RBI repo rate cut set to provide major fillip to real estate
 
RBI repo rate cut set to provide major fillip to real estate-9amstories
Image courtesy: http://www.moneycontrol.com/

RBI repo rate cut set to provide major fillip to real estate

Real estate and banking experts anticipate the home loan interest rate to hover around 8 percent once the banks decide to pass on the benefit to consumers.

In the backdrop of major regulatory reforms such as RERA and GST being implemented, Reserve Bank of India’s decision to cut repo rate by 25 basis points after a gap of almost nine months is likely to put the residential real estate market back on the growth trajectory and give a boost to affordable housing.

Real estate and banking experts anticipate the home loan interest rate to hover around 8 percent once the banks decide to pass on the benefit to consumers. The RBI rate cut announcement does not mean an immediate reduction in home buyers' equated monthly installments (EMI) as banks may take time to pass on the benefit to consumers. It also does not mean that home buyers will make a beeline to purchase homes from day one of the announcement.

The RBI Governor-headed Monetary Policy Committee (MPC) noted that there was an urgent need to reinvigorate private investments, clear infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana (PMAY).

“There is an urgent need to reinvigorate private investment, remove infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana for housing needs of all. This hinges on speedier clearance of projects by the states. On their part, the government and the Reserve Bank are working in close coordination to resolve large stressed corporate borrowers and recapitalise public sector banks within the fiscal deficit target. These efforts should help restart credit flows to the productive sectors as demand revives,” the third bi-monthly monetary policy statement for 2017-2018 noted.

The Monetary Policy Committee also highlighted how longer approval process under RERA is likely to delay launches and have an impact on growth of construction and ancillary activities.

“With the real estate sector coming under the regulatory umbrella, new project launches may involve extended gestations and, along with the anticipated consolidation in the sector, may restrain growth, with spillovers to construction and ancillary activities,” it noted.

Samantak Das - Chief Economist & National Director - Research, Knight Frank India: “With real estate prices remaining stagnant, interest rate showing a declining trend, tamed inflation, RERA in place, the confidence of home buyers will be back in the market. This is an opportune time as the festival season is just over a month away. The move to cut rates is bound to increase sales traction. There may not be a full-fledged revival of the real estate market but it certainly heralds an initiation of a growth trajectory in the residential space.”

Interest rate for home loans is likely to hover around 8 percent going forward once banks decide to pass on the benefit to the consumers. Homebuyers will also be able to avail of the PMAY scheme benefit over and above this rate cut, he said.

“The RBI's decision to cut the repo rate by 25 bps to 6 percent - a 7-year -low – is in line with industry expectations amidst low inflationary trends. We believe that this cut will result in making housing loans cheaper and help credit offtake in the housing sector. In the long run, this will provide further impetus to the segment and help in rejuvenating housing sales. Coupled with the other structural reforms introduced in the recent past, this announcement will further enhance activity levels in the real estate and construction sector,” Anshuman Magazine, Chairman, India and South East Asia, CBRE.

“The RBI has taken a positive step by offering 25 bps reduction in the repo rate which will act as a catalyst for investment revival, going hand in hand with favorable government measures like RERA and GST which will boost housing demand benefiting both developers and buyers. This will also impact the economy positively and give a much needed credit flow,” Vineet Relia, Managing Director, SARE Homes.

“We anticipate that the rate cut announced today by .25 BPS, coupled with commensurate benefits for borrowers, will impact home loan rate positively and enhance the consumer sentiment. With the market view calling for measures that encourage investment to boost growth numbers, and with the installation of a regulatory regime for the real estate sector, we expect this move to keep the stimulus on for potential homebuyers to invest, and to benefit current borrowers,” said Brotin Banerjee, MD & CEO Tata Housing Development Company Limited.

“A repo rate cut would have a positive impact on the overall economy and the realty sector since it leads to lower borrowing costs for home buyers. With low construction costs borne by developers post GST, a regulated market with the introduction of RERA, and a repo rate cut making the home loan market even cheaper, going ahead the real estate sector is ripe for a positive comeback,” says Samir Jasuja, CEO & Founder, Propequity.

“It is also relevant to note that there may not be another rate cut during the remainder of the year as the RBI will continue to look at inflation headwinds. This stance of the MPC will also be important for global investors as the current stable interest rate regime in India will allow for better investor returns in India for global investors. This should keep investors reasonably attracted towards India,” says Anuj Puri, Chairman – Anarock Property Consultants.

By: Vandana Ramnani
Courtesy:http://www.moneycontrol.com/ published on Aug 02, 2017

 

 


 
 

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