The Reserve Bank of India's second surprise rate cut outside the regular policy review may not boost the housing demand immediately, but is being seen as reversing the direction of rate cycle and kick-starting the housing demand.
Developers are excited by the move to soften interest rateswhich would make home loans cheaper and help improve the sluggish sales scenario. A possible reduction in construction finance, currently available at up to 16 per cent, is also seen helping them cut financing costs.
"The rate cuts announced in January had not translated into action by the banks, but a cumulative cut now amounting to 0.5 per cent will enhance lending powers of the banks. It will allow banks to cut down interest rates on home loans enabling new consumers to take advantage of the low interest rates in the real estate market," said Brotin Banerjee, MD and CEO, Tata Housing Development Company.
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