Real estate welcomes rate cut by RBI

The real estate welcomes rate cut by RBI, ambivalent about the transmission of benefits by banks

RBI’s recent rate cut of 0.25 percent was appreciated by struggling real estate companies. The companies also demanded that the banks must pass the benefits directly to the consumers.

The rate cut is aimed to lower down the EMIs for consumers and finance cost for builders. Banks reluctance to transfer the benefits have been a serious concern in recent months. Now it’s a big task for RBI to transmit rate cuts on the part of the banks.

The governor of the Central Bank – Shaktikand Das, during a press conference said that transmission of cumulative reduction of 50 bps via repo rate in February and April this year was amongst the 21 points to the Weighted Average Lending Rate (WALR) on fresh loans.

Anuj Puri, Chairman-ANAROCK Property Consultant said that it is the responsibility of RBI to ensure that these changes should happen at the ground level as there are little evidences for such transmissions in recent past.

Ramesh Nair, CEO & Country Head, JLL India appreciated the repo rate cut by RBI and stated that it might have a direct impact on the real estate sector, provided the banks transmit the same by reducing the lending rates.

“It has been observed that, despite 50 bps reduction in repo rates by RBI in the previous two reviews, the mortgage interest rate has remained sticky. As a result, the required benefit of the rate cut has not reached the home buyers,” said Nair

The real state sector has considerably high potential in creating jobs and the government has taken various measures to revive it. With the provisions of the affordable housing segment in the last budget to the bringing down of GST rates.

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd. Claimed that there is only a slight reform in liquidity issues in real estate sector after two back to back rate cuts, but he believes that the third one will definitely undertake the liquidity shortfall in the sector. He expects such more steps by RBI on the liquidity matter.

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