Real Estate Industry takes a sign of relief as RBI cuts the Repo Rates..

The Reserve Bank of India (RBI) has cut the Repo Rates for the third time in 2015, this time too by 25 basis points, effective immediately.
 

After multiple events instilling hopes of a better real estate market in the last few days, there’s another one that has brought cheer amongst the industry folks. The Reserve Bank of India (RBI) has cut the Repo Rates for the third time in 2015, this time too by 25 basis points effective immediately. The rate has been brought down from 7.5 per cent to 7.25 per cent.

The move has definitely been welcomed by the real estate fraternity and has raised hopes of improving market conditions plagued by unsold inventory of housing units since a long time. Pradeep Jain, Chairman, Parsvnath Developers Ltd says, “Considering that the realty sector has been struggling with increasing inventories and low housing demand since last few quarters, it was an expected move.

We hope for the banks to pass on the benefit to the customers, thereby, stimulating the overall demand.”
Though it is seen as a positive move, the industry finds the rate cut inadequate and longs for more to have a considerable impact. Rakesh Kumar Arora, Chairman, Supertech Ltd says, “The announcement to cut the repo and reverse repo rates by 25 basis points is not sufficient, although it is an indication of the positive approach of RBI towards investment in the country.

The Industry was seeking a cut of at least one per cent to bring back confidence in home buyers and investors, ease out EMIs and give a fillip to housing demand.”
Expressing further displeasure, Arora says, “Reducing funding costs in real estate is the need of the hour as it would only bring in more investments and create more jobs. However, the RBI has not addressed this crucial issue.”
No change in the home loan interest rates, despite frequent cuts in repo rates, is also being seen as a major setback. Lalit Kumar Jain, CMD, Kumar Urban Development Ltd and Former Chairman, CREDAI believes this step to be gradational in renewing the zest of the real estate sector, however, says, "The net effect has to be translated into an interest rate cut, that has not happened as yet. Despite the RBI cutting the repo rate by 75 basis points in recent past, the net reduction by banks has not been more than 25-30 points.”

While the move may not seem to have impressed many developers due to its poor impact on the property prices, customer sentiments and sales, it still has been welcomed for its potential to trigger improvement in the realty space. Amit Modi, Director- ABA Corp and Vice President, CREDAI Western UP says, “While it is indeed a step in the right direction, 25 basis points cut may not be enough to spur the investment cycle. There is definitely more required, and lending rates will have to further come down by at least one or two percentage points to improve the general sentiment towards investments in the country.”