Housing Sector To See Revival In Q1FY20 After GST And Repo Rate Cut

As against hopes of an yet another dismal year for the housing sector in the wake of elections, a repo rate cut by RBI's MPC and the earlier GST rejig on housing is likely to push sales and demand high for the first quarter of the FY'20.

Some of the moves in the recent past are to augur well both for the developers and home buyers. In the last week, RBI cut repo rate by 25 basis points and asked banks to pass it on to end consumers as lower lending rate, as the transmission of key rates has not been at a similar level.

"The Reserve Bank of India (RBI) on its part has been proactive on slashing lending rates. However, the onus is now on banks to ensure that there is a stronger transmission of these rate cuts. Once this happens, it is likely to encourage fence-sitting consumers to undertake buying decisions, thereby providing a fillip to the residential sector," said Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO), said: "The Indian economy needs liquidity as fuel to power the growth engine. The RBI move is expected to lift industry sentiments, as also provide relief to various stakeholders like corporates as also in real estate, home buyers. We expect that banks further pass down the benefit of the rate cut to home buyers which shall further trigger the home buying into the actual sales."

Also, new GST rates that come into effect from the beginning of the new FY'20 will also spur the ailing housing sector. In February, GST Council lowered the tax on under-construction properties to 5 percent from 18 percent, and affordable housing projects to 1 per cent from 8 per cent. The new rates, however, come without the benefit of the input tax credit (ITC).

Last quarter sales also provide fresh momentum to sales of housing units for Q4FY19 as sales were robust during the quarter. For the fourth quarter of FY19 or first quarter of the calendar year 2019, as against the regular trend of tepid sales just ahead of general assembly elections, sales of housing units surged by as much as 12% across 7 metro cities.

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