Reserve Bank of India’s (RBI) recent move to revise the repo rate could be a great boost to the overall sentiments in the Indian realty market.
The reduction in rate which has been quickly followed by surge in stock market prices of some of the leading realty entities such as DLF, HDFC, Unitech and India Bulls Real estate etc., can stimulate growth in the Indian realty sector through multiple ways. Firstly, it will ideally be followed by cut in home loans by the banks, thereby enhancing demand. In fact, United Bank of India has announced to cut their home loans rates and similar moves are being indicated by other leading banks such as SBI and ICICI.
Secondly, it will translate into low cost of capital for developers, which should result in price cuts in houses.
Thirdly, the rate cuts are also indicative of the fact that inflation has been put under check and now the government intends to implement strong economic growth activities, which will further infuse positive sentiments in the market.
In fact the cut needs to be seen in the context of the larger picture of heightened economic activities in the country. Across the country, industrial and service sector output is increasing along with more jobs and salary rise. All in tandem will eventually translate into higher demand for the home sales in the near future.
If our discussion with industry insiders serves us right, it’s expected that rates will be revised further bringing more good news to the industry.
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