Status quo on repo rate a dampener for homebuyers: Experts

By: |
Updated: April 6, 2017 4:35:27 PM

The Reserve Bank of India on Thursday left its benchmark lending rate unchanged at 6.25 per cent for the third time in a row. Many real estate experts are disappointed by the move and said that a decision to cut rates would have given a push to the realty sector.

Status quo on repo rate a dampener for homebuyers: Experts

RBI monetary policy review: rate cut could give the ideal fillip for growth in the residential sector riding on the lower interest rate regime. (Photo: Reuters)The Reserve Bank of India on Thursday left its benchmark lending rate unchanged at 6.25 per cent for the third time in a row citing upside risk to inflation. It however increased the reverse repo rate at which it pays to lenders by 0.25 per cent to 6 per cent. Experts said the move by the central bank to keep the repo rate unchanged is on expected lines. Shishir Baijal, chairman and managing director, Knight Frank India said,”The decision to keep the repo rate unchanged at 6.25% is on expected lines because of the liquidity scenario and inching up of inflation. However, deep down we wished that a rate cut could give the ideal fillip for growth in the residential sector riding on the lower interest rate regime, regulator on the anvil and overall better performance of the economy.”

Although RBI’s move was on expected lines, home and auto loan borrowers would still want to know how it affects their EMIs. The new borrowers may gain from the move as banks may cut interest rates to stay in competition. The RBI feels that there is still some room for complete transmission of last rate cuts. In its bi-monthly review, RBI said,” Banks have reduced lending rates, although further scope for a more complete transmission of policy impulses remains, including for small savings/administered rates.”

However, many real estate experts are disappointed by the move and said that a decision to cut rates would have given a push to the realty sector. Pratik K. Mehta, MD, Unishire, Bangalore based real estate developer said,” The status quo on repo rate will be a dampener for real estate. Input costs are rising and margins are shrinking for developers and affordability is being hit for end users who might have to pay higher prices for homes with the increase in raw material cost and unless borrowing costs don’t come down, there will be a challenge for buyers to make the investment. Already the real estate market is affected with the demonetisation effect and sales have slowed down to an all time low and added to the affordability and higher costs, will make it even more difficult for an end user to afford a home.”

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.