Reserve Bank of India (RBI) announcing a drop in repo rate has given relief not only to loan seekers but also to the real estate sector. Builders are now hoping the real estate market in Bengaluru will pick up henceforth. Post-Ashadha, the real estate market has not picked up as expected, forcing builders not to increase prices. The industry says the move was expected as early as June this year, and though late, the decision will positively affect the industry.
Suresh Hari of CREDAI, Bengaluru, said, “Reduction in repo rate was expected much earlier. It should have been done at least by June. Even though it has come late, the time is very favourable. As the festive season is arriving and Ashadha has just got over, people are expected to invest now.” Hari says to promote investment further, builders will not increase prices.
He added, “Builders are giving a lot of discounts to promote investments. Once the repo rate reduces, the markets are expected to remain stable for the next one year. This will lead to reduction in payment period, reduction in outflow as well as more eligibility for customers. We are sure people will invest now.”
It is believed that the maximum advantage will be for customers looking for a dwelling unit at a range of up to Rs.80 lakh. Some real estate industry members also believe that a few more repo cuts should follow. Farook Mahmood, chairman and managing director, Silverline Group, says the only way to increase investment is through repo rate cuts.
Mahmood, who has more than 20 years’ experience in the Bengaluru real estate market, said, “People are expecting costs to reduce. However, that is not possible as the prices of raw materials have gone up drastically. Each and every material has increased in cost. Hence, rates are never going to come down. In such a scenario, the repo rate is the best way to benefit customers.”
As per various real estate reports, from January to June this year, Bengaluru recorded the highest number of new real estate project launches in the country. However, the city also recorded a 40 per cent drop year on year. In the last one quarter, there were 7,000 new launches in the city. However, there was a 14 per cent drop in new homes sales in the second quarter of this year. The unsold inventory in Bengaluru until August was 1,05,281 units, which is the highest in the country.
Satish BN, executive director, Knight Frank, said, “Rate correction is a sensitive thing for developers to do. Developers can re-look at rates depending on the position of the flat and competition around. Wherever possible, if they make reductions, the industry will pick up faster.”