The real estate industry on Thursday hailed RBI's decision to cut repo rate by 0.25 per cent, saying the move will help the sector to tide over the liquidity crisis.
"The reduction in repo rate by 0.25 per cent is an excellent move as this should help the industry and business in general to tackle liquidity crisis. In fact, there is further scope to ease the credit policy," Confederation of Real Estate Developers' Association of India (Credai) Chairman Lalit Kumar Jain said.
The Reserve bank of India reduced the repo rate by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect.
"Given that the recently-presented Union Budget did not have any major announcements aimed at directly boosting home buying to lift the listless real estate sector, there were higher expectations from the RBI by the stakeholders. Housing developers have been anxiously hoping for interest rate cuts to spur home buyers into making purchase decisions," Cushman & Wakefield Executive Managing Director, South Asia Sanjay Dutt said.
He further said the hike in service tax rate from 12.5 per cent to 14 per cent will increase the costs of buying and unnecessarily prolong the rebound of housing sales.
"Even while the magnitude of the rate cut is 0.25 per cent, the move will build the confidence of developers and buyers alike that there are more rate cuts in the offing, provided of course, that inflation maintains its downward trend or remains stable," Dutt said.
Commenting on the announcement, HDIL's Vice-President, Finance and Investor Relations Hariprakash Pandey said, "This move is set to benefit the entire real estate sector. A rate cut would help in bringing down the mortgage rates and at the same time secure more working capital. The impact on borrowing cost is also encouraging as a 0.50 per cent reduction in borrowing cost can reduce the interest cost substantially by 10 per cent."
"With two cuts in a span of one-and-a-half months, the apex bank has given the right signals and it's time banks reciprocated."
The impact of the cut has already been felt in the market with Sensex scaling 30,000 mark and this reduction will boost the morale of consumers, investors and India Inc," Omaxe Chief Executive Mohit Goel said. Echoing similar views, Tata Housing Managing Director and CEO Brotin Banerjee said, "The rate cuts announced in January had not translated into action by banks, but a cumulative cut now amounting to 0.5 per cent will enhance lending powers of the banks. It will permit banks to cut down interest rates on home loans."