The Reserve Bank of India’s (RBI) decision not to cut interest rates has spooked real estate companies facing the brunt of a housing industry slowdown caused by the high cost of mortgage financing. RBI, on Tuesday, decided to keep interest rates unchanged in its third-quarter monetary policy review. Real estate companies were expecting a cut, especially in the backdrop of slowing home sales in major cities in the past few months.
”High interest rates is a serious concern as far as property market is concerned. There was some expectation that the rates would be lowered today. However, the impact will depend upon the region and the demand-supply scenario there. The impact on Mumbai where the supply is limited will be negligible,” Godrej Properties managing director Milind Korde said.
Buyer resistance and a series of interest rates hikes last year put the brakes on home sales last year. Middle-class households put off purchases after seeing prices break all records in most major metros. ET’s report, on Tuesday, cited RBI data to show that home loan sales fell 39% in April-November 2007 while loans to developers eased by a fourth to Rs 12,563 crore.
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