Repo Rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. It is used by monetary authorities to control inflation.
A cut in Repo Rate has a positive influence on the Real Estate Industry in the following ways:
Firstly, it will boost affordable housing: Gaurav Gupta, General Secretary, CREDAI-RNE says, “Such rate cuts are helpful for housing projects falling under the affordable price segment. Home loan interest rates impact the home buying decision of middle class buyers the most as they hugely depend on financing.”
Secondly, it will reduce EMIs: The reduction in the repo rate will help reduce the EMIs of homebuyers and lessen their burden, as they are already loaded with various other taxes.
Thirdly, for the real estate sector, it will improve sales figures: The rate cut is anticipated to revive buyer sentiments and bring back some to the market, resulting in improved conversion rates and sale volumes as more potential customers will think of buying homes due to reduced interest rates.
Last, but not the least, it reduces interest rate on home loans: While the Repo Rates have been cut for the third time in this fiscal year, home loan interest rates have been cut only once. But this cut, might just force banking institutions to revise interest rates again.
This is why the real estate industry, along with investors and homebuyers look forward to Repo Rate cuts eagerly.