Housing demand to recover with RBI rate cycle
Though, second rate cut done by Reserve Bank of India doesn't immediately improve the housing demand, it is seen to reverse the direction of the cycle and will result in kick start the housing demand. By the move made by RBI, the constructors' group is filled with excitement since the interest rate that is less would give home loan at cheaper rate. Further, review on Amarprakash builders would say that this move would better the slowdown sales rate. A possible decrease offered in the construction finance, would be another reason that is helping to cut the mortgage cost.
RBI brought this move in the month of January, till now, almost March middle week has started but the banks has not translated this scheme into action. A cumulative cut that is costing 0.5% will be improving the lending powers of the financial institutions. It allows financial institutions to cut down interest rates on housing loans which will become advantageous for the customers in the real estate field, stated review on Amarprakash builders. On the month of March, 2015, RBI slashed the repo rate by 25 basis points that is to 7.5%. The reduction in repo rate is done so that the central bank can lend money in this rate to the commercial banks. After January, 2015, the RBI had decided to reduce the rate by 25 basis points.
Though demand for housing may not be restored immediately with the rate cut, a positive sentiment can be noted in the final move towards ground action. It is expected that the rate cut would bring better sales rate for the section of builders and also decrease in the cost of construction financing, reported review on Amarprakash builders.Though this move of reduced interest rates is effective into action, the banks could take a month or more to implement the change. After April, the property purchasers can expect EMI for lower rate. It is expected that the intensity and frequency of rate cuts may vary when the rate cycle is turned. The demand for property market has been reducing over 2 years since housing cost is unaffordable along with high interest rates.
Sales of residential homes have failed in Indian market by around 40% in top 10 property markets, including Delhi, Chennai, Mumbai etc. Already 8 to 10% drop in cost is provided by some of the builders in the form of discounts and incentives. But, with these discounts, the market has not responded effectively which made project launches drop by almost half percent during same time. The real estate builders have been waiting for a long time for a cut in interest cost since it can only bring changes that direct discount and incentives can't bring. As per industrial experts, it is hoped to restore the housing demand post July.