‘Property demand to spike after RBI cut’

RBI has asked banks not to levy foreclosure charges or pre-payment penalties on home loans extended on a floating interest rate.

Written by Agencies | New Delhi | Published: April 17, 2012 2:12 pm

Realty firms today hailed the RBI’s decision to cut short-term lending rate saying the move would reduce the cost of funds to home buyers as well as developers and boost property demand.

“Reserve Bank’s decision to cut the repo rate by 50 basis points and abolish pre-payment penalties are good moves for home buyers,” Confederation of Real Estate Developers Association of India (CREDAI) Chairman Pradeep Jain said.

In its annual credit policy,RBI has asked banks not to levy foreclosure charges or pre-payment penalties on home loans extended on a floating interest rate.

The country’s largest realty firm DLF also welcomed the decision,saying it would significantly improve the cash flows of developers.

“It is a positive news although very-very delayed. This will benefit home buyers besides the industry. It will improve cash flows tremendously,” DLF Group Executive Director Rajeev Talwar said.

Jain too said that liquidity for developers would improve and cost of funds would be cheaper.

On demand,Credai Chairman said the move would definitely boost housing demand.

However,property consultant DTZ India CEO Anshul Jain felt more measures need to be taken to have a positive impact on housing demand.

“It is a step in right direction although lot more measures need to be taken before we see any effect of the rate cut on the real estate sector,” said Jain of DTZ.

The housing demand,which is very subdued currently,would only rise if the interest rates on home loans come down to below 10 per cent,he added.

Reacting to RBI’s rate cut,Jones Lang LaSalle India Chairman and Country Head Anuj Puri said: “It is a good news. After a long gap,the downward trend in policy rates has now been established. It’s a positive news for home buyers and developers as their cost of funds would reduce”.

However,Puri said the negative is that RBI has indicated there would not be any further rate cuts.

Realty major Unitech Managing Director Ajay Chandra said the decision would have a positive impact on the economy,particularly,on the real-estate industry.

“Not only will the cost of borrowing rationalise,this reduction will also provide an impetus to growth and enhance business-confidence,” Chandra added.

Property consultant Cushman & Wakefield India expects pick up in demand following reduction in repo rate.

“After a lukewarm budget,the real estate market finally has something to cheer about with the RBI’s repo rate cut. The resulting reduction in interest rates that banks are expected to pass on to consumers will provide a positive boost to market sentiments and result in some transaction activity in the residential sales markets,” Cushman & Wakefield India Managing Director Anurag Mathur said.

Mathur pointed out that buyers had to defer their purchase decisions last year as they were facing the double-edged sword of rising interest rates and stubborn price levels.

“Whilst some of these buyers may still hold out for a while longer to see if there are further rate cuts,we expect to witness some pickup in the volume of sales transactions,” he added.

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