India Development News & Foreign Investment Opportunities

RBI Cuts Key Lending Rate

Will Real Estate Benefit?


Will Real Estate Benefit?


ANAROCK Property Consultants.
Anuj Puri.

As widely anticipated, the Reserve Bank of India (RBI) has once again reduced its key lending rate by 25 basis point. The lending rate now stands at 5.75, and this is the third consecutive rate cut since February 2019.

Even though the Indian economy is perceived to be in the grips of a slowdown, the markets are quite bullish on Prime Minister Narendra Modi’s return to power with a thumping majority.

This may eventually lead to mitigated risks in fiscal deficit – in all likelihood, it is sensing this that the RBI has made this rate cut.

As for the housing sector, this rate cut may only send out positive notional signals – its real gain can be realised only if banks pass on the benefits to actual homebuyer borrowers.

The apex bank will need to ensure that this actually happens at the ground level since there has been little evidence of such transmissions in the recent past, said Anuj Puri, Chairman of ANAROCK Property Consultants.

In the current scenario bereft with rising NPAs and the ongoing NBFC crisis, things look quite bleak at the moment, according to Puri.

The reason why most banks are not really able to pass on the benefits of RBI’s rate cuts is that their deposit rates are still very high. This ultimately makes reducing interest rates to borrowers unfeasible, he pointed out.

Nevertheless, this rate cut will only have any really significant impact on the housing market if and when banks reduce their lending rates to homebuyers, according to Puri.

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