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RBI’s surprise rate cut may lead to cheaper home loans

RBI’s surprise rate cut may lead to cheaper home loans

The repo rate cut announced by the Reserve Bank of India on March 4 comes as a pleasant surprise to many in the realty sector. In a surprise move, the bank had reduced the repo rate by 25 basis points to 7.5 %. The last rate cut came in January when the central bank knocked off 25 basis points which put the rate at 7.75%.

Repo rate is the rate at which the RBI lends to commercial banks. A reduction in this rate could translate to cheaper home loans EMIs for the buyers. After the first rate cut in January, many expected the banks to pass on the benefits to the customers.

But this did not happen as many banks did not reduce their interest rates. With the second round of cuts, there is increasing demand from the realty sector to ensure that the burdens on the home buyers is reduced.

The realty industry which was previously quite displeased with the high interest rates charged on home loans has expressed its satisfaction with this move. “Considering the overall economic situation and challenges being faced by the industry, we welcome the second reduction in repo rates from January in the hope that it results in lower rates for home loans, which will ease the burden on the home buyers and create a positive traction in demand for housing.

rbi cuts repo rate

However, there is a need for larger cuts in the interest rates to facilitate reduction in EMIs and increasing the eligibility of the common man to buy a house,” said C Shekar Reddy, president of the Confederation of Real Estate Developers’ Association of India (CREDAI).

Reddy further added, “The critical issue that is hampering the growth of the affordable housing segment is the prevailing high interest rates that make housing unaffordable to the middle and lower middle classes. It is here that we demand the interest subvention to affordable housing by the private sector for the middle and the lower middle classes to create momentum and achieve the mission ‘Housing for all by 2022’.”

Kavitha Ravi for IndiaProperty.com

Source: http://blog.indiaproperty.com/rbis-surprise-rate-cut-may-lead-to-cheaper-home-loans

RBI’s surprise rate cut may lead to cheaper home loans

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