Jun 28, 2006, 09.11 AM | Source: Moneycontrol.com

Fed scare may spare real estate sector

Fed hiking interest rates will not have any impact on the macro level, and even if there is any, it will be for a very temporary period, say experts.

If you are thinking of postponing your plan to buy that dream house, seeing that the Fed is going to increase interest rates and that domestic banks will also take cue from that, there is no need to worry because experts say that domestic banks will firm up interest rates at the most by 50 basis point.


This in turn is good news for investors who want to invest in the realty sector because demand will keep moving up and up. Fed hiking interest rates will not have any impact on the macro level and even if there is it will be for a very temporary period. 


Experts like Guarang Shah, Geojit Financial Services, said, "Just because interest rates have gone up, I don't think people are going to postpone their requirement of buying a house. Maybe they would decide to settle for lesser valuation plan than what they would have gone for otherwise, if interest rates go up because you may have to pay up little in terms of outflow like EMI. They will try to substitute it by going in for a lower-end kind of loan."


Shah added, "I don't think the Fed increasing interest rates will have any impact on the realty sector. Interest rate hike will not have any adverse impact on demand as the demand is there but the supply is not there,"


SP Tulsian, Investment Advisor, agrees with Shah. He says, "From the perspective of an actual user this will not impact, though interest rates are hardening. It will not have any material impact on the actual user. As regards the developers availing loan from institutions at a higher rate like HDFC which gives loan to Hiranandani or any builder, they will pay half a percent extra if there is so much need. So it will not have a much impact on the realty sector. It will have an impact on the stock market and not on the real estate sector.


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