RBI rate cut to give real estate sector much needed stimulus

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RBI rate cut to give real estate sector much needed stimulus
Yagnesh Kansara - 05 April 2019

RBI on Thursday cut benchmark interest rate by 25 basis points (bps) for the second time in a row to bring interest rate to the lowest level in one year on softening inflation. The central bank, however, kept monetary policy stance at ‘neutral’.

The benchmark interest rate was cut by 25 bps to 6 per cent, a move that will result in lower cost of borrowing for the banks that are expected to transmit the same to individuals and corporates.

This move is also expected to bring some respite to home buyers. As the cost of borrowing of the housing finance companies (HFCs) will come down following the cut in the interest rates, the relief is expected to be passed on to the customers seeking home loans. Today’s rate cut, second in two months, along with the cut in the Goods and Services Tax (GST) announced last month for under construction properties in the real estate sector, the residential housing sector is going to see a big boost in the demand.

Vinay Sah, MD and CEO, LIC Housing Finance, said,

“With this rate cut the decks have been cleared for immediate take off for the realty sector and to bring back buoyancy. The rationalisaton of GST rates coupled with interest rate reduction is certain to lift buyer sentiments. This is the right time for home ownership.”

Ravindra Sudhalkar, ED and CEO, Reliance Home Finance, said,

“RBI’s decision to cut interest rates, second time in a row, is icing on the cake for the interest-rate sensitive sector. After government’s proactive steps to boost real estate markets by relaxing GST rates and offering tax sops in the interim budget, the rate cut will provide much needed impetus to the real estate sector, which is reeling under liquidity pressures. Setting up the committee for assessing housing finance securitisation market is a welcome move. Overall, today’s cut in rates will positively impact home loan interest rates by reducing EMIs, and in turn provide stimulus to demand-side in real estate. We also expect improvement in flow of bank credit to NBFCs.”

Shishir Baijal, Chairman and MD, Knight Frank India, said,

“We are delighted about the second consecutive rate cut announcement. This ushers an era of falling interest rate regime. We hope that the reduction in rate will be passed on by the banks to the home buyers. Lower interest rates, along with the recent reduction in GST rates for under construction properties, should provide the fillip to end user demand. The real estate sector has been looking forward to such stimuli to boost sales velocity.”

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