While most real estate developers have lauded the surprise repo rate cut by 25 basis points as a welcome step that will lead to increased sales this festive season, realty experts caution that it will only lead to marginal improvement in homebuyer sentiment.Implementation of Real Estate (Regulation and Development) Act, 2016, is mandatory to instil confidence among end-users to come forward to buy property. Banks too must pass on the benefit to home loan borrowers, they say. Most experts are, however, positive, that banks will pass on the benefits of the rate cuts to buyers, making home loan EMIs cheaper.
After the first round of rate cut in April this year, the Apex bank has for the second time decided to slash rates after no change in the June and August policies citing falling inflation as the main reason for the move.
“Unless RERA and other pro-consumer policies come into play, buyers will continue to be wary. Therefore, we can expect only a marginal improvement in sentiment on the back of this rate cut. At this point, there is also no ready answer to the question of what benefits of the rate cuts will banks actually pass on to borrowers. Cheaper loans for homebuyers will prompt a renewed interest in residential property purchase from end users and investors,” says Anuj Puri, chairman and country head, JLL India:
Shishir Baijal, chairman and managing director of international property consultants Knight Frank India is of the view that a 25 bps cut in policy rate is encouraging and signals well for the real estate sector. “We do hope that the transmission of the rate cut is efficient and banks pass on the benefit to the customers in similar magnitude,” he says.
Builders are nevertheless upbeat about sales this festive season following the cut in repo rates and say they could not have expected better news. Manoj Gaur, president Credai-NCR and MD, Gaursons India Ltd, says that “at this point of time when the sentiments are positive and people are eager to buy and invest in property, banks will now cut interest rates. This will allow buyers to get their EMIs reduced. The demand will witness a better rise in the current festive season which will allow the inventory to clear in major metro cities.”
Vineet Relia, managing director, SARE Homes, says that this is a welcome step by the government and “will infuse confidence in the system, thereby providing a boost to not only the real estate sector, but the overall economy ahead of the festive season as well. It is imperative for banks to reduce interest rates and the combination of lower interest rates alongside the progressive measures taken by the government towards reforms has the potential to reinvigorate demand in all segments of the economy.”
Rajeev Talwar, CEO, DLF Ltd, says that the 25 basis point rate cut has come at the right time. “We now earnestly hope that the banks will quickly pass the benefit of this repo “rate cut to their customers by bringing down their lending rates, given the easy liquidity conditions and the recent downward adjustment in small saving rates. A cut in home loan rates will surely help buyers firm up their decision to buy a house in this festival season and give fillip to sales.”