Realty Play­ers Ex­pect Rate Cut to Help Beat Slow­down Blues

De­vel­op­ers feel lower EMIs on hous­ing loans will bring buy­ers back to the mar­ket

The Economic Times - - Companies - Kailash.Babar@ times­

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.


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