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RBI Stumps Expectations, Real Estate No Better or Worse

Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15% while maintaining an accommodative stance, said Anuj Puri, Chairman – ANAROCK Property Consultants.

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, he said.

However, Puri said,  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.

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani, said: A repo rate cut would have been welcome as it would have lifted industry sentiments. The growth trajectory of the real estate sector will depend on the successive transmission of rate cuts to the end consumers and translate into lower EMIs. Lower interest rates will also bring back fence-sitters who were waiting for the perfect opportunity to invest in their dream home.

However, it has been observed that, despite the reduction in repo rates by the RBI in the previous reviews, it did not have any significant impact on lending rates. Going forward, it is imperative for banks to reduce the lending rates and ensure that the home loan borrowers reap the benefits of this move, he said.

Real estate sector is one of the few sectors which have the potential to kick start a sluggish economy. Going forward, we request the government to take necessary steps to create housing demand across segments. We look forward to the Government’s constant support to help bring the real estate industry back to global forefront. We hope to see a positive upturn in the real sector soon, Hiranandani said.