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Last Updated : | Source: Jones Lang LaSalle

RBI Monetary Policy - Effect on real estate sector

The revision in the REPO rate will positively impact the sentiments surrounding the real estate market. Banks will now be able to offer loans at more attractive rates.


As India`s GDP is poised for its slowest growth in over a decade, the Reserve Bank of India (RBI) has revised their monetary policy. The RBI has further lowered the REPO rate an additional 25 basis points (0.25%) to 7.5%.


The revision in the REPO rate will positively impact the sentiments surrounding the real estate market. Banks will now be able to offer loans at more attractive rates. Cheaper loans for home buyers will prompt a renewed interest in residential property purchase from end users and investors. Banks may revise the base rate, which would benefit old home loan borrowers who are currently paying much higher interest rates than new borrowers would. We feel that this would be an important move by banks and help them contain client attrition.


The cost of funding for real estate developers should also reduce marginally. Any kind of relief to developers is important at this stage, since they have been burdened with ever-increasing development and borrowing costs since last two years while at the same time being under pressure to keep sale costs rational. 


Overall, this move definitely indicates a positive direction for the economy in general and therefore also for the real estate sector, whose performance is directly wired into the country's basic economic fundamentals.



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First Published on Mar 20, 2013 02:31 pm
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