The RBI (Reserve Bank of India) retained unchanged interest rates on 6th August, 2021. This was the 7th successive time that the RBI kept rates unchanged for backing economic growth and revival. Shaktikanta Das, RBI Governor, stated that the considerable lending rate reduction on commercial realty and personal housing categories will boost the economy since the sectors are linked to high employment. There was a unanimous vote at the 6-member Monetary Policy Committee for retention of the key repurchase rate of 4% although they were divided on retaining the lower-for-longer approach. Das also stated that transmission has improved in the present easing cycle, adding that repo rates have lowered by 250 basis points from February, 2019. This has led to WALR (weighted average lending rate) coming down by 217 basis points on rupee loans according to him.
He also talked of how the lending rate dip has lowered overall household burden. The loan servicing burden has eased up to an extent according to Das. Experts feel that the unchanged rates will be favorable for borrowers since floating retail loan interest rates are at their lowest thresholds over the last couple of decades. Continuing this regime will naturally boost housing affordability according to experts. Some feel that sentiments are positive with repo rates coming down by 250 basis points overall from February, 2019. The GDP outlook is forecasted at 9.5% for FY2021-22.
Retail home loans are expected to increase with NPAs at lower than 2% and this indicates fundamental housing demand growth owing to security and stability in tough time as per leading market players. The low rates will give buyers a financial cushion and regulators may consider scaling up credit for projects which are stalled through allowing higher SWAMIH funds. This will help in combating the prolonged realty industry slump. The developer community remains positive about home loans remaining more affordable.
With stamp duty cuts announced earlier by States like Karnataka and West Bengal, demand may skyrocket soon for affordable and mid-segment homes according to the Co-Founder & CFO at Square Yards, Piyush Bothra. He also feels that new home launches will get a boost while overall market conditions will be more conducive for aspiring homebuyers. The residential realty segment is witnessing signs of recovery with economic conditions improving and businesses reopening steadily. Lower rates on home loans, the RBI’s pro-active stance, stable pricing and attractive payment plans and incentives from developers are reasons for higher sales owing to pent-up demand. The sector should recover strongly in H2 201 as per experts, if COVID-19 cases continue going down.
The continuation of historically low rates of interest will make sure that home loan rates stay at lower levels while aiding a recovery in the realty space. Several developers are also getting borrowings refinanced at lower rates of interest and staying afloat at this critical time as per some market players. A large number of homebuyers is expected to invest in real estate with the RBI keeping repo rates unchanged.
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Published Date: Aug 06, 2021
