Property Price hike further|Housing prices may go up by 5-10 pc with rising interest rates

Housing prices may rise by 5-10 per cent in the next 3-6 months as the cost of funds for developers is expected to increase following the Reserve Bank of India''s decision to raise key policy rates by 25 basis points.

"Property prices are bound to go up in next 3-6 months by 5-10 per cent across the country," Confederation of Real Estate Developers'' Associations of India (CREDAI) Chairman Pradeep Jain .

Jain, who is also the Chairman of Parsvnath Developers, said the hike in repo and reverse repo rates would result in an increase in interest rates for builders and the same would be passed on to home buyers.

He, however, said demand would not be hit despite the expected rise in interest rates on home loans. "People will continue to buy knowing that housing prices would go up further," he said.

Instead of demand, Jain said supply would be affected, as the increase in interest rates would impact the liquidity situation of small developers.

Asked about impact of the hike in repo and reverse repo rates on the realty sector, DLF Group Executive Director Rajeev Talwar said, "The constant increase in interest rates over the last one year would definitely have an impact", and suggested that the government initiate reforms to boost the supply of housing.

The Reserve Bank, for the tenth time since March, 2010, raised the repo rate by 25 basis points to 7.5 per cent and the reverse repo rate by a similar margin to 6.5 per cent today.