How will RBI slashing REPO rates will boost housing sales

Owning a house is the ultimate goal for most Indians, most of us spend a good part of our lifetime in fulfillment of this dream.

The ever-increasing land rates too had made it close to impossible for the commoner especially in urban areas to opt for ahome loan. This is all expected to change with the slashing of REPO rates by RBI and this might just be the best time to take a home loan.

REPO Rate Cut:

The Reserve Bank of India has decided to cut the REPO rate by 25 points a 7-year low, it is now 6% from 6.25%. The last time the REPO rate was reduced in October 2016 making this the lowest since 2010. RBI is expected to stay with this rate until 2019.

This move comes due to inflation running well below RBI’s target for multiple quarters. The rate cut now puts the ball in the court of the banks to reduce the rate of home loans across the country. Before we talk about how REPO rate affects the home prices let’s see what REPO rates are.

What is REPO rate?

REPO rate or repossession rate is the rate at which the RBI lends money to other banks. REPO rate is used to reduce inflation in the country. In the event of inflation RBI increases the REPO rate to make it unfavorable for banks to borrow money and in turn makes the bank to circulate less funds through its services.

How does REPO rate affect Home prices?

With the REPO rate slashed, banks can borrow more money from RBI at a lower interest rate. Experts are expecting banks to pass on this advantage they get to the customers where banks can provide more home loans at a lower interest rate.

The lower interest rates directly translate to reduced EMI burden for new home buyers.

Individuals with existing home loans under a floating loan rate however will have to wait till their reset period is over. The reduction in REPO rate will also encourage those looking to do a balance transfer of their existing lenders.

The housing industry too can expect a boost in sales and expect this growth to feed into related sectors. This is the best time for people who are living in rented houses to get their dream homes through home loans and paying lower EMIs.

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