Bangalore realty developers see marginal impact on rate hike

Real estate developers in the country's IT hub today said RBI's decision to hike key policy rates will have a marginal impact on demand sentiments in short term.

Updated: Sep 22, 2013, 17:11 PM IST

Bangalore: Real estate developers in the country's IT hub today said RBI's decision to hike key policy rates will have a marginal impact on demand sentiments in short term.

"There will be some impact as people were expecting that the interest rates will go down but on the other hand, suddenly to their surprise it has been increased, but I don't think there will be a major impact," K K Malpani, founding member of Confederation of Real Estate Developers' Association of India (CREDAI) Bangalore told PTI here.

Stating that the Bangalore realty sector has been doing well due to quality, demand and rate factors, he said, "People are confident about quality of the property in Bangalore as the city is fast developing and climate is also favourable here."

RBI had on September 20 raised the short-term policy rate by 0.25 per cent to keep inflation under check, a move that may increase EMIs for home and auto loans in the medium term.

Commenting on the market situation in the city, CREDAI Bangalore President C N Govindaraju said overheated markets like Mumbai, Gurgaon and NCR region have seen a slowdown and Hyderabad market is seeing a turbulent phase due to Telangana issue. All these factors have created a demand in Bangalore market.

"There are companies that are relocating to Bangalore, expansions have been planned in the city, there will be an influx of IT and other professionals into the city so there will be a demand," he added.

Govindaraju said, "Due to increase in rates, sentiment will be marginally hurt, but in long term, as housing is a basic necessity - the impact is going to be short lived."

Stating that the real estate developers are not affected by the changing market conditions as they have designed themselves to the changes, CREDAI Bangalore Secretary S Suresh Hari said "impractical and outdated regulations are affecting the industry... What we are asking for is practical regulatory mechanism."

He said the impact of RBI hiking key interest rates will have marginal affect on the sentiment. "At least in Bangalore market I don't see any major impact," he added.

Echoing industry sentiments, an official from a nationalised bank said, "Despite hike in policy rates, there will be steady demand for home loan in midcap range of up to Rs 40 lakh."

Industry officials also pointed out that they are seeing steady inflow of investment into reality sector from Indians residing overseas due to devaluation of rupee against dollar.

"NRI's and Indian's staying abroad will like to invest here because of better dollar rates and they have been doing it... This is one of the reason we are getting lot of foreign investment," Malpani said.

"NRI's are pumping money into the realty sector in the country for better returns," he said.

CREDAI Bangalore President Govindaraju said depreciation of the rupee against the dollar has encouraged NRIs and people living abroad to invest in the realty sector across the country, including Bangalore.

Stating that there would be real increase in investment from foreign residing Indians into the realty sector in cities like Bangalore, Suresh Hari said, "They will try to encash the opportunity by investing into the market... Lot of investment will come in, if the price is advantageous for them, an inflow is expected."