Realtors Welcome RBI's Repo Rate Cut, Urge Lower Rates for Home Loans

Published: 07th March 2015 06:04 AM  |   Last Updated: 07th March 2015 06:04 AM   |  A+A-

HYDERABAD: The recent move by the Reserve Bank of India to reduce the repo rates by 25 basis points (BPs) to 7.5 per cent, the second rate cut within a span of 50 days, has cheered the city’s real estate builders and developers who feel that the move may translate into lower rates for home loans which will ease the burden on buyers. Repo rate is the interest rate at which RBI lends commercial banks in case of shortage of funds.

Realtors feel that this is a favourable shift in RBI’s stance in view of the controlled inflation projection and a favourable business environment, and augurs well for development of the sector in the city.

“Considering the overall economic situation and challenges being faced by the industry, we welcome the second reduction in repo rates from January in the hope that it results in lower rates for home loans, which will ease the burden on the home buyers and create a positive traction in demand for housing. However, there is a need for larger cuts in the interest rates to facilitate reduction in EMIs and increasing the eligibility of the common man to buy a house,” says C Shekar Reddy,  president of the Confederation of Real Estate Developers’ Association of India (CREDAI).

Realtors opine that not much has been done by banks towards increasing lending in the affordable housing segment and feel that the government and the RBI must immediately work for a mechanism and set targets for banks to ensure increased lending for affordable housing projects and cheaper home loans.

“The critical issue that is hampering the growth of the affordable housing segment is the prevailing high interest rates that make housing unaffordable to the middle and lower middle classes. It is here that we demand the interest subvention to affordable housing by the private sector for the middle and the lower middle classes to create momentum and achieve the mission ‘Housing for all by 2022’,” Reddy notes.   

Developers across the city feel that the move comes as a welcome change after a disappointing budget. “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 State Bank of India promising to take the appropriate call in response to RBI’s move. This could lead to a domino effect and other banks following suit.

In a way this will make up for the lack of focus on home loans in the Union Budget 2015 and will ease the burden on potential mid-income home buyers slightly. With the likely decrease in home loan interest rates and the Union government’s push for affordable housing, buyers should be scouting for properties to invest in, particularly in the high growth areas outside major cities,” observes Santosh Shetty, chairman and managing director of Expat Group.

Agreeing, Sanjay Dutt, executive managing director (South Asia) of Cushman & Wakefield, says, “Even while the magnitude of the rate cut is 25 BPs, the move will build the confidence of developers and buyers alike that there are more rate cuts in the offing, provided of course, that inflation maintains its downward trend or remains stable. The sector would now like to see that banks actually pass on the benefits of the rate cuts initiated by RBI this year to the customers to spur housing sales and speed up the overall economic recovery in the country.”

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