MPC meet: Home loans to become cheaper; RBI rate cut to give a fillip to housing sales

RBI's decision to slash the repo rate by 25 basis point to 6.25 per cent will give a breather to the battered real estate sector as fence-sitting buyers, who have been waiting for a rate cut, may take the plunge now. "As a result of this reduction, we hope that banks will pass on the benefits of the revised rates to the end consumer of loans, thereby making it easier for them to make their purchase decision. For a sector which has been suffering from poor end user demand for some time now, this is a step in the right direction," Shishir Baijal, Chairman & Managing Director, Knight Frank said.

"It is a welcome and unexpectedly positive move. Rate cuts give a substantial push to property buyer sentiments, and it was certainly high time for a cut," Anuj Puri, Chairman, Anarock Property Consultants said. Home loan interest rates have risen by as much as 5 to 7 per cent in the last one year because the RBI hiked its repo rates by 50 basis points over the period. Home loans turning expensive was another factor adversely affecting housing sales, which have been growing only at about 5 to 6 per cent in the last few years. "The rate cut will spur investment and boost demand. Coupled with the budget stimulus for the economy, and the real estate sector in particular, it will impact consumer sentiments positively," Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East & Africa, CBRE, said.

Rohit Poddar, Managing Director Poddar Housing and Development, said the reduction in the repo rate was expected given lower inflation numbers. "It will stimulate growth in an election year. The cut has changed the current calibrated tightening to a neutral stance," he said. Parth Mehta, Managing Director, Paradigm Realty said the cut was in line with expectations as there is a serious liquidity crunch faced by banks and NBFCs resulting in the dampening of overall business environment. "Since inflation is in check, the cut is a logical move by RBI to induce required liquidity," he said.

Puri, however, said the real estate market does not depend only on marginally improved buyer sentiment and there remain larger issues that hold the sector hostage right now. The liquidity issues post the NBFC 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," he noted.

Also read: MPC Meet: RBI cuts repo rate by 25 basis points, changes stance to 'neutral'