Recently, RBI reduced repo rate by another 25 basis points. It is expected to bring down construction costs and home loan interest rates, giving a boost to the real estate sector. RBI has cut the repo rate by 50 basis points since February 2019, bringing it down to 6 percent.
“This step by RBI is going to augment the real estate sector. The sector has already started improving after several steps taken by RBI and the government,” says Jayesh Dave. The March quarter has witnessed 12 percent increase in housing sales across the top seven metro cities, all credit goes to various measures by the government and RBI.
“After reducing the repo rate, RBI has done its work. Now banks should reduce home loan interest rates further so the step by RBI could reach end term customers. Doing this will encourage people to purchase property,” said Mr Jayesh Dave. He also added that lower interest rate clubbed with reduced GST rates for under construction properties will enhance the demand of property amongst the buyers, improving overall real estate sector.
Repo rate is the interest rate at which RBI lends money to bank. Lower cost of borrowing directly impacts the EMIs you are paying for your loans. For instance, if the current rate of interest offered by SBI is 8.75% then consider a Rs 30 lakh loan amount for 15 years tenure for your home loan and the EMI which you will have to pay will be Rs. 29,983. But with the reduced interest rate to 8.5%, your EMI will come down to Rs. 29,542. The total amount which you are going to save will be Rs. 80,000.
“At large the repo rate reduction is going to affect the overall Indian economy. It will reduce the borrowing costs of MSMEs, corporates and retail borrowers. This will boost the private consumption and private capex. Also, this will definitely bring up private consumption and housing demand,” stated Jayesh Dave.
Eligible new borrowers can take advantage of Pradhan Mantri Awas Yojana (PMAY). The scheme offers credit-linked subsidy based on your annual income under the flagship ‘housing for all’.