Mumbai: The auto industry expressed shock at the Reserve Bank's decision to hike key policy rate by 25 basis points on Friday, saying the move will further dampen the already cringing demand and hit 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.
RBI raised its lending rate (repo) by 25 bps points to 8.25 percent - 12th hike since March last year, to batten down inflation which was 9.78 percent in August.
"Usually, every year we target around 20 percent jump in sales during the festive season, but this year we expected only 5 percent spike due to repeated interest rate hikes. But now it will be difficult to achieve even this 5 percent growth in sales," Balendran added.
Asked whether the company will increase car prices, he said, "We have not decided anything on it."
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. It's going to further dampen the festival sales," Fiat India President and Chief Executive Rajeev Kapoor said.
"The RBI step will hurt the overall auto industry," he said, adding that the company has not decided on price hikes. Rajkot-based 3-wheeler maker Atul Auto also said the hike will hit demand.
"Definitely, it will have an impact on the industry. The auto sector is already reeling under pressure due to high input costs and rising fuel prices and the steady hike in interest rates will affect sales," Atul Auto Director Vijay Kedia said.
However, he expressed the hope that 3-wheelers will not be hit majorly by the rising interest rate.
Pune-based Force Motors voiced concern as well.
"Certainly, the move will have a negative impact on sales. The auto industry is in a slowdown right now and it will further curtail demand," Force Motors President (Personal Vehicles Division) Sanjeev Gargh said.
"On Thursday we had a steep spike in petrol price, and on Friday we have a rate hike. That certainly is not good," he said.

Realtors foresee higher housing prices following RBI rate hike

Housing prices are likely to go up on account of an expected rise in the developers' borrowing costs following the Reserve Bank's decision to hike key interest rates by 25 basis points, but realtors do not foresee demand being dampened during the ensuing festive season.

"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 percent 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.

Asked about demand, he said there are no concerns, as buyers understand there is no benefit to putting their decision on hold due to rising property prices.

"The housing prices will raise by 30-50 percent, depending upon location, once the proposed land acquisition Act is passed by the Parliament. So end-user customers know this and therefore, we do not see any adverse impact on housing prices," he said.

Jain said end-user demand during the festive season would remain buoyant, but felt that investor demand could be lower than the last year due to the negative sentiment.