In what will turn out to be a further boost to Indian real estate, the Reserve Bank Of India (RBI) has recently announced repo rate cut by 25 basis points. The announcement comes as a relief amidst weak global scenario and considerable dip in private consumption.
The repo rate has been reduced to 5.75% from previous 6%. The reverse repo rate was reduced to 5.50 percent. This is the third time this year that the Central Bank has reduced the key lending rates. Previously, repo rates were reduced in February and April.
This the first time in 2019 when all members of the MPC unanimously decided to reduce the policy rate by 25 basis and change the stance of monetary policy from neutral to accommodative.
“The MPC (monetary policy committee) notes that growth impulses have weakened significantly. A sharp slowdown in investment activity, along with a continuing moderation in private consumption growth, is a matter of concern,” read the policy resolution, Housing.com reported.
Noteworthy here is that repo rate is the rate at which the RBI lends money to commercial banks. The repo rate cut is expected to have some ripple effect in Indian real estate owing to expected reduction in home loan lending rates.
The Indian realty sector was anyway looking forward to a reduction in the repo rate since the anticipation of the MPC meeting.
Affects On Home Loan EMI
Assuming that the banks will be ready to pass on the benefit of the rate cut to the end users, the RBI’s announcement came as good news for borrowers as their EMIs are expected to go down. If banks pass on the entire rate cut from RBI in tandem, the borrowers will save approximately Rs. 474 per Rs. 30 lakh home loan.
Shishir Baijal, Chairman & Managing Director, Knight Frank India, shares his perspective on the #RBI #MonetaryPolicy for the #RealEstate sector. #KnightFrankIndia pic.twitter.com/qk3SQv2FPG
— Knight Frank India (@KnightFrank_IN) June 6, 2019