The RBI’s surprise 50 bps rate cut has lifted investor sentiment. While banks have started paring lending rates, Bloomberg TV India caught up with Rajeev Talwar, CEO of DLF, to find out how the housing sector is going to be impacted by the rate cuts.

The RBI has cut rates by 50 bps. Does it surprise you? What’s your expectation from banks?

It’s a very good and aggressive policy measure and I am sure this is a Diwali gift from the RBI Governor. The Finance Minister has being speaking of a three-way action, which is by the Finance Ministry, the RBI and now hopefully the national banking sector. And I think as far as the general demand is concerned, yes, the banking sector needs to come forward now and reduce the delta — the difference between their bank rates and the RBI rate. I think it’s also time to take an aggressive stance which the SBI Chairperson had suggested last month — that teaser home loan rates need to be introduced. One, this would give a big boost to GDP growth, which will mean greater activity on the construction front; and two, the sector will have more inventory sold off because you do need new buyers. I think what the Finance Minister has been saying is, yes, there would be fresh infusion of equity into banks as well as perhaps reduction of the government holdings, which will mean much more liquidity coming into the banks.

Everyone is really excited about this move, saying it’s coming just ahead of the festival season. Do see a rate transmission happening?

Certainly. I think we would see a huge impact. In fact, I was just reading a newspaper article last Saturday which said it’s raining discounts in the real estate market. So I think builders all over India are pretty geared up that should there be an increment in demand, they would do their bit. This has already been done over the past five-six years but add to it right now, get rid of unsold inventory and thereby give a huge fillip to new launches and new construction.

I think since there is a large unsold inventory, they would do well to offer more and more discounts and get rid of this inventory, get cash flow back into their systems and thereby promote more of ‘Make in India’ and more of construction projects within India itself to meet the demand.

The demand for homes, as we all know, is a huge demand which is pent up, specially in the affordable sector. I think a large number of realty companies would go into various segments, right from premium and luxury to affordable. And I think overall this is a very good move, and should the banks follow suit, there should be a great fulfilment of what the Finance Ministry is hoping for.

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