Rapo Rate Cut
In a latest initiative, while carrying out certain changes in its credit policy for the current fiscal, the RBI has effected a 25 basis points cut in the repo rate at which it lends funds to the banks and the move has signaled that rate of interest for the residential housing are all set to go downward. The RBI also said in a statement that residential housing projects are less risky as compared to other sections of the segments including commercial real estate making crystal clear that lowered rates on loans to developers to implement housing projects are on the card. However, the PSU banks are still apprehensive and they may lower interest rates only for fresh borrowers and not to existing ones. They explained that banks are unlikely to implement rate cuts on housing loans through a reduction in the base rate. They would prefer to lower the differential charged over and above the base rate. This would mean that the interest rate would not be reduced for existing borrowers, but would drop for fresh house buyers.