Low-interest rate regime works well for home loan borrowers, say realtors

The Central Bank’s policy to keep its benchmark rates unchanged is expected to help the real estate sector which is reeling under the impact of the pandemic.

Reacting to RBI move to maintain its key interest rates, Ramani Sastri - Chairman & MD, Sterling Developers said, “It also goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market.”

“However, home loan interest rates have already gone down substantially in the recent past, and are presently at an all-time low. Homeb uyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset and many fence-sitters will take the plunge and make the purchase once the situation normalises,” he added.

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Developers saw a major revival in the residential sector recently despite the pandemic last year. “The second wave of the pandemic may have disrupted the recovery of the real estate sector to some extent but we expect a strong revival in the second half of this fiscal and the long-term outlook remains healthy. As the states are in the process of easing lockdowns, the real estate industry would need all-around support and quick assistance to pick up their business thread again,” said Sastri.

Positive for borrowers

“This is the sixth time in a row that the RBI has kept the benchmark rates unchanged, in clear response to the exigencies of the Covid-19 pandemic uncertainties,” Anuj Puri, Chairman – Anarock Property Consultants.

“It is certainly positive for home loan borrowers as the floating retail loan rates (which are directly linked to external benchmark repo rates) has been at the lowest level of the last two decades. The continuation of this low-interest rate regime works very well for all borrowers as the environment of high affordability is likely to continue for some more time,” he added.

Had it not been for the pandemic, then the RBI would have definitely taken a different stance for the benchmark rates today, he said. Considering the rate at which inflation is rising presently in the country, the RBI would have sought to increase the key rates.

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Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE said, “RBI’s maintenance of an accommodative stance will help sustain homebuyer sentiments which were strengthening pre-second wave. Despite the present disruption, real estate has been one of the most resilient industries even amidst the pandemic and has been showing signs of recovery over the last few quarters. With the repo rate and reverse repo rate being maintained at a status quo of 4 per cent and 3.35 per cent respectively, banks and NBFCs will continue to render loans at reduced rates to homebuyers, thus supporting demand in the realty sector.”

Lockdown impact

Dr Samantak Das, Chief Economist and Head Research & REIS, JLL said, “Recovery in residential real estate that was witnessed during January-March 2021 quarter was impacted by the lockdowns introduced to control the pandemic resurgence. Though the competitive mortgage rates are expected to provide long term support for sustained growth of real estate, overall economic recovery leading to jobs, and income growth will be contributing factors for housing demand.”

He added, “We believe that low home loan interest rates, realistic property pricing, the focus of developers on project completion and economic recovery will take the residential sales in all likelihood to better levels than 2020.”

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Shishir Baijal, CMD, Knight Frank India said, “We welcome the RBI’s move to maintain status quo on key policy interest rates. Besides monetary policy intervention, as we come out of graded regional lockdowns and further resume economic activities, there is a greater need to provide adequate fiscal support to jump start consumption demand. Demand stimulant measures like credit subsidy or tax waivers even for a limited period can play a transformative role until we reach the pre-Covid normalcy thresholds.”

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