The Reserve Bank of India’s (RBI) aggressive rate cuts and liquidity push through the pandemic benefited real estate. Commercial properties reported a financing-cost decrease of 283 basis points-roughly three times the reduction in official policy rates.
One basis point is 0.01%.
As a result of the unprecedented lockdowns, the RBI cut policy rates by 115 basis points, lowering the cost of financing to its lowest level in history.
On average, the repo rate remained stable at 4%, although commercial real estate loans averaged 7.14% at the end of February 2022. Similarly, rates on home loans were reduced by 129 basis points.
Rates on unsecured loans dropped 218 basis points. Trade and agriculture had the least benefits with 5 and 64 basis points, respectively.
“Our conversations with lenders in recent months suggest extremely high levels of bullishness,” said MB Mahesh, director, Kotak Securities. “This implies that they are likely to go down the risk curve or duration curve, and borrowers are still quite wary to take credit.”
The transfer on outstanding rupee loans was the highest in the unsecured category, with rates lowering by nearly 165 bps and interest averaging 10.39%. Housing loans, too, got a substantial boost of 110 bps. Rates on outstanding loans to the medium and small sector declined by 124 bps, while rates on loans to large enterprises fell by 122 bps.
The low interest rate cycle is about to reverse, with the RBI signalling that inflation control is now its top priority. As a result, the country’s largest lender, State Bank of India, has increased its marginal cost of lending rate (MCLR) by 10 basis points for all types of loans, including residences, autos, and corporates.