The slew of measures announced by the Reserve Bank of India (RBI) last week have brought some relief for the cash-strapped real estate sector. A cut of 100 basis points (bps) in both repo and reverse repo rates and restructuring of commercial loans have come as steps which can boost demand.
In fact, it is felt that government giving priority to housing loans up to Rs 20 lakh will bring affordable housing into focus once again. But in what way will these benefits be passed on to consumers? And how much will these measures help in reviving the realty growth?
Sachin Sandhir, MD & country head, Royal Institution of Chartered Surveyors (RICS) India, feels that the RBI's move will help reposition the sector as a priority one and bring it on par with other sectors.
"The across-the-board rate cuts by the RBI is expected to bring in more liquidity into the system by reducing the cost of borrowing for both corporates and retail consumers. Overall, this is a positive move as it signals the easing of interest rates, thereby increasing demand. This will infuse more liquidity into the system and lead to reduction in interest rates, eventually helping the market to expand and diversify."
What also comes as a positive measure is that housing loans below Rs 20 lakh will be categorised as a priority sector. This means that consumers can now get double benefit in terms of a reduced interest rate as well as more affordable pricing. Hence, properties in the range of Rs 25-30 lakh will become more accessible for the end-user.
"Buyers now have the advantage of getting better prices for their dream homes. Locations in Delhi NCR such as Ghaziabad, Faridabad, Manesar, Sonepat and others will be conducive. Also, developments surrounding tier II & III cities such as Mohali and Zirakpur and all outlying areas of Hyderabad, Bangalore, Kolkata and Pune will be viable locations," says Rohit Malhotra, CEO, Realtech Group.
Targeting tier II and III towns as well as NCR are locations where you could look to avail of the loan advantage, feels Vijay Jindal, CMD, SVP Builders India. "End users were waiting for a reprieve in home loan interest rates. The measures announced by the RBI will be a big help. The benefits will clearly be passed on to the consumer as developers have already started targeting the affordable bracket for the end-user and will further step up their efforts now," says Jindal.
Clearly, the consumer stands to gain in the wake of the recent RBI measures. So what should be the buyers' outlook now? Experts say the disadvantage of waiting too long is that one could lose out on best properties as well as on lower rates which will not hold once the market regains equilibrium.
"The reality is that a reduction in interest rates along with a 20-25% correction in property rates is an ideal situation and the prospective home buyer should take advantage of this situation as the resulting EMI will be a lot more affordable," adds Sandhir.
In fact, people familiar with the trends feel that the present situation is ideal for a buyer looking at a value buy. "The situation today is buyer-friendly, especially for the end-user group. Developers are keen to sell their projects and hence are offering the best value deals.
Banks are also supportive in lending and extending various long-term schemes. The market is good for projects which are ready-for-possession. One can get attractive deals at best locations as the developers want to sell their unsold stock," asserts Punit Beriwala, MD, Vipul.
However, even though end-users have incentives right now to buy, real estate players still have challenges to face. For most realty firms facing an acute credit crunch, the recent initiatives mean a limited impact. Rohtas Goel, CMD, Omaxe, feels that the current move will solve some of the current liquidity crisis for many real estate companies.
"Restructuring of loans will alleviate the liquidity problem for the moment. That I think is a positive development for many of the struggling real estate companies today. It is a small point but it is a significant point."
Beriwala, too, is cautious and feels the benefit to the real estate sector is yet to be seen. "Much depends on the banks to announce a policy change to ensure that this extra money is pumped into the realty sector by making funds easily available to developers. We also look forward to banks reducing the home loan rates which will bring the customers back to the market."
The housing sector is one of the most significant sectors in the economy. These steps, no doubt, will offer some relief to those looking at value-for-money buys. With the latest RBI initiatives, the market is in all likelihood expected to see a revival of demand in the near future.
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