Housing Demand to Improve with RBI’s Rate Cut

After leaving the repo rates unchanged for five times in a row, Reserve Bank of India Governor finally announced the much-awaited cut in the interest rates by 25 basis points. The cash reserve ratio (CRR), however, has been kept unchanged at 4 per cent. This drop in the rate is RBI’s first positive step of this year which has brought the interest rate down to 7.75 percent from 8 percent previously.

The real estate sector and public has largely welcomed this move, predicting a better demand for property this year.
It has been observed that whenever repo rate has been decreased, a strong wave of positive sentiments is spread across the public which helps in the creation of demand.

CommonFloor spoke to several realty experts on the same. Here is what they have to say.

Mahipal Singh Raghav, CMD, MMR Group

“A no rate change in December last year, consistently decreasing inflation and a much slower WPI and CPI recently provoked the RBI to reduce the rate. Although, a 25 basis point reduction won’t be much, but a series has begun here which will help in the generation of positive sentiments in the market. The effects will become visible in the market by third or fourth quarter this year, as customers will now be gearing up for investment.”

Kushagr Ansal, Director, Ansal Housing

“The economic recovery has begun and this move is a valid proof for the same. The effects will be quickly prominent for the commercial real estate category and leasing; as the housing demand will pick up by the end of this year.”

Rajesh Goyal, MD, RG Group

“If the present inflation rate and variations in inflationary expectations continue to occur, and fiscal developments are encouraging, a positive change in the monetary policy stance is likely to continue further as well. The market sentiments are on the move and this reduction in interest rate will surely result in creation of a pool of demand which will help this sector to perform better. The rate is likely fall down further if this economic condition persists.”

Prithvi Raj Kasana, MD, Morpheus Group

“The new government has spent a good amount of time at the centre now and is very well aware of the economic condition of the country. Last year December also, the interest rates were kept unchanged which proved to be a very welcoming move and this year already a down by 25 basis points is an impressive move. This will help in forming positive sentiments across the market which in turn will create higher demand for property in near future.”

Rupesh Gupta, Director, JM Housing

“Aided by dipping global oil prices, India’s wholesale price index for December went up just 0.11 percent year-on-year, after staying flat in November. Though this early move was a bit unpredicted, aggressive drops in rates were well anticipated over the course of the year to assist India’s economy out of a furrow, with growth rates stressed to get better from their fragile level in a quarter century. This move will now encourage investors and homebuyers to invest in the market, thereby reviving the sector from a severe drought.”

Deepak Kapoor, Director Gulshan Homz

“Developers and potential customers had this on their wish list and RBI has bought an early surprise for the public. The commercial property market will receive an immediate boost from this decision whereas; homebuyers will start increasing demand by late this year or first quarter next year. The inflation rate and fiscal deficit is getting under control which is a strong sign that RBI might even lower these rates in the upcoming 2-3 quarters.”

Rishi Mehra, Co-Founder, deal4loans

“RBI surprised the entire country by cutting repo rate by 25 basis points to 7.75 percent from 8 percent, ahead of its February 3 policy review. Repo is the rate at which RBI lends short term funds to banks. Banks are likely to cut rates for Home loans especially for new customers. Expect rates to come to single digit after a long period of time. We expect Banks to lower rates min. by .25% for new borrowers and this can go upto 0.50 % also. Rates will come in the range of 9.5-9.8% in coming few days for new Home loan borrowers. Customers are advised to take Home loans in floating rates and expect rates to come down in next 1-3 years. The reduction in rates will help real estate industry in ensuring sales start rising.”

Manoj Gaur, MD, Gaursons India ltd & President CREDAI Western UP

“We are happy by this move of RBI as this decision will bring a huge relief to the sector which was battling through tough times. The existing and upcoming buyers were eagerly waiting for this to happen since last year. Now with this move we expect the sales to improve as more potential customers will think of buying homes as the interest rates will be reduced. Now we have to wait and see that when will the banks and Home loan providers will reduce the interest rate. I think the year has started on a good note.”

Nayan A Shah, CEO & Managing Director, Mayfair Group

“It is a very positive sign that Dr. Raghuram Rajan has initiated, it is first rate Cut after 2013, and this will induce Banks to offer New Home loans at the rate below 10 % after a gap of around 4 Years which shall act as confidence building move for new home buyers. Also lending rates by Banks to Real Estate Developers. This shows the confidence in the Economy and that now inflationary pressure is within control and now on more growth can be seen. Overall, it is a very positive news for economy and growth oriented and confidence boosting and shall all the sectors across economy.”

Ajay Aggarwal, Managing Director, Microtek Infrastructures

“Various sectors of economy, including real estate, were eagerly awaiting this moment since last one year and there could not have been a better time to cut the repo rate. With this rate cut, it seems that the central bank has tamed the inflation rate and has enough room now to align policy rates with growth, in stead of earlier focus on inflation. Now, its turn of banks to pass the benefit to consumers. We hope to see lending rates coming down to 8 per cent for home loans in near future.”

Aman Nagar, Director, Paras Buildtech

“This repo rate cut, though insufficient, is a timely dose to revive and revitalize the consumer sentiments. With inflation effectively tamed and a series of reform measures being taken, the apex bank has pitched in as an ideal ally to the central government who is working hard to boost economy and manufacturing. The real estate sector, along with other areas of economy, now has a reason to cheer, not merely because of rate cut, but the underlying positive message sent out by Mr. Rajan and his team.”

Manish Agarwal, Managing Director, Satya Group & Secretary, CREDAI NCR

“The rate cut by 25 points, that too a fortnight before schedule meeting speaks for itself that RBI has enough leeway now to adjust policy rates as per growth needs. We look forward to continued spell of rate cuts this year.”