RBI Stumps Expectations, Real Estate No Better or Worse

Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15% while maintaining an accommodative stance. 

From a real estate point of view, rate cuts are obviously always welcome as they help improve overall sentiment.

Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates.

The expected rate cut of 25 bps would have caused home loan values to fall below 8% for first time ever

However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories.

The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales. In fact, back in 2014, even when the home loan rates were high in two digits at 10.3%, housing sales remained at peak levels.

In the present scenario, only the combined effect of lower interest rates coupled with other measures such as a cut in personal taxes – reportedly being considered by the FM – can actually stimulate residential sales out of their current lethargy.