Realty stocks mixed after RBI policy; all eyes on transmission of interest rate cuts by banks

The real estate sector is still saddled with 6.56 lakh unsold housing units.

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NDA majority will boost infrastructure demand. Further, a rate cut and current liquidity issues at the NBFC level augurs well for large developers with strong execution track record and healthy balance sheet.
Rate-sensitive real estate stocks were trading mixed in the afternoon trade despite the Reserve Bank of India (RBI) on Friday cut its key rates by 0.25 per cent.

The BSE Real Estate index was down 0.49 per cent at 1,913. Indiabulls Real Estate, Prestige, Sobha and Sunteck were down between 2 per cent and 5 per cent.

On the other hand, DLF, Oberoi Realty, Phoenix, Omaxe and Godrej Properties were trading in the green.


Anuj Puri, Chairman – ANAROCK Property Consultants said that the repo rate cut is in line with expectations.

“RBI had room for such a rate cut. It can probably go some way in improving consumer sentiments ahead of the festive season, which is a crucial quarter for the real estate sales. However, much depends on how efficiently banks transmit the benefits to their home buying borrowers. An efficient transmission will lower the cost of capital not only for consumers but also for developers, making room for price revisions and further discounts. Some banks have agreed to link their lending rates to the repo rates, but all major lending institutions need to follow suit,” he said.

The real estate sector is still saddled with 6.56 lakh unsold housing units (as of Q3 2019) across the top 7 cities, and developers are struggling to raise funds to complete projects and launch new ones.
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With first quarter GDP growth plunging to 5 per cent, the RBI cut its estimate of economic growth in the current fiscal to 6.1 per cent from its earlier estimate of 6.9 per cent.

The repo rate, at which it lends to the system, has been brought down to 5.15 per cent to help reduce borrowing costs for home and auto loans, which are now directly linked to this benchmark.

This is the fifth straight cut in rates by the Reserve Bank in its key rates in as much policy reviews in 2019, and takes the total quantum of reductions to 1.35 per cent.
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