How does the monetary policy of RBI influence the real estate sector in India?

February 09, 2018 admin News

In recent years, the real estate industry in India has undergone massive changes. Several prominent developers are coming up with elegant residential complexes. The demand for commercial property, too, has increased in recent times. The RBI policies and the economic policies of the government policies have greatly influenced the real estate market in India. One of the important moves taken by the RBI is the revised REPO rate. This will probably have a positive impact in the real estate market. The buyers will be able to get home loans easily, at lower rates of interest. The economic measures undertaken by the Government include demonetization, inception of RERA, GST and other measures. Although these measures have been taken, eyeing a growth of the real estate sector in the long term, the economy in this industry has slowed down as an immediate impact.

The RBI has come up with a policy to deal with this stagnation in the market and revive the health of the real estate sector. According to the new RBI Policy, the REPO rate has been cut to 7.5%, a drop of 25 basis points. This will draw the investors, who need bank loans to invest in commercial and residential properties. The lowering of the REPO rate is likely to have a positive impact on the sentiments around the real estate market. The investors will get maximum benefits, as they will be able to get cheaper loans to develop the homes. The financial inflow in the sector will get a boost, which will revive the health of the industry in the coming months. Buyers will also be benefitted, as they will get a reward interest while purchasing property from the investors and end users. They will find it easy to buy residential property in India. The banks are likely to revise the base rates. The old borrowers will be befitted, when they seek bank loans. At present, they are paying higher rates of interest than the new borrowers. As more cash will be available in the hands of the buyers, the business will get a boost and is likely to be back on tracks in the coming months.

The new economic policies will benefit the developers to a certain extent. The Real Estate Investment Trusts have also come into the market. The real estate industry will witness a drop in the cost of funding, which is likely to benefit the real estate developers. At this stage, it will be a relief for several developers. After the economic reforms last year, the industry has slowed down and the developers are facing problems with getting the funds for developing the projects. They need to borrow the sum and maintain a rational sales cost at the same time. When home loans are available at a low rate of interest, most of the buyers will get the purchasing capacity. This is likely to favour the business.

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