Ripples are being felt in two key sectors of the economy that owe their prospects to consumer sentiment and cheaper credit,after the Reserve Bank of India hiked key interest rates by 25 basis points on Friday. The realty and auto sectors have reacted negatively to this development. Leading real estate developers said that housing prices are bound to go up due to an expected rise in the developers borrowing costs,which will be passed on to buyers. The countrys largest realty firm DLFs executive director Rajeev Talwar said,Housing prices may go up as cost of financing the project will rise, and added that prospective buyers would be discouraged to buy property with rising EMI on home loans. Interest rates on home loans as well as on developers borrowings are bound to go up. Housing prices,which have gone up by 15-20 per cent in last one year,will further increase as we are not left with no choice but to pass on the same to buyers, Confederation of Real Estate Developers Association of India (CREDAI) chairman Pradeep Jain said. The auto industry already reeling under sagging demand,has expressed shock at the RBIs move and is bracing for a further hit in sales this festive season. The market has already slowed down. This latest hike will further dampen the auto sector. It will dampen demand during the festive season. It was never expected. The RBI should have given a break,at least this time, General Motors India vice-president P Balendran said. Usually,every year we target around 20 per cent jump in sales during the festive season,but this year we expected only 5 per cent spike due to repeated interest rate hikes. But now it will be difficult to achieve even this 5 per cent growth in sales. He,however,said that the company has not taken a call on increasing prices. Fiat India also sees a significant impact on the sector following the RBI action. The industry is already under tremendous pressure and this fresh step by the central bank will further aggravate the situation. We never expected this. Its going to further dampen the festival sales, Fiat India president and chief executive Rajeev Kapoor said. (With PTI inputs)
