After a raft of reforms, the government has announced the implementation of the Seventh Pay Commission’s recommendations. This, coupled with a good monsoon, is expected to boost demand both in urban and rural areas. Speaking to Bloomberg TV India , HDFC Vice-Chairman and CEO Keki Mistry says a rise in income spurs demand for housing more than interest rate cuts. The impact of Brexit on India will be very limited, he adds. Excerpts:

Markets are rallying on reforms and monsoon progress. Are we finally entering a period of accelerated growth?

After the approval of the Pay Commission mandate, the next trigger for the markets will be the monsoon. By all accounts, the monsoon looks good. So that’s a big positive. And the other thing which the market will look at now, will be the first quarter results. The impact that Brexit would have on India is very limited. Some impact on currencies and stock markets for a while, and then markets forget about it and revive.

What kind of impact do you expect in the demand for housing, particularly affordable housing?

I would always say there is a great attraction on demand — whether it is housing or any other item — arising out of increase in pay, rather than by a little reduction in interest rates. Reduction in interest rates helps a little bit, but it does not help as much as something like the Pay Commission hike, which leads to more money in the hands of people and willingness to spend it.

We saw a little bit of this happening in 2009. The Lehman crisis happened in August-September 2008 and then we saw a period of 6-7 months when everything in the market was very depressed, growth slowed down, people started losing jobs and a whole lot of negative sentiments.

And then in 2009, the world started reviving, the markets started reviving and things started looking a little better. And suddenly in the quarter of January-March 2010, markets just dramatically boomed — incomes went up, people started spending money, consumption increased and companies paid far more bonuses in January 2010 than they ever did in recent times because they had not given bonuses in the previous year. We have seen a massive thrust, a massive growth in demand from our perspective in terms of housing loans.

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