The
Reserve Bank of India on Thursday cut the key interest rates by 25 basis
points. This news will bring good cheer to borrowers who have home and consumer
loans as a cut in interest rates translates into cheaper EMIs. The slowing
inflation has led to this cut, experts say.
The repo
rate is the rate at which the RBI lends to other banks. The repo rate has a
direct impact on home loan rates and a hike in this rate would mean that anyone
who has taken a home loan will have to pay more. Conversely a cut in the same
lowers the burden on the home loan takers. The repo rate before the cut stood
at 8%. It has now come down to 7.75%.
The cut
in rates comes after 2 years. The move has pleasantly surprised many industry
watchers. The effect of this decision is already being felt as the state-owned
Union Bank and United Bank have lowered their lowest lending rates. One can expect
many more such state owned and private banks to start lowering their borrowing
rates in the coming days.
The good
news for borrowers does not stop there as the RBI has hinted at further rate
cuts in the near future. The move has been lauded by the many in the real
estate industry who say that this could pave way to an increase in housing
demand. It will also serve to buoy the sentiments of the realty sector.
C Shekar
Reddy President CREDAI – National said, ‘Considering the overall economic
situation and challenges being faced by the industry, we welcome the reduction
in repo rates, which will ease the burden on the buyers and developers. The
decision of RBI to cut the interest rates was long overdue in the environment
of lower inflation and poor domestic demand. The home buyers were upbeat but in
a wait and watch mode due to high prevailing interest rates. We are hopeful
that with this interim announcement of rate cut the banks will take the cue and
pass on the benefits to the end user which will trigger the demand and off take
of housing. We are hopeful that keeping in view the low inflation RBI will
continue the change of stance in the monetary policy and address the industry
concerns for growth and give the necessary impetus.’
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