Positively Affects The Indian Real Estate Sector
The Reserve Bank Of India has recently cut policy rates by 25 basis points. Cutting the key interest rates will now boost the demand in the residential market of the country, which has not been stable for the past few years.
This move is said to have a positive impact on the home buyers and it will lead to an improvement in the real estate sector in the country. Here are 3 reasons why the RBI’s rate cut positively affects the real estate sector:
Drop In Lending Rates
As the RBI has cut the Repo rate from 8% to 7.75 % with immediate effect, many of the leading banks are expected to follow suit, and start giving out cheaper loans. As the credit demand has collapsed, banks like United Bank Of India have already announced the 25 basis point drop in their base rates, and HDFC and SBI are expected to follow suit. Home loans are predicted to fall by almost 9.5% to 9.8% in the coming few months.
With major banks announcing the drop in lending rates, home loans and automobile loans are expected to become cheaper and more affordable.
Increase In Residential Market Sales
With the expected reduction in the mortgage rates, there will be a further increase in the residential market investments in the country. Housing rates reduced to as much as 1.75 lakh units in the primary markets of seven major cities in 2014, against nearly 2 lakh units in the previous year. This was because of slow demand. However, this is expected to change now, and more positive changes are to be brought about in the residential market sector.
More Liquidity In The Market
CRR, or the Cash Reserve Ratio is the amount of funds that the banks have to keep with the Reserve Bank Of India. So, if the banks decide to decrease the percentage of this, then the available amount with the banks increases. RBI has used this method to permeate some liquidity in the market. By providing surplus money to the banks, more money is available for lending to the public.
More liquidity in the market ensures easier access to home loans. This coupled with the low rate of interest, increases the demand from consumers.
The RBI has taken a small, simple, but sure step to increase the number of investors and homebuyers in the country. A single-digit home loan is now possible. With this decision, EMIs are also cut down and this throws the market into smooth relief.
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