Dec 2017
29

Impact of RBI Monetary Policy on Real Estate Sector in India

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Impact of RBI Monetary Policy on Real Estate Sector in India Update

The real estate industry in India has undergone a number of changes in the recent years. A large number of prominent developers have come up with sophisticated estates. Commercial property, too, is in great demand today. The recent measures undertaken by RBI have cast certain effects in the real estate industry in the country. The repo rate cut is one of the important factors to mention in this context. The REPO rate has been revised, which is likely to bring about a positive impact in the real estate market. The loans provided by banks will come with more attractive rates, following the RBI policy. Well, in the last couple of years, various economic reforms have been incorporated in the country. These include demonetization, GST, inception of RERA and other measures. As a result, the economy has slowed down to a certain extent. The GDP in India is poised to grow at the slowest rate in the last decade, following these economic reforms. Although these measures have been undertaken keeping the long-term economic goals of the country in mind, the immediate effect has resulted in the slowing down of the economic growth.

In order to cope up with this stagnant condition, RBI has come up with the strategy, particularly aiming to recover the health of the Real Estate industry. The REPO rate has been lowered by RBI by 25 basis points, to 7.5%. This is likely to attract investors who seek bank loans for investing in residential and commercial properties. The sentiments around the real estate market will have a positive influence as a result of the lowering of the REPO rate. The investors will gain the most as they can get cheaper home loans as a result of this policy. The overall financial flow in the real estate sector is likely to receive a boost and the health of the industry is likely to come back to form in the coming months. The buyers will also get a reward interest when they purchase residential property from the end users as well as investors. The base rate may be revised by the banks, which is likely to benefit the old borrowers opting for home loans. They are presently paying much higher rates of interest than the new borrowers. The availability of cash at the hands of home buyers is likely to stimulate the business and the real estate industry is expected to be back on tracks, following the monetary policy.

Apart from this, the economic policy will benefit the real estate developers to a certain extent. The cost of funding will undergo a drop, and the developers will benefit from this. This is a sort of relief for the developers at this particular stage. Following the past reforms in the economy, the development in the real estate sector had slowed down. The developers had been burdened with costs of borrowing and developing for the last couple of years. At the same time, they had to maintain a rational sales cost. The availability of Home Loan at low rates of interest will favour the business, as more buyers will enjoy the purchasing capability.

As a result of this economic measure, the real estate industry will move in a positive direction. The economy, which was going through a dull phase, is likely to get a boost, following the reform. Homeowners, too, will enjoy a better financial condition while buying residential and commercial properties.

Updated: 2/24/2018 6:26:59 PM
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