New Delhi: The RBI's decision to cut key policy rate by 25 basis points will boost consumer sentiment as well as housing sales during the ongoing festive season which is a crucial period for realty sector, property consultants said on Friday.
However, they said the RBI should ensure effective transmission of rate cuts, announced on Friday as well as earlier, to home loan borrowers.
"Consumers are spending less on everything from FMCG to automobiles – and, of course, real estate. Naturally, the sector eyes RBI's monetary policy for cuts in the key lending rates to support various measures taken by the government to boost consumption sentiment," Anarock Chairman Anuj Puri said.
The move would go some way in improving consumer sentiment in the festive season, which is a crucial period for real estate sales, he added.
"However, much depends on how efficiently banks transmit the benefits to their homebuying borrowers," Puri said.
Dhruv Agarwala, Group CEO of Housing.com and PropTiger said, "The RBI's decision to further reduce repo rate gives the real estate sector a reason to cheer at a time when it expects sales to improve in the ongoing festive season."
"A reduction in interest rates means more cost-effective home loans for buyers when key property markets already offer them great ready-to-move-in options to pick from, on affordable rates," he added.
CBRE India Chairman and CEO Anshuman Magazine said, "The timing of the cut is crucial as it is expected to spur real estate demand and consumption in the festive season as it is an important period for investment/consumption across sectors."
While the RBI has done its bit, it is now critical that banks facilitate a faster transmission of these rate cuts to ensure that the measures reap results, he added.
JLL India CEO & Country Head Ramesh Nair said the real estate sector is likely to witness accelerated sales owing to favourable policy reforms and the gradual transmission of rate cuts to end-consumers through lowering of mortgage rates.
"The consecutive rate cuts have been a succour for real estate sector thereby making it the most opportune time for buying homes," he added.
However, Knight Frank India CMD Shishir Baijal said the rate cut should have been steeper to boost housing sales.
"In light of the ongoing economic distress in the country, the 25 basis points cut in policy rate is short of expectation. While it is the fifth consecutive rate cut this year, it is insufficient to support the flagging consumer demand.
"The stressed real estate sector was looking up to a strong rate cut and sector-specific lending provisions to improve both liquidity scenario and consumer spending ability," Baijal said.
A slew of factors such as slowing economic output, rising unemployment rate and low consumer confidence have hindered the percolation of these small quantum rate cuts to the economy at large, he added.
The Reserve Bank on Friday cut its benchmark lending rate by 0.25 percentage points to revive growth that has hit a six-year low of 5 per cent, and affirmed commitment to remain accommodative to address growth concerns 'as long as necessary'.
With this cut, repo rate, at which it lends to the system, will now come down to 5.15 per cent.
This is the fifth straight cut in rates by the RBI in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 percentage points.
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Updated Date: Oct 04, 2019 14:25:10 IST