Delhi: With the Reserve Bank of India (RBI) increasing the Cash Reserve Ratio (CRR) by 25 basis points and the repo rate by 50 basis points, the real estate boom in the Noida, Greater Noida, and Indirapuram in Ghaziabad is likely to get hit as most banks have already hinted enhancing the home, consumer and other loans.

Experts are of the view that with the rising real estate prices and potentially higher interest rates on the anvil, the prospective home buyer is in for a tough time.

Slowdown expected

RBI's move can bring slowdown in the real estate market especially in Noida, Greater Noida and Ghaziabad where so many housing projects have been lined up.
 
Commercial banks are bound to further raise the prime lending rates (PLR), making credit more costly for the industry and trade.

Pradeep Jain, Chairman Parsvnath Developers Ltd, said, "The steep hike in the CRR and repo rate will have a direct impact on consumer's pocket as well as the balance sheet of the real estate companies. Real sectors support over 280 ancillary industries and any such increase in the interest rate or the home loan will have a direct impact on the project cost."

Hole in the pocket

Hemant Roy, a software engineer bought a house at Indirapuram in Feb 2006. At that time an interest rate of 8 per cent was charged on a loan of 19 lakhs. Now it has increased to 10.50 per cent.

"The pace at which the interest rate has increased in past two years has left a deep hole in my pocket. It has become difficult for me to survive. Our salary has not increased in the same proportion to the bank interest rates. Even half a percent increase in the interest rate increases the tenure from 6 months to 1 year," Hemant said.

Cautious buyer

In the wake of better infrastructure facilities, Noida, Greater Noida, Indirapuram in Ghaziabad already gain preference over other places. Many prominent names in both domestic and international real estate are to initiate exclusive projects at these places but the new buyers are extra cautious on the move.

"I am planning to buy a house in Ghaziabad but RBI's move has dampened all my planning. Now I will have to rethink on my decision. It's still difficult to predict future. Maybe the RBI plans to further increase the rates," Izhar Arman, a prospective buyer, said.

The repo rate has been revised for the third time in three months to 9 per cent, while the CRR will also be hiked to 9 per cent from August 30, 2008. Repo rate was last raised on June 24 by 50 basis points to 8.5 per cent.