Repo Rate Cut to boost Housing Demands
The decision of RBI to cut the repo rate would serve as a boon in reviving the housing segment. The real estate players insist that this will happen on condition that the banks hand over the benefits to the home buyers. Also, the lending rate’s benchmark has been lowered by the RBI by 25 points. It is now at a low of 5.75% which is almost 9 years low.
Satish Magar, the CREDAI President was clearly of the opinion that the rate cuts will augment the real estate scene in India. This is turn will have a very positive impact on the revival of the industry situation as a whole. Of course, he was of the expectation that all the benefits would be passed to the last mile which is to the borrower. Niranjan Hiranandani, the NAREDCO president was also of the opinion that this rate cut would provide the market with the much-needed momentum through much more needed to be dived into now is to address the liquidity issue.
The Tata Realty Managing Director Mr Sanjay Dutt said that the decision of RBI will lead to an increase in investments and this will serve to be very beneficial to real estate. Ramesh Nair had a point to make when he said that the rate cut will have a direct impact on real estate only if banks transmit back the same with a reduction in the lending rates. In fact, despite the reduction of 50 basic points in the repo rate in the last two reviews, what has still remained sticky is the interest rate of the mortgage. Anshuman Magazine who is the Chairman and CEO of CBRE said that decision was very much expected especially when growth is a major concern in the economy and low inflation persists. In fact, he welcomed this, saying that the effect would be positive. Anuj Puri, the Chairman of Anarock was very candid is stating that the nation can get positive signals only if banks do pass the benefits to the actual borrowers who are the homebuyers. He also added that it is the role of the apex banks to make sure that it materializes at the lowest level particularly so because of the little evidence of transmissions in the past.
Impact of the rate cut
After the policy has been announced, the rate stands at 5.75 % down further from 6%. Also, the reverse rate stands reduced at 5.5% from 5.75%. During the earlier policy reviews of Feb and Apr in this year, the RBI reduced the rates each time by 25 bps. In totality, the central bank in this year has reduced 75 bps. This is serving as good news for the borrowers because EMIs most likely will go down if we assume that banks will pass the benefit of rate cut. Rightly as Shantilal Das the RBI Governor said that it is expected going forward that there will not just be higher transmission but faster transmission too. The impact will be felt on loans which may be two-wheeler, individual consumer or consumer durable loans.
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