Mumbai: The Land Bill cast a dark cloud over planned townships, reducing chances of availability of good homes at affordable rates. Now, looks like the interest rate hike is going to rain it down hard, making affordable housing almost akin to a dream.
RBI on Friday hiked base rates for the 12th time in 20 months by 25 basis points to 8.25 per cent. The bankers are neither ruling out a possibility of passing on the additional cost incurred because of this, nor an increase in EMIs for home loans.
MR Jaishankar, chairman and managing director, Brigade Enterprise joins CNBC-TV18 to explore this angle of the rate hike. "Demand will remain for affordable housing since it is more need-based than investor interest-based," he says. Explaing the relationship with interest rates, he says, "We will always get the benefit of lower interest rates as and when the economy improves, and as and when RBI reduces interest rates."
Below is the edited transcript:
CNBC-TV18: How would you look at this rate hike? Do you think that you are going to see a further reduction in demand for affordable housing?
MR Jaishankar: I hope the bankers will not increase the rates further. That is just a hope, of course; it is their call. It has already been upped substantially and any increase will certainly not be a positive thing anymore. We have enough of negative news flow in the last few months and we certainly don’t want anymore bad news on this front.
As far as government policies are concerned, I would definitely feel it is two steps backward, and there is no positive news in the market unfortunately. As far as affordable housing is concerned, I don’t expect a significant drop in demand other than what has happened in the recent past. However, generally in affordable housing, the demand is need-based and not speculative, and investor-demand is not much in the segment. Since it is need-based, people will go for flexible interest rate options. We will always get the benefit of lower interest rates as and when the economy improves and as and when RBI reduces interest rates.
CNBC-TV18: Are you beginning to pencil in lower growth by the end of the year because the rates hikes are more likely to be passed on than not?
MR Jaishankar: Rate hikes will definitely be passed on and it will have some pressure and negative impact. Otherwise, in the beginning of 2011, we were quite bullish of the real estate market. Today there is quite a bit of cautiousness, particularly on account of US markets. So I am hoping that things will settle down in the months to come.
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