After Repo Rate cuts by RBI, Realtors want banks to cut home loan rates

Q: It is expected that the reduction in the banks' lending rate will lower the borrowing cost of builders and comfort the pressure on interest charges.

Nishant Bhat, Mumbai

30th September 2015

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Replies (5)

A real estate agent thinks 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 instantly work for an instrument and set targets for banks to make sure increased lending for affordable housing projects and cheaper home loans.

Sandeep Mhatre, Mumbai

2nd October 2015

Comment

Yes Ramesk,
The effect that falling interest rates have on EMIs is not huge. A home loan of Rs 50 lakh, at an interest rate of 10% and a tenure of 20 years, leads to an EMI of Rs 48250. At 9.5%, assuming the fifty basis point repo rate cut is passed on to the borrower, the EMI works out to around Rs 46605, which is around Rs 1645 lower.

Shenoy, Ghaziabad

1st October 2015

Comment

As per the sources, the total debt level of the top 15 listed realty developers stood at over Rs 54567 crore as on FY15 end, against Rs 50400 crore during 2012-13 end. Developers are also expecting the comforting of cost loading to result in better prices for consumers.

Amit Raj, Delhi-NCR

30th September 2015

Comment

If think that by lowering the interest rate people will flock to buy houses. Then you are thinking wrong. According to me Raghuram Ranjan should have instead pressurized the builders to cut their rates by 40 to 50%. By reducing home loans interest rate, if you are thinking that common man is going to buy it. Then it is your wrong perception.

Jay, Delhi-NCR

30th September 2015

If real estate companies are still not managing to sell enough homes and have managed to accumulate a huge amount of inventory of unsold homes, high interest rates are not responsible for it in anyway. The home loan lending by banks hasn't slowed down one bit and continues to grow at a good pace.

Ramesk Polekar, Mumbai

30th September 2015

If we see the improvement in operational performance of developers, we need more of price correction than interest rate reduction. Realty developers' debt levels have been rising in the backdrop of low sales for some time now and a saving of 40-50 bps in interest cost would be significant.

Shenoy, Ghaziabad

30th September 2015

Comment

Hello Rina,
The real estate developers have refused to look at this basic fact and continue to price homes at high rates. The new launches data express that happened in Mumbai between April and June 2015, only 3.2% of the homes being built were priced between Rs 31-65 lakh. There were none under Rs 30 lakh.

69% of the unsold homes in Mumbai are priced more than Rs 1 crore. This when the weighted average price of a home in the city is around Rs 1.3 crore.

Sandeep Mhatre, Mumbai

30th September 2015

Real estate developers have welcomed the RBI's decision to cut repo rate by 50 bps, but have also requested to banks to pass on the benefits to consumers by lowering the home loan rates.

Jay, Delhi-NCR

30th September 2015

Comment

@Jay....
This move will help both the parties. The reduction in the banks' lending rate is also expected to lower the borrowing cost of builders and ease the pressure on interest charges. The reduction will have a positive impact on developers' borrowing cost.

Ramesk Polekar, Mumbai

30th September 2015

There are 3 factors which are not existing today. 1) incomes are not rising, 2) supply is too much and 3) it is not access to credit. Because of these factors people are not buying the properties. Real estate is commodity and does not have investor interest.

I can add more facts like emergence of VAT, Service Tax etc which makes investor entry costly. Further, regulation is more strict which comes to pre-sales and best of all "credibility" of realtors is at all time low.

khushisha, Mumbai

3rd October 2015