Real estate sector hopes to get rate cut benefits

Tags: News
Developers says banks should pass on the benefits of reduction in repo rate cut to consumers and bring down housing loan interest rates so that the real estate sector which has been struggling for the last couple of years witnesses revival in demand.

Developers said that the last rate cut was not passed on to consumers by banks and this time banks must take the initiative to bring down interest rates of housing loans. RBI unexpectedly lowered its policy rate for the second time this year on Wednesday, as inflation cools.

After cutting the policy repo rate by 25 basis points to 7.50 percent, Rajan issued a statement citing his reasons for making the move a month before a scheduled policy review. The repo rate is the rate at which the central bank lends to commercial banks while the cash reserve ratio is amount of their net liabilities they need to keep in cash.

"Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action," he said.

Rajeev Talwar, executive director, DLF, said, “This is the second time repo rate has been reduced but banks have not yet passed the benefits of the first rate cut. However, if the banks brings down interest rates on housing loans then the sector is expected revive in the next two-three quarters.”

Talwar said already things are improving for the sector and further moderation in housing loan interest rates will trigger demand.

Santosh Shetty, chairman and managing director, Expat Group, also said, “The banks were expected to lower home loan interest rates in January with the first repo rate cut but most banks failed to pass on the benefits to the consumers. However, this time the outlook is especially positive, with the SBI promising to take the appropriate call in response to the RBI’s move. This could lead to a domino effect with the other banks. In a way this will make up for the lack of focus on home loans in the budget 2015 and will ease the burden on potential mid-income home buyers slightly. With the likely decrease in home loan interest rates coupled with the union government’s push for affordable housing, home buyers should be scouting for properties to invest in, particularly on the high growth areas outside major cities.”

The RBI embarked on an easing cycle on January 15 with a quarter percentage point reduction. The benefits have still to pass through to borrowers, however, as commercial banks have been hesitant about lowering their lending rates.

Pankaj Srivasatva, COO, Maitreya Realtors, said, “The cut in the repo rate by 25 basis points is a good start for the financial year. Further we expect the cut that makes home loans affordable for pubic which will boost their sentiments and revive economic growth for the sector.”

Describing the RBI’s announcement of repo rate cut by 25 basis points as “an excellent move”, realtors apex body Confederation of Real Estate Developers' Association of India, chairman, Lalit Kumar Jain, said, this should help the industry and business in general to tackle liquidity crisis. In fact, there is further scope to ease the credit policy, said Jain, who is also the chairman and managing director of Kumar Urban development.

Jain said that several projects have been delayed due to financial crunch; hence rollover, restructuring should be permitted in current scenario. It is about time that the banks opened their doors to help the key sectors tide over the crisis, he added.


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