Developers expect demand to go up after RBI's rate cut

President of real estate association Credai, said home buyers would get at least a 50 basis point cut in home loan rates

The real estate sector expects demand to go up in the next couple of months after the Reserve Bank of India (RBI) announced a repo rate cut on Tuesday.

RBI reduced the short-term lending rate by 25 basis points (bps) to 6.50 per cent.

Rajeev Talwar, chief executive officer of DLF, the country’s largest realty firm, said, “In the interest of economic growth, RBI governor could have reduced the key policy rate by 50 bps and brought in lower borrowing cost. However, even a 25-bp cut is a good signal for pushing up housing demand.”

Getamber Anand, president of Confederation Of Real Estate Developers’ Associations Of India, said home buyers would get at least a 50-bp cut. The sector has been facing a fund crunch, with declining sales and high inventory for the past few years.

Many developers have gone back on commitments, which has led to a negative atmosphere. End users are holding on to buy property in the hope that prices will come down in the future.

Real estate consultants, too, hailed the cut and said it could boost demand and spur sales.

Anshuman Magazine, chairman and managing director of CBRE South Asia, said the cut would likely help lower borrowing costs and support growth further in 2016. “For the real estate sector, this is particularly critical. It is expected that this benefit will be completely transferred to borrowers, helping revive sales,” Magazine said.

According to JLL India chairman and country head Anuj Puri, real estate is an interest rate sensitive sector, and benefits from interest rate reductions. While developers are doing all they can to ensure homes become more affordable to a larger set of buyers, rate cuts will help banks attract genuine end-users home buyers, Puri said.

This will make home loans cheaper, said Gaurav Mittal, managing director, CHD Developer. “'The increase in liquidity along with improvement in the health of the economy will boost demand.'”