The Reserve Bank of India’s decision to hold the rate will help homebuyers to avail the benefit of the prevailing lowest mortgage rates and retain the real estate sector’s recovery.

By Kausar Firdausi

With the Reserve Bank of India keeping the lending rates unchanged, home loan interest rates are likely to stay at an all-time low and complement the other recent measures announced by the government. According to real estate experts, maintaining an accommodative stance is significant as it emphasises the central bank’s focus on spurring demand which remains the highest economic concern at the moment.

Dr Niranjan Hiranandani, president, ASSOCHAM & NAREDCO is of the view that while the move to keep the repo rate unchanged at 4 per cent and reverse repo rate too stands unchanged at 3.35 per cent was on expected lines, the apex bank needs to have a hawkish stance while looking at the inflation figures and try to taper it further in order to mitigate the supply-side pressure.

“While the move to keep the repo rate unchanged at 4 per cent and reverse repo rate too stands unchanged at 3.35 per cent was on expected lines, the apex bank needs to have a hawkish stance while looking at the inflation figures and try to taper it further in order to mitigate the supply-side pressure.”
— Dr Niranjan Hiranandani, President, ASSOCHAM & NAREDCO

Anuj Puri, chairman, Anarock Property Consultants too believes that increasing interest rates would obviously impact overall demand at a time when the government is keen to boost consumption. It goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. “This would be enabled by reducing the repo rate, at least in theory, given that transmission of reduced repo rates to bank interest rates has been slow at best,” adds Puri.

However, home loan interest rates are already at a record low, i.e. below 7 to 8 per cent, which provisions traction among serious homebuyers and will be instrumental in building momentum towards the primary housing sector. Shishir Baijal, CMD, Knight Frank India highlights that home loan interest rates, which are at the lowest, have played a key role in rekindling the latent demand in housing market by nudging homebuyers to make purchase decisions even during the pandemic.

This move, as per Aditya Kushwaha, CEO and director, Axis Ecorp, can be seen as an impetus provided by the government to boost the real estate sector and elevate construction activities in the upcoming days. For new buyers, it will be a good time to take a home loan as the interest rates are low.

“This move can be seen as an impetus provided by the government to boost the real estate sector and elevate construction activities in the upcoming days. For new buyers, it will be a good time to take a home loan as the interest rates are low.”
— Aditya Kushwaha, CEO and Director, Axis Ecorp.

The growth in the economy has also been reflected in the real estate sector of the last quarter where almost all segments of the sector have seen a sharp increase in activities, especially the residential market. “Residential real estate witnessed initial signs of recovery with sales increasing by 34 per cent in Q3 2020 over Q2 2020. The RBI’s decision to hold the rate will help homebuyers to avail the benefit of the prevailing lowest mortgage rates. Green shoots of recovery armed with other incentives such as stamp duty reduction in some states and the flexibility of developers in offering best prices or payment schemes will help in further improving home sales,” states Ramesh Nair, CEO & country head (India), JLL. Also, Anurag Mathur, CEO, Savills India puts in that additional allocation towards the PMAY-U and tax relief measures are a right step in revitalising the residential segment in a post-pandemic era.

However, the experts also emphasise that there is a lot which needs to be done for the sector to improve the pace of growth. “The sector is yet to see the full swing impact of various measures announced recently by the government and we feel that a rate cut now would have given some respite to the realty sector which has been facing headwinds due to the pandemic. However, we are upbeat as consumer sentiment is high, especially after they witnessed the brittle nature of other investment vehicles compared to real estate. The post-pandemic world will be good for the real estate sector as it offers you the best bet – stability, security and safety. So, one must take advantage of the current scenario and invest with a long-term perspective to ensure superior returns,” points out Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group, known for luxury holiday homes in Goa.

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“The post-pandemic world will be good for the real estate sector as it offers you the best bet – stability, security and safety. So, one must take advantage of the current scenario and invest with a long-term perspective to ensure superior returns.”
— Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.

According to Ankush Kaul, president (sales & marketing), Ambience Group, the government should further strive to revive the homebuyer’s sentiments. “There is a need to put a check on spread of covid and disruptions like the farmers’ protest etc. These may collectively dampen the festive spirit and the upswing in home buying that we witnessed a few months back,” stresses Kaul.