The CRR hike by RBI is a regulatory step to manage inflation and does not look like it will impact interest rates much as of now, says SHILPA SACHDEV

Shobhit Agarwal, Jt. MD, Capital Markets, Jones Lang LaSalle Meghraj says, "This direction given by RBI to curb inflation may have implications on loans to, both developers and end users as the year progresses. Considering the fact that inflation is becoming a major concern now, such steps to curb excessive liquidity in the system should be anticipated. For home buyers, the implied effect would be an upward pressure on home loan rates, and a knee-jerk analysis would be that sales will drop. However, the possible marginal hike in interest rates would also have to be viewed light of the fact that sentiments in the residential segment are once again very positive, and that demand is high. Considering this, the impact in terms of market activity would be minimal."

A senior official from Axis Bank adds, "India as of now is not fighting recession as much as it is fighting inflation. This was an expected move given the inflationary conditions that have arisen with regards to food prices and other commodities, which may spill over to other sectors. If the situation is not under control, then after the budget RBI may take stricter steps."

Manish Kaneria, director, Mont Vert Homes agrees. He explains, "Inflation in food prices (17%) is of major concern affecting the entire population of the country. RBI has chosen the lesser evil to help tackle the inflation monster. A worse choice, although more effective, would have been increasing the interest rates which would have affected money supply much more severely an undesirable step for the growing economy. That would have had much more adverse effect on all other industries including the real estate and infrastructure funding as well as home loan borrowing. Reduction in liquidity that will be created as a result of increasing the CRR may not be all that bad but its effectiveness to control the 'food inflation' is a wait and watch game."

He adds, "My advice to a home buyer is that if RBI's "increase in CRR" intervention does not work on controlling the food prices, then RBI is left with no other choice but to increase the interest rates. This will lead to increase in input costs for builders and will also lead to increase in home loan rates for a home buyer. So if you are a potential buyer who is postponing the home buying decision this may be the time to buy a home. Further reductions in home prices are not expected so no point in waiting around for either home prices or interest rates to go down."