Repo rate cuts to boost realty mkt, reduce loan EMIS
RBI’S move will lead to higher availability of funds and aid the sector with increased liquidity. ASHOK MOHANANI, vice president, National Real Estate Development Council (West)
MUMBAI: The real estate sector has a reason to cheer as the Reserve Bank of India (RBI) on Thursday cut repo rates by 25 basis points (bps). The move may result in a reduction of interest rates on home loans along with lower equated monthly instalments (EMIS), and cheaper funds for builders.
Both builders and analysts predict the cut will have a positive impact on the housing market. “We expect sales and launches to gain momentum on the back of the improved economic scenario,” said Ramesh Nair, CEO and country head, JLL India.
Ashok Mohanani, vice president, National Real Estate Development Council (West) called it a boon for both buyers and builders. “The RBI’S move will lead to higher availability of funds and aid the sector with increased liquidity. Reduction in home loan interest rate will increase sales and induce fence-sitters to take the plunge,” he said.
Repo rate is the interest that banks pay RBI when they borrow money to meet short-term fund requirements. The RBI has reduced repo rate to 6.25% from 6.50%. However, most often, banks are reluctant to pass on the benefit thus defeating the pur- pose. “One will have to wait and watch if banks bring down lending rates. Should that happen, it will surely improve sales,” said Rahul Shah, CEO, Sumer Group.
Amidst the optimistic reactions, some industry voices are sceptical of any significant change in the realty sector.
“The real estate market does not depend only on marginally improved buyer sentiment as there are larger issues that hold the sector hostage right now. Liquidity issues post the NBFC [Non-banking Financial Companies] crisis are a bigger concern. This has seriously curtailed disbursements to developers. Moreover, repayment capabilities of many developers are also in question,” said Anuj Puri, chairman, Anarock Property Consultants.
In the past few years, the RBI imposed stringent lending conditions and hiked interest on home loans. In addition, builders quoted exorbitant realty prices, making houses beyond the reach of homebuyers.