Repo rate cut to boost housing sales: Realty experts

Repo rate cut to boost housing sales: Realty experts

The Reserve Bank of India’s (RBI’s) decision to slash repo rate by 25 basis points has come as a respite to the real estate sector. The move is likely to ease the financial burden on potential homebuyers and developers by bringing down home loan Equated Monthly Installments (EMIs) and boost housing sales in the sector.

For the third consecutive time, the Reserve Bank of India (RBI) has reduced the short-term lending rate (repo rate) by 25 basis points, bringing it to 5.75 percent. The decision was taken unanimously by RBI’s six-member Monetary Policy Committee (MPC), led by Governor Shaktikanta Das. It also changed its policy stance from 'neutral' to 'accommodative'. Amidst increasing global uncertainty and slowing economic growth, the apex bank, in its last two policy reviews had slashed the repo rate by 25 basis points each.

The MPC’s decision is in line with the economists’ expectations since a reduction in repo rate and change of policy stance are vital to boost the sagging economic growth. A reduction of 75 basis points since February 2019 spells good news for the housing sector, which has recently started showing signs of revival. The alteration in repo rate would translate into cheaper home loans for potential homebuyers and developers; thus, eventually helping in stimulating investments in the sector.

Hailing the RBI’s decision, Ramesh Nair, CEO and Country Head, JLL India, avers, “As the residential sector is already at inflexion point signalling a sustainable recovery, this decision will support the trend. The repo rate cut is likely to have a direct impact on the real estate sector, provided the banks, in turn, transmit the same by a corresponding reduction in lending rates.”

The affordable housing segment is expected to be one of the major beneficiaries of this decision. Amit Ruparel, Managing Director, Ruparel Realty, opines “The tax sops given for affordable housing in the interim budget along with cheaper home loans due to repo rate cut create a perfect setting for real estate to gain its momentum again. While project launches were a trend in the past year, real estate faced dull buy-ins mainly due to cash crunch. But now, with the real estate industry and the government moving on the same lines and pace, we expect a big bounce-back of the realty sector.”