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Only Rate Cut Not Enough To Boost Realty Market, Say Experts

Reserve Bank of India on Wednesday cut the repo rate by 35 basis points or 0.35 per cent to 5.40 per cent.

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Only Rate Cut Not Enough To Boost Realty Market, Say Experts
Mumbai: 

Real estate developers have joined the industry chorus to welcome the 35 basis points (bps) cut in repo rate but market players and experts also stressed the fact that the mess in the construction sector and the ongoing demand slowdown is of such magnitude that only a rate cut is unlikely to boost subdued sentiments.

Anuj Puri, chairman of Anarock Property Consultants, said that the hard facts of declining consumption and a deepening economic slowdown in India are inescapable, and real estate has been severely impacted by them. 

"For real estate, a rate cut of 35 bps is, however, insufficient to significantly improve buyer sentiment in the mid-income segment, which still has a staggering unsold inventory of 2.17 lakh units in the top seven cities," he said.

Mr Puri said that on the other hand, the demand for affordable housing, which accounted for 2.4 lakh unsold units in these cities, may see improvement as this highly budget-sensitive segment already has the benefit of other incentives.

Shishir Baijal, chairman and managing director, Knight Frank India said: "In light of the present economic distress in the country, we welcome the move to bring down repo rate by 35 bps... however, we would have really expected to see a more substantial cut is the need of the hour for its effective transmission to end users. “

While it is the fourth consecutive rate cut this year and is in line with RBI's recent shift to an ‘accommodative' monetary policy stance, it may not be sufficient to give the required impetus to the stalling consumption numbers, he added.

More needs to be done to provide a liquidity stimulus to the broader real estate spectrum, Mr Baijal said.

Mani Rangarajan, group chief operating officer of Housing.com, said: "How far these rate cuts will succeed in spurring consumption is something only time will tell. However, there is no denying that in the mid-income and affordable housing segments which are very price sensitive, these rate cuts can boost sentiment and sales, provided they are passed on to the end-users by the banks." 

As ideally the reduction in repo rate, the rate at which the RBI lends to banks, should lead to further reduction in retail loans to the common man, developers are hopeful that the rate cut would eventually be transmitted to the consumers and demand for home loans and properties would increase.

"RBIs move will reduce the outgo in terms of EMI for the borrowers, benefitting the home buyers, which will surely boost confidence in the segment bringing in the much-awaited momentum in sales," said Manoj Paliwal, CFO, Omkar Realtors & Developers.

Surendra Hiranandani, chairman, House of Hiranandani, was of the view that going forward, it would be imperative for banks to reduce the lending rates and ensure that home loan borrowers reap the benefits of this move. 

Amit B Wadhwani, co-founder of realty consultancy firm, SECCPL said: "We believe that more banks will practice the revised rates while lending. This will help sell the inventories at a faster pace, and it will also encourage developers for new launches."
 



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