Houses in Bangalore are now less expensive, thanks to RBI cut

The Reserve Bank of India’s latest move to cut key policy rates has been welcomed with open arms by real estate players. The decision to reduce 25 basis point repo rate is being seen as a positive move, which will help ease pressure off the realty sector.

Shobhit Agarwal, managing director—capital markets, Jones Lang LaSalle, said the significant step taken by the RBI would boost real estate market sentiment and send out positive signals to global investors.

This move will result in a reduction in interest rates for developers and buyers alike, boosting housing demand. The cut in Cash Reserve Ratio is expected to release about Rs18,000 crore into the economy, allowing developers to borrow at competitive rates. The RBI’s move will also encourage Foreign Direct Investment in the sector.

“The rate cut by RBI is a much needed relief, especially for the realty sector,” said Ravindra Pai, managing director, Century Real Estate, adding, “We expect this to spur housing demand, but more importantly, it is a signal that the government and the central bank are committed towards the growth of the economy.”

“The cuts should provide great relief to real estate industry, reeling for quite some time now under the burden of huge debts... The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing,” said Pranab Datta, chairman, Knight Frank India.

Buyers too welcomed the move in the hope that developers will now reciprocate the policy cut by showing a reduction in property prices. “This is good news for buyers like me. Now mortgage rates will be more realistic and affordable for the middle classes. I am looking at some properties. It’s a good time to seal the deal,” said Jagdish Vaswani.

Real estate players have been facing the heat with high cost of construction coupled with lacklustre sales. As the industry had been lobbying for a rate cut for some time now, many builders felt that while 25 basis point cut was a positive step in the right direction, a larger reduction of 50 basis point would have had a more desirable impact on the sector.

However, Datta said he was optimistic that this would be the start of a series of cuts that will follow in the coming quarters.