Four ways in which Repo Rate cut would impact real estate

With the RBI cutting Repo Rates three times in 2015, the industry is hopeful of improving real estate scenario in coming times. 

Frequent rate cuts by the Reserve Bank of India (RBI) have instilled lot of confidence amongst all stakeholders of a better market scenario. While the sellers hope for increased interest from homebuyers and thus, better sales; the buyers are looking forward to reduced property prices. The recent 25 basis point rate cut from 7.5 per cent to 7.25 per cent, after the last cut by same points in March and January, has something in store for everyone.

Here are some of the direct benefits that the rate cut would bring with it –

1. Boost to affordable housing – Given the high cost of real estate, affordable housing has been a far-fetched dream. The Repo Rate cut will only take us closer to achieving this dream. Gaurav Gupta, General Secretary, CREDAI-RNE says, “Such rate cuts are helpful for housing projects falling under the affordable price segment. Home loan interest rates impact the home buying decision of middle class buyers the most as they hugely depend on financing.”
2. Reduced EMIs – Every rate cut has a direct impact on a common man’s pocket. Reduced Equated Monthly Instalments (EMIs) would make property buying less burdensome for many. Manju Yagnik, Vice Chairperson, Nahar Group says, “The reduction in the repo rate will help reduce the EMI’s of home buyers and lessen their burden as they are already loaded with various other taxes.”
3. Improved sales – Political uncertainty, legal hurdles or other infrastructural bottlenecks have been adversely impacting real estate sales in major Indian cities. Buyers have been waiting for price correction in Tier I markets, which has impacted sales adversely. The rate cut is anticipated to revive buyer sentiments and bring back some to the market, resulting in improved conversion rates and sale volumes. Reiterating, Manoj Gaur, MD, Gaursons India Ltd says, “This decision will bring huge relief to the sector which has been battling through tough times. We expect sales to improve as more potential customers will think of buying homes due to reduced interest rates.”
4. Reduced home loan interest rates – While the Repo Rates have been cut for the third time in this fiscal year, home loan interest rates have been cut only once. But this cut, might just force banking institutions to revise interest rates again. Supporting, Rishi Mehra, Cofounder, deal4loans.com says, “Due to RBI’s monetary policies, banks are forced to reduce interest rates. In April, all major home loan banks and corporations reduced their interest rates from 10.1 per cent to 9.85 per cent. We expect the rates to fall by at least 0.25 per cent in the immediate future.”

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