Realty Players Expect Rate Cut to Help Beat Slowdown Blues
Developers feel lower EMIs on housing loans will bring buyers back to the market
Mumbai: Realty developers have welcomed the Reserve Bank of India’s (RBI) decision to reduce repo rate by 25 bps, a move that may help ease home loan rates. The decision, developers hope, would translate into lower EMIs on housing loans, which eventually might aid the sluggish property market.
“The RBI move has the potential to reduce the overall burden for home buyers, and can eventually boost real estate sales by enhancing positive sentiment for home seekers. We are confident that banks will pass on the benefit of this cut to home loan borrowers as NPAs in this segment are the lowest at around1% in India,” Niranjan Hiranandani, CMD, Hiranandani Group, said.
Since January 2015, RBI had cut key rate cumulatively by 150 basis points, including Tuesday’s rate cut. In the September 2015 review, the key rates were cut by 50 basis points, but this has not benefitted retail borrowers in equal measure. Real estate experts hope that banks would pass on the benefits to borrowers this time.
“A 25 bps cut in policy rate is extremely encouraging and will definitely provide a fillip to the real estate industry that’s currently facing a tough time. We hope that banks will pass on the benefit to the consumers,” said Shishir Baijal, CMD, Knight Frank (India).
Developers say that the cut may improve homebuyers’ affordability, and the market may spring back to life if home loan rates, which are currently around 9.5%, move below 9%.
“Any rate cut, given the current housing sales scenario, will help in pushing sales. However, home loan rates have to see a substantial reduction to expect a clear revival in residential sales. Developers have been shrinking sizes of apartments to make them affordable for more homebuyers, but a resurrection in the market can be expected only after home loan rates go below 9%,” said Vipul Shah, MD, Parinee Group.
According to experts, a direct 25 basis point reduction in home loan rate would offer .₹ 800 savings per month for .₹ 50-lakh loan with 9.5% interest rate and 20 years’ term.
Home sales in top seven property markets have been sluggish for the past three years. While there have been few markets like Pune and Bengaluru that have registered a small uptick in sales, the improvement across markets isn’t much to talk about.