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Interest Rates And Property Prices Set To Rise, Say Bankers & Realtors


Expect hardening of interest rates and a spike in property prices soon. At least that is what banking circles and real estate players would like their prospective clients to believe.

Bank officials say the soft interest rate regime is set to end with rates likely to creep up in a couple of quarters. Real estate players say property prices have corrected and the demand has started picking up. Bankers and realtors also say the festive season is the most fascinating period for house hunters. That means, if you have been waiting to buy your dream house at ‘‘the right price'', probably this is the time for you to go for it. Why so?

"Clearly, we have seen customers coming back to the market in the last three months as they see value in deals. Also, everything — be it economy, monsoon, or global issues — has started looking up. That gives people additional confidence," says Dharmesh Jain, managing director, Nirmal Group. The pick- up in demand is vouched by other industry players, too. "The demand is genuine. There is no evidence to prove that investors are getting into the market. It is regular home buyers who are in the market," says Harsh Roongta, CEO, Apnaloan.

If that is the case, then real estate players could be right. The prices are not likely to come down any further on the face of renewed demand. In fact, the opposite looks very likely. That, along with a spike in interest rates, could once again force many house hunters go on the back foot.

How far the scenario is likely? First, most bankers say that though hardening of interest rate looks imminent, chances of a huge spike in lending rates is very remote. "The central bank as well as the government will not like a higher interest rate regime immediately. They have to make sure that rates are kept at reasonable levels to boost the economic growth, which is a top priority at the moment," says a senior banking official. According to him, housing loan rates won't go up more than 50 basis points (100 bps = 1%) in the near future.

As for the property prices, never the one to lose an opportunity to make money, builders have already started quoting a little higher prices in most places, say real estate analysts. "Some builders have started quoting higher rates (up to Rs 500 extra per square feet) since the last month. Though many players believe that this may drive away genuine customers, greedy elements are cashing in on the opportunity," says an analyst. Dharmesh Jain also says that prices are "firming up". Roongta says buyers would once again find it tough going if both the interest rate as well as property prices go up. "Genuine buyers will find it difficult to finance their purchase if prices started going to previous levels," he says.

Demand for houses has already started picking up. Interest rates are poised to harden in the next few months If demand remains, property prices may go up. Instead, some builders have started quoting higher rates (up to Rs 500 extra per square feet)

Source: Times of India




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