Monday, 19 January 2015

A cut in repo rate brings cheer to realty sector

A cut in reverse repo rate by 25 basis points by the Reserve Bank of India on Thursday has brought in hope for the real estate sector. In this weak economic scenario, where real estate in particular is desperate to pick up and has a huge target to chase to meet the mission Housing For All by 2022.

Citing easing pressure of inflation, RBI Governor Raghuram Rajan explained several domestic factors behind the decision to announce sudden rate cuts. “These factors have significantly reduced the momentum of inflation, compensating for the widely anticipated ending of favorable base effects,” Rajan said.

How will the move impact Indian real estate, let’s find out what the industry says.

“It is a “good beginning, in fact, a roll back of all liquidity tightening measures and easing the situation to make cost of funding for both home buyers and developers cheaper than what it is today,” says Lalit Kumar Jain, chairman, CREDAI.

Though it is a small cut, developers say that it is a good sentiment booster and will be a deciding factor to determine the trend for the market in the coming months. 

“It shows the confidence of RBI in fiscal consolidation of the country. It will boost the situation of recent sluggishness in investment activity and domestic sentiments because interest rate is an important component in driving the economy,” says Nitesh Kumar COO TDI Infracorp Ltd.

“With the inflow of liquidity, it will help developers to expedite their projects which were otherwise facing fund crunch. Home buyers’ dreams of owning a home would also get a boost as we expect an accelerated purchase cycle,” says Rohit Raj Modi, president, CREDAI NCR.

However, the Industry feels that RBI has a room to give more cheer to the consumers and real estate sector expects more rate cuts in basic point, ranging from 0.75 to 1 per cent in upcoming time. Consequently, it is now expected that the banks will further cut down interest on the home loans to give a boost to the buying spree which has been witnessing sluggish sales across the country.

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