Mumbai prices are expected to fall 25 per cent in the next year Pal Pillai/Bloomberg India's decision to raise a key interest rate is unlikely to change the current course of the property market, Jones Lang LaSalle's local director in India says. The central bank today raised the key interest rate by half a percentage point. Typically, that type of move would send ripple effects through the entire real estate industry, raising construction costs and making it more expensive for consumers to finance purchases of homes. But India's market is already sliding, making it difficult for builders to pass any increased financing costs to consumers, said Jones Lang LaSalle's Ashutosh Limaye. Home prices in Mumbai are expected to fall by as much as 25 per cent in the next year, thanks to slow sales and an abundance of product. "The market for residential real estate is far from effervescent at the moment," Mr Limaye said in a report. "In a scenario where staying competitive and selling stock is of utmost essence, developers are unlikely to increase the cost of their units and thereby risk losing more customers." Low- and middle-income buyers will be most affected by the rate hike, But their prospects for buying a home were far more impacted by a recent changes requiring a 25 per cent down payment, instead of 15 per cent. "The impact of increased cost of borrowing is not as severe as that of the decreased allowable percentage of borrowing," Mr Limaye said. "The fact that the salaried class now have to supply a higher contribution to the cost of their homes that is having a very tangible impact on demand."