Consequences of the Repo Rate Cut

With the cut in repo rates by the RBI, 79% of floating rate loan customers will benefit immediately from lower costs. The liabilities that are pegged to the repo rate stand at 12% for a company such as Aadhar Housing Finance. These direct repo rate cuts can be translated into direct benefit as far as lower costs are concerned, which can be passed on, right away.

Consumer Advantage

• Borrowing Impact
  • The repo rate cut works for consumers since 80% of all borrowings in this housing finance domain are on floating rate systems and can thus reduce EMIs for home buyers in general.
• Rushed by Government
  • The cuts are tellingly good since they indicate growing faith in the strength of the Indian economy, even when faced with global upheavals. While we don’t seem to be seeing any further cutdown for now, some liquidity measures may help down the line.

For Increased Transparency by RBI

• Disclosure Needs
  • NBFCs, MFIs, and HFCs must now publish the interest rate slabs applicable to different types of loans, on their respective websites, every month. This move towards curbing exorbitant rates and enhancing transparency will empower consumers with the knowledge to make informed choices.
• Thus, the RBI continues to observe lending practices closely, particularly with regard to unsecured lending, and urges corporations to practice caution.

Affordable Housing Taking Re Definition

• Old Definition
  • This is defined as affordable housing with an upper limit of ₹35 lakh for the metros and ₹25 lakh for the non metros, considered increasingly out of touch with the current property prices.
• Amendments suggested
  • Aadhar Housing Finance suggested an increase in the limits for affordable housing from ₹45 lakh for the metro and ₹35 lakh for the non metro, which will allow a huge increase in access to affordable housing.