India's liquidity-starved economy will restrain housing market activity and price rises in coming months and into 2020, according to a Reuters poll of property market experts who were skeptical aggressive interest rate cuts will revive it.
A majority of respondents in the Aug. 13-27 survey said risks to those already-modest predictions were skewed more to the downside.
That comes despite the Reserve Bank of India having slashed its repo rate by 110 basis points so far this year, to 5.40%. It is also expected to cut it further to 5.15% over the coming months to revive a slowing economy.
However, much of that easing has not reached borrowers as banking and non-banking financial companies (NBFCs) are still grappling with very large bad loans on their balance sheets, which has led to a liquidity crunch.
The government's own assessment is that the lack of available credit is the worst in over 70 years.
"It is my expectation that we will continue to see more defaults over the next few years as developers are still facing liquidity issues due to slow sales and lack of refinancing options," said Siddhart Goel, principal consultant and founder at ARAIS Consulting.
"Even the recent rate cuts will not have a positive impact on the situation as easing by the Reserve Bank of India (is) seldom passed on by the banks to the loan seekers and never in the same quantum."
Indeed, nearly three-fourths of 18 analysts who answered an additional question said the RBI's interest rate cuts this year would have no impact on the housing market. Five said it would be stimulative and none said very stimulative.