The RBI announced a repo rate cut for the fourth time in 2015. Will this turn out to be the much needed Diwali bonanza for the real estate sector?
In a surprise move, the Reserve Bank of India (RBI) cut the Repo Rates for the fourth time since January 2015. The 50 basis points (bps) cut has brought the Repo Rate to 6.75 per cent, the lowest in the last four years. The cut is being hailed by the real estate industry, for it holds the potential to boost investments, improve buyer sentiments and bring stability to the collapsing real estate market.
A total reduction of 125 basis points this calendar year is expected to give the much needed fillip to the realty market. Shishir Baijal, Chairman & Managing Director, Knight Frank India says, “At a time when the Indian real estate is reeling under tremendous pressure with both sales and new launches plummeting by 60-70 per cent, a rate cut was the need of the hour.”
The move will not only boost the home loan market but will also have a positive impact on the consumers and corporate. It will lead to a significant reduction in home loan rates, thereby reducing EMIs of home buyers. Corporate would benefit as interest outgo on existing loans would reduce and also enable them to raise equity. Deepak Kapoor, President, CREDAI Western UP says, “Since home loans are linked to base rates, the reduction in repo rate will benefit borrowers and reduce the EMI’s for home buyers. This is a great move by RBI and home buyers can reap rich benefits out of it.”
While several industry leaders welcomed the move, many of them also highlighted that banks need to pass on the real benefits to buyers so as to make the most of the rate cut. Rohit Poddar, Managing Director, Poddar Developers says, “The rate cut will be effective only if banks pass on the benefits to home loan seekers and also to developers constructing affordable housing. Both these rates have not come down in conjunction with the reduction in repo rates in the past and there is still a large gap between the same. This gap should not be used by banks to manage their non-performing assets (NPAs).”
Another major advantage of the rate cut, as eyed by the industry, is the boost given to the ‘Housing for All by 2022’ mission. Deepak Joshi, President and Chief Business Officer, Religare Affordable Housing Business says, “This rate cut, coupled with the interest subsidy scheme announced under the Pradhan Mantri Awas Yojna Mission - Housing for All by 2022, will see the affordability quotient further going up for the EWS (Economically Weaker Sections) and LIG (Low Income Group) consumer segments.”
The rate cut is expected to boost the manufacturing industries and businesses as well. Expressing delight, Getamber Anand, President, CREDAI National says, “Besides this reduction, 1 per cent Statutory Liquidity Ratio (SLR) during the year (0.25 per cent per quarter) is also a welcome move. This move is actually in coordination with the Prime Minister’s vision of making India an aggressive manufacturing destination.”
While the rate cut has brought immense cheer, it is also being rejoiced for its timeliness. Just ahead of Diwali, the move is expected to boost sales in the realty market and improve the overall market scenario across the country.
Here’s what a few other industry experts have to say about the Repo Rate cut –