RBI rate cut: Realty developers heave a sigh of relief

Many property developers, struggling with falling home sales and high cost of borrowing, believe the cut would help bring back prospective buyers

Real estate developers were relieved at Thursday’s rate cut by the Reserve Bank of India (RBI).

Property developers across the country were struggling with falling home sales and high cost of borrowing. They believe the cut would help bring back prospective home buyers.

“It is a confidence booster for the home buyer and lead to more launches and completion of projects,” said Rajeev Talwar, executive director, DLF, the largest developer.  J C Sharma, vice-chairman of Bengaluru-based Sobha Ltd added  “The cut will the boost sentiment of home buyers in the sense that if they buy homes now, they will not pay higher rates. Developers’ liquidity pressure is also reduced.”

Enthused, the BSE Realty Index, which tracks stocks in the segment, went up about eight per cent, whereas the broader BSE Sensex went up 2.7 per cent. DLF, the country’s largest listed developer, went up 10.4 per cent and Prestige Estates by 11.9 per cent.

The Mumbai-based Dosti group launched a scheme on Thursday which offers an interest rate of 7.99 per cent for its home buyers who have taken loans at up to 10.5 per cent, in select projects. The developer will reimburse amount beyond 7.99 per cent for the first three years on booking of the apartment.  If rates go beyond 10.5 per cent, it would also reimburse the increased amount, it said.

However, chief  of Confederation of Real Estate Developers Association of India Lalit Kumar Jain termed the cut “not enough”. He wanted a withdrawal of all liquidity tightening measures and for easing the situation to make cost — for home buyers and developers cheaper. A reduction of two per cent in interest rates was needed in a short span, he said.