Cost of funding for realtors may fall marginally

Some industry observers feel that the cost of funding for real estate developers may decline marginally following the reduction in the repo rate by the Reserve Bank of India (RBI). On March 19, the central bank cut the policy repo rate by 25 basis points (0.25%) to 7.5 percent. Any kind of relief to developers is important at this stage, since they have been burdened with ever-increasing development and borrowing costs for the last two years while at the same time being under pressure to keep sale costs rational, some industry players said. They feel that the RBI's action indicates a positive direction for the economy in general and therefore also for the real estate sector, whose performance is directly wired into the country's basic economic fundamentals. Following the cut in repo rate, banks may be able to offer loans at more attractive rates. Cheaper loans for home buyers will prompt a renewed interest in residential property purchase from end users and investors. Banks may revise the base rate, which would benefit old home loan borrowers who are currently paying much higher interest rates than new borrowers would. We feel that this would be an important move by banks and help them contain client attrition, industry observers opine.