‘Home buyers set to gain on RBI Governor’s statement: quarter percentage point reduction in interest rates reduces EMI on a 20-year Rs 50 lakh home loan by Rs 850’: Niranjan Hiranandani
MUMBAI, APRIL 08, 2015: The Reserve Bank of India (RBI), as part of its policy review on 7 April, has maintained status quo and kept interest rates at 7.50 per cent. “RBI Governor Raghuram Rajan after announcing the rate cut status quo said he was granting banks more time to reflect its previous rate cuts. The RBI Governor refuted claims that the cost of funds for banks had not fallen. In what seems like a reaction to this stance of the RBI Governor, three leading banks announced having reduced their lending rates,” said Niranjan Hiranandani, MD, Hiranandani Constructions Pvt. Ltd. (HCPL).
“ICICI Bank has announced a reduction in its base rate by 25 basis points to 9.75 per cent, HDFC Bank and State Bank of India have announced reducing their benchmark base rate by 15 basis points to 9.85 per cent from 10 per cent. Home buyers will gain as a result, and I hope that competition will result in other home finance institutions following suit,” said Niranjan Hiranandani.
By rough estimates, a quarter percentage point reduction in interest rates reduces the equated monthly installment on a 20-years tenure; Rs 50 lakh home loan by Rs 850, said Niranjan Hiranandani. “From a real estate perspective, the revision in interest rates by Home Finance Institutions has the potential to be a ‘trigger’ and bring in a positive sentiment in the real estate industry,” he said.
The RBI policy review on 7 April was the first such event following the first full budget presented by Finance Minister Arun Jaitley.
Lower interest rates for project finance and home loans have the potential to be a key ‘trigger’ for real estate, everyone understands this, said Niranjan Hiranandani. “We have seen two unscheduled rate cuts since January 2015, which brought the repo rate down by 50 basis points to the existing 7.50. In the near future, I expect further rate cuts. It is anyone’s guess when we will have the next ‘rate cut’ from the RBI,” he said.
In a lighter vein, Mr Niranjan Hiranandani pointed out that the two unscheduled rate cuts this year happened on festive days. “The festival of Akshaya Trittiya, which is perceived to has positive connotations for real estate, is coming up on 21 April. I have my fingers crossed and am hoping for some good news from RBI,” he concluded.
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