Repo rate cut - reaction from banks and real estate industry body
The announcement by the Reserve Bank of India on Repo rate slash was welcomed by the realty sector. The rates were slashed from 8.5% to 8%. The effect of this slash will be reflected in the home loan rates, especially in the floating loan rates. Leading banks in both public and private sector have indicated a substantial cut in the lending rates soon.
Managing Director and Chief Executive Officer, of ICICI, Ms. Chanda Kochhar said, "I think consumers have to take that as good news… But how fast the transmission will take place and at what rate, is what we all will have to watch, depending on our cost of funds. This is clearly the beginning of a trend where EMIs would fall."
Top players in the sector do confirm some real estate action following this announcement. Many potential real estate investors who were adopting a wait and watch situation due to consecutive interest rate hikes are expected to make an investment following the rate cuts. For home buyers who have availed home loans especially the floating ones, it is an ideal time to finish off their loans as the rates are lowering and there are no hassles regarding pre-payment penalties. Hence the players are positive about a considerable rise in the number of property transactions.
The developer community, though they have welcomed the move, they are also expecting some CRR cut. According to some developers the current rate – 11% is on a higher end because of high inflation and no tax exemption. A few real estate players also believe that the determining factor in property purchase is the property prices, which are not likely to come down. Mr, Lalit Kumar Jain, National President, CREDAI (Confederation of Real Estate Developers' Associations of India), felt that Cash Reserve Ratio also mush be cut to bring in some liquidity in the market. "Cash crunch is one of the biggest problems being faced by the real estate India industry in particular and the economy in general". He feels the central bank must take immediate action regarding this so that the developers can get out of fund crunch. This will help the real estate industry to get over the crisis situation.