Good things have started to happen. International crude oil prices have dropped significantly, which has brought fuel prices down by about 15 per cent in the last couple of months. Since about 75 per cent of India’s crude oil needs are met through imports, this significant drop in prices is good news and can have a positive effect on other economic aspects as well.
With the drop in domestic fuel prices signalling a drop in inflation, it may also signal a softening of interest rates. Industries are hoping that in the next fiscal policy (due December 2) the RBI will finally start taking a lenient stance and bring interest rates down. This could definitely prop up various segments, significantly real estate. If funds get cheaper, banks and financial institutions will be able to lend money at lower rates, which would increase credit offtake by the housing segment and encourage new property purchases by individuals.
Borrowers who have been reeling under the high EMI regime of the last few years could breathe easy. Some banks and HFIs have already brought down lending rates on home loans to as low as 10 per cent, which has spurred the demand for loans.
Lower EMI outflows would also result in higher savings, which could help consumption levels, leading to overall economic growth and recovery. A note of caution: the RBI might consider the latest drop in inflation as a one-off thing, and may not be in a hurry to tinker with key policy rates. The central bank may wait another quarter to see if inflation continues to behave.
Since the long-term benefits of investing in real estate cannot be doubted, it’s a prudent decision to invest in good property.
With lower rates leading to more demand, the competition among property developers will hot up, which could lead to competitive prices and offers. That would mean a dual advantage of lower interest rates and attractive prices. Don’t forget, floating rates will be a better choice.
