The coronavirus pandemic will spell another global recession. Trillions of dollars have been lost in the wake of this global crisis. Economies across the world have suffered irreparable damage which may take years to get them back on their feet again. However, a good tiding came from the United Nations Conference on Trade and Development (UNCTAD) report that India will be spared from this recession.
The United Nations Conference on Trade and Development (UNCTAD) in a report titled ‘The COVID-19 Shock to Developing Countries’ has mentioned that the world will face recession this year due to loss of global income in trillions of dollars. The economic fundamentals are intact and strong enough to sustain the global recession shock. The advantage for India, it has one of the largest consumer markets and the youngest working class in the world. Probably these are the reasons why India will stand tall during economic hardships.
The slew of measures taken by the Reserve Bank of India (RBI) last week will surely uplift the market sentiment and help to keep the economic fundamentals intact. Real estate leaders and experts welcomed the RBI’s move to cut repo rates and steps taken to maintain liquidity in the banking system. Through reducing repo rates by 75 bps and reverse repo rate by 90 bps, injecting funds of INR 3.74 lakh crores in the banking system through multiple measures and extending the moratorium of 3 months on EMIs of home loans, RBI has shown its intent to mitigate the risk emerging out of COVID-19 pandemic.
With the current reduction in repo rate and reverse repo rate, the home loan is expected to fall by 90-110 basis points. The RBI must ensure the benefit of these rate cuts to pass on to home buyers, it will help in the revival of residential real estate in the near term.
The stupendous cut in policy rates and the magnitude of infusion of funds in the economy were witnessed last time during the sub-prime crisis of 2008. These policy measures and fund injections bring back memories of 2003-04 when home loan rates were around 7%. In the current economic situation, if such rates are offered to home buyers then the real estate sector might witness another boom.
Priority sector classification by banks coupled with the alternative fund creation of INR 25,000 crore from the government will surely help to recover and resurrect the real estate sector in the coming months.