If you are planning to buy a house, now is the time. Do it now, because a rise in interest rates might not be too far away.
Ending a 13-week streak of contraction, the wholesale prices based inflation rate returned to the positive zone in figures relating to the week ending September 5, triggering speculation about when the Reserve Bank of India (RBI) would announce a rise in lending rates.
Inflation measured by the wholesale price index (WPI) rose by 0.12 per cent for the week.
It had fallen by 0.12 per cent in the previous week.
The RBI faces the dilemma of containing prices without making loans costlier for individuals and corporations in an uncertain economy.
One way to contain inflation is to reduce the amount of money circulating in the economy.
The RBI usually does this either by sucking out liquidity from banks by raising the cash reserve ratio (CRR, or the percentage of deposits commercial banks have to park with the RBI) or by raising interest rates and reducing demand for money.
A rise in interest rates could upset plans of realty firms as people defer plans to buy homes.
“Borrowing rates may go up in three months’ time and that may result in a rise in lending rates,” said R.R. Nair, CEO, LIC Housing Finance.
The government said the rise in inflation rate was not unexpected. “This is a trend we were expecting,” finance minister Pranab Mukherjee told reporters.