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Rate cut, dip in interest to boost realty sales

RBI's move comes at a time when there is general optimism around the launches of new housing projects, with the hope of a gradual upward thrust.

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RBI's decision to reduce repo and reverse repo rates by 25 basis point (bps) will turn around the realty sector which has been suffering from poor end user demand for some time now, say experts. They say, this will also improve the consumer sentiments, impact home loan interest rates and EMIs, thereby leading to off-take of real estate across India.

RBI's move comes at a time when there is general optimism around the launches of new housing projects, with the hope of a gradual upward thrust. Stakeholders have opined that buyers are still in the wait-and-watch mode which will dampen sales. Future sentiments for price appreciation, however, remained marginally down, indicating that the sector does not expect any price rise in the coming six months.

Knight Frank CMD Shishir Baijal hoped the RBI's move will provide a further fillip to the demand side for real estate. "As a result of this reduction, we hope banks will pass on the benefits of revised rates to the end consumer of loans, thereby making it easier for them to make their purchase decision. For a sector which has been suffering from poor end user demand for some time now, this is a step in the right direction," said Baijal.

ANAROCK Property Consultants chairman Anuj Puri said that rate cuts give a substantial push to property buyer sentiments. He added that it was high time for such a cut. Puri recalled that home loan interest rates had increased by as much as 5-7% in the last one year because the RBI hiked its repo rates by 50 bsp over the same period. In other words, home loans had become a more expensive proposition.

"However, the real estate market does not depend only on marginally improved buyer sentiment — there are larger issues that hold the sector hostage right now. The liquidity issues post the NBFC crisis are a bigger concern.

NBFCs and HFCs have seriously curtailed disbursements to developers. Moreover, the repayment capabilities of many developers are also in question," said Puri.

Further, the National Real Estate Development Council (west) president Rajan Bandelkar observed that the 0.25 basis points rate cut will lead to an increase in sales as there will be a dip in the interest rates on home loans enabling buyers to make realty purchases in both residential and commercial space.

Nahar Group vice chairperson Manju Yagnik said it would help in ensuring that the monetary policy is aligned with fiscal policy, keeping in mind the balance between supply and consumption. "Reduction in home loan rates will boost sales and ensure regular cash flow," said Yagnik.

Ashwin Sheth, Group director Chintan Sheth, however, said the realty sector expects the banks to pass on the benefits of the rate cut to end users with respect to home loans to reduce the financial strain on homebuyers.

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