The increase in the repo and reverse repo rate to affect the real estate developer and the buyers too:

The Reserve Bank of India has increased the repo rate and the reverse repo rate by half a percentage points each as a result to which the new rates are 7.25% and 6.25% respectively. The banks and other financial institutions are also expected to increase their lending rates soon. Also the projected growth rate is around 8% in contrast to 9%, what the government has projected in the union budget this year.

The growth in the interest rates coupled with slowdown in the economy will directly or indirectly affect the activities of the real estate sector as well. The lowering of economic growth is a consequence of the growing inflation rate which is hovering around 9%. The latest rise in the repo rates by RBI means that the cost of construction has gone up for the real estate developers and this increase certainly hasn’t come up at the best of times. According to some reports the banks have already taken cautious approach at real estate lending and reduced the burden on them. As a result most of the real estate developers are raising costs from the private sector now. The construction costs have significantly risen as the returns on the borrowings have risen to a great extent. It can easily be assumed that the burden of the increased costs will shift on the buyers to maintain the same profit margins.