be increasing repo and reverse repo rates to check the rising prices.
To forecast the impact of credit policy on real estate industry, one needs to go into the details. I will say the overall policy is designed to check the creation of a pricing bubble in the market. The loan-to-value restriction has been brought down to 80 per cent, which will certainly check flow of funds in the market, thereby, giving bankers an option not to increase the loan rates. Yes, teaser loans may be removed. RBI’s move will not have any impact on demand, as it is directly related to economic development and our economy is growing and sentiments are positive.
