RBI's Rate Cuts Give Home Buyers a Reason to Rejoice

Bangalore: RBI’s step to reduce 25 basis points in repo rate and an equal reduction in Cash Reserve Ratio (CRR) is likely to improve flaccid home sales and simplify the home loan burden from home buyers. However, the high rate had been restricted potential home buyers to buy property which in turn slowed down the home sales and hence, the country has witnessed huge stock of unsold inventories. RBI has reduced the rate for the second time since April 2002. Earlier, it has reduced by 50 basis points in repo rate. Besides, the cut in cash reserve ratio may possibly make ease of 18,000 crore into the financial system which will allow cash trapped developers to collect fund at competitive rates.

Pranab Datta, Chairman of Knight Frank India said “The rate cut coupled with the lower CRR should provide great relief to real estate industry that is reeling under the burden of huge debts on one side and poor cash flows caused by slowdown in sales. The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing.” However, “A sharp revival in the fortunes of the industry will be accelerated if the demand resistance arising from high prices of housing can be addressed through more affordable prices,” added Datta, reports MagicBricks.com.

Not only home buyers, developers too are in cheerful mode because of this reduction. However, the real estate industry has been waiting for this rate reduction for a while now. Sanjay Chandra, Managing Director of Unitech, stated that, “We welcome RBI’s decision to cut both Repo rate & CRR by 25 bps (Basis Point). This is a small but necessary positive move to boost investment as well as demand.”

 “The repo rate cut by 25 basis points is just not enough. What we need is creation of a robust supply to curb inflation for which RBI needs to continue to ease fund supply position for realty sector. The developer community expects key initiatives and boosters like according the status of infrastructure to housing,” said Chandra, reports MagicBricks.com.

According to Rana Kapoor, Managing Director and CEO of Yes Bank, this current rate cute policy is the beginning of the financial relaxation and this measure may bring cheer to both real estate developers and home buyers.