RBI rate cut ex­pected to re­vive hous­ing sales dur­ing fes­tive sea­son

Low­er­ing of key in­ter­est rate by 0.50% to sup­port Hous­ing for All ini­tia­tive

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In a sur­prise move, the Re­serve Bank has low­ered the key in­ter­est rate by .50%, the big­gest cut in over three years, to bol­ster the realty sec­tor that re­acted by say­ing that it will go a long way in re­viv­ing hous­ing sales and sup­port the gov­ern­ment’s Hous­ing for All ini­tia­tive.

With a view to im­prove af­ford­abil­ity of low-cost hous­ing for eco­nom­i­cally weaker sec­tions and low in­come groups and giv­ing a fil­lip to Hous­ing for All, while be­ing cog­nizant of pru­den­tial con­cerns, the apex bank also pro­posed to re­duce the risk weights ap­pli­ca­ble to lower value but well col­lat­er­alised in­di­vid­ual hous­ing loans.

The min­i­mum risk weight ap­pli­ca­ble on in­di­vid­ual hous­ing loans is 50% at present.

“This is a welcome move and will pro­vide the nec­es­sary sup­port to the econ­omy as well as the real es­tate sec­tor. The RBI’s pro­posal to re­duce the min­i­mum risk weigh­tage on in­di­vid­ual hous­ing loans for low cost homes will help re­vive sales apart from lend­ing sup­port to the gov­ern­ment’s Hous­ing for All scheme,” says An­shu­man Mag­a­zine, chair­man and MD, CBRE South Asia Pvt Ltd.

The Apex bank’s de­ci­sion to re­duce the in­ter­est rate sug­gests that it has set aside its cau­tious stance and as­sumed a bold ap­proach, say realty ex­perts.

As op­posed to the mar­ket’s ex­pec­ta­tion of a 25 ba­sis points cut, the RBI has de­liv­ered an as­tound­ing 50 ba­sis points re­duc­tion. With this, it has clearly aban­doned its cau­tious babysteps ap­proach and as­sumed a bolder stance, ob­vi­ously be­cause the cur­rent eco­nomic fun­da­men­tals pro­vide it with the room to do so, says Anuj Puri, chair­man and coun­try head, JLL In­dia.

“Given the mag­ni­tude of this step, I do not think any fur­ther rate cuts are likely in this fi­nan­cial year, es­pe­cially since the RBI fore­sees a mod­er­ate growth in in­fla­tion rate in the in­terim months. For the af­ford­able hous­ing sec­tor, the out­look is nev­er­the­less bright, since the RBI gover­nor has made pro­vi­sions for lend­ing to this sec­tor to be­come less strin­gent and broader in scope,” he says.

“With the latest in­ter­est re­vi­sion, t he RBI has cut repo rate by a to­tal of 125 ba­sis points this year to a four- year low that should act as a cat­a­lyst to re­vive sen­ti­ments in the real es­tate sec­tor. At a time when In­dian cities are wit­ness­ing sub­dued hous­ing sales, this cor­rec­tion in prime lend­ing rates would help stim­u­late home buy­ers’ in­ter­est and spur home­buy­ing de­ci­sions,” says San­jay Dutt, man­ag­ing di­rec­tor, In­dia, Cush­man & Wake­field. De­vel­op­ers hope that banks will pass on the ben­e­fit of the rate cut to the cus­tomers. “We are hope­ful fi­nan­cial in­sti­tu­tions would fol­low suit and pass on the ben­e­fits im­me­di­ately to the cus­tomer,” they say. In one of the largest of­fice space trans­ac­tions, Go­drej Prop­er­ties has an­nounced the sale of 4.35 lakh sq ft in its com­mer­cial pro­ject at BKC, Mum­bai for about ₹ 1,480 crore.

Sources said the of­fice space has been pur­chased by pharma com­pany Ab­bott In­dia. In a fil­ing to the BSE, Go­drej Prop­er­ties in­formed that “the com­pany has en­tered into a trans­ac­tion for selling 4,35,000 sq ft of saleable area at its com­mer­cial pro­ject Go­drej BKC in Ban­dra Kulra Com­plex ( BKC) Mum­bai to a sin­gle user for a to­tal con­sid­er­a­tion of ₹ 1,479 crore. This is the high­est ever value for any sin­gle end-user com­mer­cial real es­tate trans­ac­tion in In­dia”.

Go­drej BKC is a large high­end com­mer­cial real es­tate pro­ject with ap­prox­i­mately 1.3 mil­lion sq ft of saleable area. Go­drej Prop­er­ties had part­nered with Jet Air­ways to de­velop this pro­ject, which is ex­pected to be com­pleted and ready for oc­cu­pancy by mid-2016.

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