Realty sector players say 25 basis point cut in repo rate is not enough for the revival in Mumbai and rest of India. They admit that a rate cut sends out a positive signal but insisted that the central bank will have to soon address the liquidity crisis largely due to the high borrowing cost. Further, they want that RBI should direct the banks to pass on the benefits to buyers.
National Real Estate Development Council (NAREDCO) president Niranjan Hiranandani said a 25 basis point rate cut would provide momentum to the market but more needs to be done to address the liquidity issue. "Liquidity is very low as the borrowing cost is still very high. This liquidity crisis is taking a toll on the health of the companies and further inflicting financial damage thereby affecting the credit rating of companies and industries. It is not about 'Dil Maange More', but more about the need of the hour," he noted. RBI's decision comes at a time when the top 7 cities including Mumbai and Delhi saw a cumulative drop of 16% in overall unsold housing stock in the last two years.
ANAROCK Property Consultants chairman Anuj Puri said that the rate cut will only have any really significant impact on the housing market if and when banks reduce their lending rates to homebuyers. ''In the current scenario bereft with rising NPAs and the ongoing NBFC crisis, things look quite bleak at the moment. The reason why most banks are not really able to pass on the benefits of RBI's rate cuts is that their deposit rates are still very high. This ultimately makes reducing interest rates to borrowers unfeasible,'' he noted.
JLL India CEO & country head Ramesh Nair shared Puri's view saying that the repo rate cut is likely to have a direct impact on the real estate sector, provided the banks, in turn, transmit the same by a corresponding reduction in 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 buyers. However, with regulations reinstating homebuyers' confidence in the segment, markets witnessed recovery in sales in 2018. Further, in the January-March quarter of 2019, sales grew by 28% as compared to the corresponding quarter in 2018,'' he added.
momentum to the market
According to NAREDCO president, a 25 basis point rate cut would provide momentum to the market but more needs to be done to address liquidity issue
The repo rate cut is likely to have a direct impact on the real estate sector, provided the banks pass down the same to the buyers
