RBI monetary policy review: Housing sector expects 25 bps repo rate cut, lower EMIs

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Updated: June 7, 2016 10:52:42 AM

RBI monetary policy review: Housing sector is expecting a 25 basis rate cut will boost the sluggish realty sector and create renewed interest in home buying.

housing loans RBI monetary policy reviewRBI monetary policy review: Housing sector is expecting a 25 basis rate cut will boost the sluggish realty sector and create renewed interest in home buying. (Source: Reuters)

The housing sector is expecting a 25 basis rate cut on Tuesday as Reserve Bank of India Governor Raghuram Rajan announces bi-monthly review. They are hoping another rate cut will boost the sluggish realty sector and create renewed interest in home buying.

However, analysts are widely expecting Rajan to hold rates keeping in focus inflation and crude oil prices.

“We hope the RBI will cut the repo rate, this will help in boosting the demand and a major relief for the home borrowers. Indian economy which is under pressure and shows slow signs of progress, a rate cut will give much needed push for home buyers. Even if, RBI announces 25 basis, this will add liquidity and ease the burden of monthly EMIs. Lastly, we expect banks to pass the benefit to end users after the rate cuts, if any,” Aman Agarwal, director, KV Developers & Governing Council Member NAREDCO said.

If Rajan goes for a 25 basis rate cut, it would mean cheaper loans for homebuyers and will also boost interest in residential property purchase from end users. If the repo rate is cut again, there will be increased pressure on banks to pass on the decline in interest rates to borrowers.

“Interest rate is not the only thing that one should consider while deciding for home loans. There are other costs also included in a loan like processing charges, documentation charges, commitment fee, inspection of document charges and stamp duty cost, which are negotiable. Therefore, buyers should explore banks, compare rates of other lenders and do their proper homework before deciding to switch their bank,” Vineet Relia, managing director, SARE Homes.

The benefit of repo rate cut will be enjoyed by the new customers as banks will pass on the benefit to them. However, for existing customers the benefits will not be in the same proportion as new customers.

Paisabazaar.com has given us a rough estimate on how the rate cut will impact your car and home loan in case of a 25 bps rate cut.

For example, if you have a home loan of Rs 30 lakh for a tenure of 20 years at an interest rate of 9.50 per cent per annum, then a 25 bps cut on the lending rate by any bank would mean that a borrower may save around Rs 1,17,104 overall on its existing EMI.

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