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Rate cut gives real estate sector a boost

Oct 1, 2015 – The Hindu

The real estate sector, which is reeling under tremendous pressure with high unsold inventory and lacklustre sales, is all set to bounce back, says Kanchana Krishnan, Director, Knight Frank Chennai Branch.

Welcoming the recent rate cut of 50 bps, she said: “A total reduction of 125 bps this calendar year will give the much needed boost to the market and will incentivise home buyers to make the ‘buy’ decision. With festive season just around the corner, the timing can’t get any better. However, the transmission of this rate cut by banks to consumers has to be more aggressive to help the market reap the benefits of this reduction.”

“Most of the real estate investments are funded by home loans, so interest rate cuts incentivises a potential buyer as the monetary outflow reduces and eases their EMI pressure and boosts buyer’s confidence to purchase; this in essence is also expected to fuel demand for the housing sector,” she said.

Mehul Doshi, Director, Doshi Housing said that the RBI Governor sprang a surprise by going in for a 50 bps rate cut instead of 25 bps. This would give a much needed boost to the sector.

Mentioning that they had not heard about a 50 bps cut in the recent past, Mr. Doshi said the first time buyers, who were postponing their purchases waiting for the right time and right price might swing into action. “If the banks act swiftly and pass on the rate cut, then the enquiries would get translated into meaningful deals.”

Mr. Doshi said though RBI had announced 0.25 bps rate cut twice in the last few months, some of the banks had not transferred even half of the benefit to its customers. “So, this sector has not felt any major benefit so far. But, this time, I believe that RBI wants to ensure that the benefits are passed on,” he said.