The Reserve Bank's decision to cut key policy rate by 25 basis points will boost consumer sentiment as well as housing sales during the ongoing festive season which is a crucial period for the realty sector, industry experts said on Friday. With this cut, repo rate, at which it lends to the system, will now come down to 5.15 per cent.
The central bank must now ensure effective transmission of rate cuts, announced on Friday as well as earlier, to home loan borrowers, they said.
"It is a significant and welcome move by the Reserve Bank of India (RBI)... to boost the credit flow and spur the economic growth of the country," said Confederation of Real Estate Developers Association of India (Credai) National Chairman, Jaxay Shah.
"We hope that the benefit of this reduction is passed on to the home buyers by the banks/financial institutions.
"This, coupled with the upcoming festive season and reduction in corporate tax, will further enhance the sentiment amongst them, thereby providing a fillip to the housing demand and achieving Hon'ble Prime Minister's goal of Housing for All by 2022," Shah added.
Echoing Shah's view, National Real Estate Development Council (Naredco) President Niranjan Hiranandani said the move will boost sales in festive spirits.
"Consumers are spending less on everything from FMCG to automobiles – and, of course, real estate. Naturally, the sector eyes RBI's monetary policy for cuts in the key lending rates to support various measures taken by the government to boost consumption sentiment," Anarock Chairman Anuj Puri said.
The move would go some way in improving consumer sentiment in the festive season, which is a crucial period for real estate sales, he added.
"However, much depends on how efficiently banks transmit the benefits to their homebuying borrowers," Puri said.
Dhruv Agarwala, Group CEO of Housing.com and PropTiger said, "The RBI's decision to further reduce repo rate gives the real estate sector a reason to cheer at a time when it expects sales to improve in the ongoing festive season."
"A reduction in interest rates means more cost-effective home loans for buyers when key property markets already offer them great ready-to-move-in options to pick from, on affordable rates," he added.
CBRE India Chairman and CEO Anshuman Magazine said, "The timing of the cut is crucial as it is expected to spur real estate demand and consumption in the festive season as it is an important period for investment/consumption across sectors."
While the RBI has done its bit, it is now critical that banks facilitate a faster transmission of these rate cuts to ensure that the measures reap results, he added.
JLL India CEO & Country Head Ramesh Nair said the real estate sector is likely to witness accelerated sales owing to favourable policy reforms and the gradual transmission of rate cuts to end-consumers through lowering of mortgage rates.
"The consecutive rate cuts have been a succour for real estate sector thereby making it the most opportune time for buying homes," he added.
However, Knight Frank India CMD Shishir Baijal said the rate cut should have been steeper to boost housing sales.
"In light of the ongoing economic distress in the country, the 25 basis points cut in policy rate is short of expectation. While it is the fifth consecutive rate cut this year, it is insufficient to support the flagging consumer demand.
"The stressed real estate sector was looking up to a strong rate cut and sector specific lending provisions to improve both liquidity scenario and consumer spending ability," Baijal said.
A slew of factors such as slowing economic output, rising unemployment rate and low consumer confidence have hindered the percolation of these small quantum rate cuts to the economy at large, he added.
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