Real Estate

Rate cut to give a boost to realty sector

Bengaluru | Updated on February 07, 2019 Published on February 07, 2019

Representative image

Home loan interest rates increased by as much as 5-7 per cent in the last one year

The real estate sector welcomed the decision of the Reserve Bank of India (RBI) to cut the repo rate cut on Thursday.

“RBI’s decision to slash the repo rate by 25 basis point to 6.25 per cent is a welcome and unexpectedly positive move, given the sops that the recent expansionary budget gave to farmers at an additional cost of Rs 75,000 crore per annum,” Anuj Puri, Chairman – Anarock Property Consultants.

He further said, “It was also overdue, as this has been the first cut in a long time. It definitely augurs well for the real estate sector which also received a budget bonanza in the previous week.”

Home loan interest rates increased by as much as 5-7 per cent in the last one year because the RBI hiked its repo rates by 50 basis points over the same period. In other words, home loans had become a more expensive proposition.

“However, the real estate market does not depend only on marginally improved buyer sentiment - there are larger issues that hold the sector hostage right now. The liquidity issues post the non-banking financial companies (NBFCs) crisis are a bigger concern. NBFCs and HFCs have seriously curtailed disbursements to developers. Moreover, the repayment capabilities of many developers are also in question,” Anuj Puri said.

Furthermore, though the account deficit (CAD) widened to 2.9 per cent in December, inflation targets are more or less within control and the Gross Domestic Product (GDP) is estimated to grow at a very healthy 7.5 per cent in the new fiscal. Going by these indicators, the Indian economy is looking at a good financial year ahead – always assuming that a stable government is voted to power in the upcoming general elections.

Commenting on rate cut, Ramesh Nair, Chief Executive Officer (CEO) & Country Head, JLL India said, “The Monetary Policy Committee’s stance is quite positive from the perspective of providing the necessary growth stimulus and reviving investments.”

“2019 has started on a positive note for Indian real estate with a welcome budget that has given a slew of incentives for home buyers and developers with adequate focus on affordable housing. The timing of the reduction in policy rate could not have been better. Not only will this improve the overall sentiment, but will also boost the housing market that is already showing signs of recovery,” he added.

“With residential sales and new launches on an upward trend in 2018, home buyers are now actively considering a serious buying decision. Overall, this is going to have a positive impact on the housing market and we expect sales and launches to gain further momentum on the back of improved economic scenario,” he explained

Aashish Agarwal, Head-Consulting Services, Colliers International India said, “After a sentiment-boosting budget, the cut in the Repo rate is yet another positive step for the real estate sector. The softening in stance from calibrated tightening to neutral reinforces the message that Government wants to increase private investment and consumption. However, the impact of this hinges on the willingness of banks to pass on the benefit to consumers in a tight liquidity environment.”

Published on February 07, 2019

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