No Change in Repo Rate by RBI and its Impact on Real Estate: ANAROCK Property Consultants
Real estate sector was expecting 25 basis points cut in repo-rate by RBI but as the rates have been left at the previous level, the event won't have much of impact on real estate sector. In major cities, real estate inventory has been dropping, which is a good sign and prices could firm up in coming quarters. However, if the home loans become cheaper, real estate sector can benefit in a major way. Comments on RBI policy by Anuj Puri, Chairman – ANAROCK Property Consultants follow.....
Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15% while maintaining an accommodative stance. From a real estate point of view, rate cuts are obviously always welcome as they help improve overall sentiment. Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates. The expected rate cut of 25 bps would have caused home loan values to fall below 8% for first time ever
However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories. The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales. In fact, back in 2014, even when the home loan rates were high in two digits at 10.3%, housing sales remained at peak levels.
In the present scenario, only the combined effect of lower interest rates coupled with other measures such as a cut in personal taxes – reportedly being considered by the FM – can actually stimulate residential sales out of their current lethargy.