The price of property in India is set to rise by 5-10 per cent in the next three to six months after the Reserve Bank of India raised interest rates by 0.25 per cent. With house builders facing increased interest charge, these costs are likely to be passed on to homebuyers.
Increases in developers costs to be passed on to consumers
The Reserve Bank of India recently raised the cost of borrowing by 0.25 per cent and experts believe this will push up the price of property in India. Pradeep Jain, chairman of the Confederation of Real Estate Developers’ Associations of India (CREDAI), said: ââ¬ÅProperty prices are bound to go up in next 3-6 months by 5-10 per cent across the country.ââ¬Â
Mr Jain said that the increase in interest rates would result in increases in costs for developers and that these would be passed on to home buyers in India. Jain, who also heads Mumbai-based Kumar Urban Development Ltd , said. “… The cost of funding from the developers’ point of view would also shoot up. This will be passed on to the customer, who is already under stress.”
Concerns that interest rate rises will contribute to inflation
The Reserve Bank recently raised the repo rate by 25 basis points to 7.5 per cent and the reverse repo rate by a similar margin to 6.5 per cent. This is the tenth increase since March 2010.
Credai President Lalit Kumar Jain said, “Any increase in the rate of interest will be counter- productive and my fear is that it will give rise to inflation instead of curbing it.”
Raheja Developers Chairman and Managing Director Naveen Raheja said: “As the cost of money goes up, the cost of construction and production will also go up. This will lead to further inflationary pressures.”
