Real estate companies on Tuesday welcomed the Reserve Bank of India’s decision to reduce the short-term lending rate. This action, according to them, will lower the cost of funds for both individuals purchasing homes and developers, which will subsequently boost the overall demand in the property market.
Industry Reactions
The Confederation of Real Estate Developers Association of India (CREDAI) Chairman, Pradeep Jain, stated that "Reserve Bank’s decision to cut the repo rate by 50 basis points and abolish pre-payment penalties is a good move for home buyers." As part of its yearly credit policy, the RBI has instructed banks to refrain from charging foreclosure fees or prepayment penalties on home loans with a floating interest rate.
The nation's largest real estate firm, DLF, also expressed its support for the decision, noting it would significantly enhance developers' cash flows. Rajeev Talwar, the Group Executive Director at DLF, commented that "It is positive news although very-very delayed. This will benefit home buyers besides the industry. It will improve cash flows tremendously."
Anticipated Effects
Jain also pointed out that the liquidity situation for developers ought to improve and the cost of funds will decrease. The Credai Chairman believes that this measure will undoubtedly stimulate housing demand. However, Anshul Jain, the CEO of DTZ India, a property consultant, suggested that additional steps are necessary to make a substantial impact on housing demand.
Anshul Jain of DTZ stated, "It is a step in right direction although lot more measures need to be taken before we see any effect of the rate cut on the real estate sector." It was further iterated that the housing demand which is currently subdued, would only increase if the interest rates on home loans drop below 10 percent.