Developers upbeat post RBI Repo rate cut

With the sheer volume of unsold units piling up, the real estate industry has heaved a huge sigh of relief at the RBI’s rather unexpected decision to cut the Repo rate by 25bps from the earlier 7.75 percent to 7.50 percent.

As per industry estimates, developers today are saddled with approx 832mn sq.ft of unsold inventory as of December 2014, with amchi Mumbai, the financial capital leading the way with the maximum unsold stock thanks mainly due to the rising property prices here which has forced buyers to keep their distance and opt for rental properties instead.

Welcoming the RBI’s decision to cut rates, Lalit Kumar Jain, chairman, Kumar Builders, a leading Pune-based developer and chairman, CREDAI opined that the decision would go a long way in helping the realty sector come to terms with its ongoing liquidity issues.

He further stressed on the fact that real estate and infrastructure development, a key focus area for the new central government, were complementary to each other and there was further scope to ease the pressing liquidity problems faced by both sectors.

Others like Rajesh Prajapati; the MD of Mumbai-based Prajapati Constructions anticipates a positive impact of the move on reducing home loan interest rates which are presently a major concern for the realty industry.  Agreeing with Jain’s assessment on the potential for a further reduction, he pointed out that this in turn would help lower home loan interest rates to a more affordable 8 percent approx.

Echoing this sentiment, Brotin Bannerjee, the MD & CEO of Tata Housing stated that it would contribute to the growth of the real estate sector in the country, while enabling banks to look at a reduction in interest rates on home loans. He added that given the prevailing positive sentiments in the country, post the budget and signs of an economic revival, there was an opportunity for another interest rate cut by the RBI in the near future.

Voicing his reactions on the issue, the COO of Maitreya Realtors Pankaj Srivastava welcomed the 25bps rate cut as a positive precursor to the next financial year and hoped that the move would help in reducing home loan interest rates, thereby boosting sales for developers weighed down by the rising number of unsold units.

However others like Abhay Kumar, CMD of Grih Pravesh Buildtech were not so optimistic in their assessment of the situation. According to Kumar while the cut in rates was welcome and executed at a crucial time for the realty sector, its impact on the home loan segment was likely to be marginal.

He further added that this was a symbolic gestures at best, since the Budget had cold shouldered the industry, there was a pressing need for some drastic measures to salvage the situation including a bigger rate cut in the near term to tackle the market slowdown.

While the real estate industry per se has largely been supportive of RBI’s decision to cut rates and even gone to the extent of hailing its governor as a ‘man of vision’ among other pleasant sounding epithets, the actual impact of the cut is yet to percolate down to the man on the street.

A majority of the banks that disburse home loans are said to be still mulling over the potential impact of this unexpected generosity from the apex bank, before announcing any cuts in their interest rates for home loan customers.

However this rather lukewarm reception among banking circles hasn’t dampened the enthusiasm of the realty fraternity who have been grappling with a whole gamut of issues ranging from rising input costs and shrinking land parcels to the royal snub in the budget and finding new ways to woo back the absconding buyers to their projects.