RBI step may boost real estate slump

The city developers welcomed the Reserve Bank of India’s decision of reducing the 25 basis point repo rate, hoping that it would lead to less expensive home loans.

However, the buyers feel that the developers also need to slash the highly inflated property rates to make housing affordable.

The developers said RBI’s move will help decrease the interest rate, boosting the slow down in real estate industry. “It is a small, but good beginning. We hope that RBI will come out with many more such steps. And, bankers will follow suit by cutting down the lending rates,” said Paras Gundecha, president of MCHI-CREDAI.

He added that it would boost liquidity in the real estate market, easing pressure on cash-strapped developers.
“Last year was particularly bad for the real estate sector. Due to liquidity crunch and costly EMIs, sales plummeted,” said Gundecha, adding that the RBI should take some pragmatic decision to support the capital- and labour-intensive real estate sector.

The real estate sector is reeling under the burden of huge debts 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. The long-awaited move will trigger off a change in sentiments and catalyse the required buyer behaviour,” said experts.

Real estate expert Atul Nemade said developers were asking to cut down interest rate.

“Now, they have to take some complimentary steps to make unaffordable houses affordable. Beside the bank interest, the current skyrocketed housing prices are major factor for low sale. Now, it is the developers turn to cut the property rates to boost the sale,” he said.

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