Developers’ body Confederation of Real Estate Developers’ Association of India (CREDAI) has expressed concerns over a potential hike in the repo rate by the RBI in its upcoming monetary policy committee review. CREDAI National has urged the RBI to not increase the repo rate any further, citing the financial challenges faced by developers and the potential impact on housing sales due to the consequential rise in prices and home loan rates. In the last 1 year, the repo rate has increased from 4%-6.5%, being solely absorbed by developers leading to added financial burden and burgeoning costs.
CREDAI has highlighted that another hike in the repo rate would lead to even higher
borrowing costs for developers and make it a more challenging lending environment. This
would ultimately lead to even higher project costs and housing prices, on the back of
prices already increasing by 5-6% in the last one year. Coupled with rising raw material
costs, it would further reduce the wafer-thin margins that currently exist for real estate
projects, making certain projects financially unfeasible for developers.
CREDAI emphasized the direct correlation between repo rate and the country’s GDP
growth, pointing to the period from March 2021 to March 2022, where the repo rate was
hovering around 4-4.4%, leading to one of the strongest eras in the Indian economy, with a
GDP growth of 8.95% in that period.
Homebuyers, too, will face higher, almost double-digit home loan rates with a potential
repo rate hike, which could further deter them from purchasing a property, especially in
tier 1 cities. This could lead to a slowdown in the real estate market and result in
homebuyers postponing their purchase plans, reversing a trend in the post COVID era
wherein homebuying was on the rise.
Harsh Vardhan Patodia, President CREDAI, said, “In the last 1 year, the cost of
construction has risen rapidly due to the gradual increase in repo rates by the RBI, which
has adversely impacted many developers as they struggle to cope up financially. Another
repo rate hike would not only make certain projects financially unfeasible, but it would
also deter homebuyers as home loan rates will be at an all time high. Acknowledging the
support RBI has lent to the industry in the past, especially during peak COVID, CREDAI has
backed the need for a lower repo rate by stressing on the strong GDP growth numbers that
India could achieve during 2021- 2022, ultimately enabling a win-win situation for all
stakeholders involved.”
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