Real Estate and automobiles are two segments on the retail side, where the impact of the interest rate is significant.
Local businessmen have welcomed the move of the Monetary Policy Committee to reduce Repo Rate by 25 basis points but reiterated that it is more important that banks and other finance companies also pass on the benefits of a rate cut in a manner that the burden of monthly installments on the customers is decreased. Real Estate and automobiles are two segments on the retail side, where the impact of the interest rate is significant.
Jaxay Shah, National Chairman of the Confederation of Real Estate Developers Associations of India (CREDAI) said that with the latest move, the repo rate now stands at 5.15 per cent taking the cumulative cuts to 135 basis points this year and the lowest since April 2010. The reduction of rate is expected to boost the credit flow and spur the economic growth of the country.
"This is an indication of the government's commitment to industrial growth. We hope that the benefit of this reduction is passed on to the home buyers by the banks and financial institutions. This, coupled with the upcoming festive season and reduction in corporate tax, will further enhance the sentiments," said Shah.
Sources in the auto sector also feel that in spite of the reduction of rates by MPC, there is no visible impact on a monthly installment of the buyers, nor is there a visible indication of growth in demand. The auto sector is one of the most hit in the ongoing economic and business slowdown with sales dropping to a multi-month low.
"There does not seem to be any impact of benefit to the customers. Mostly, its various schemes and discount offered by the companies reduced the purchasing cost. Even previous rate cuts have also not caused any improvement in the demand for vehicles," said Rupesh Jantrania, Director of Oceanic TVS, which sales TVS two-wheelers in the city.
A dealer of a leading car brand also said that recent rate cuts had no impact on bringing footfalls or booking for the dealers. Personnel involved with retail finance said that rate cuts are not immediately passed on to the buyers because interest rates depend on the total cost of funds, so it takes time for the benefit to be passed on.
Industry players are apprehensive as they believe that as of now there is not much room for fresh investments as the demand from the end-user is low. "When manufacturers are not able to dispose of their existing inventory, there is no point in going for capacity expansion. So in spite of rate cuts, the demand for credit is likely to be subdued," said a source on the condition of anonymity.
SLOW IMPACT
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The Monetary Policy Committee of Reserve Bank of India cut Repo Rate by 25 basis points
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Despite rate cut, no visible impact on a monthly EMIs of buyers
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| The auto sector is one of the most hit in the ongoing economic and business slowdown |
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