Housing demand will get a big boost with interest rates on home loans becoming cheaper following steep cut in lending rates by major banks, including SBI, according to real estate developers and consultants.

Banks are cutting lending rates after spurt in deposits following demonetisation of old high denomination currency notes of Rs 500/1,000.

Housing sales have been sluggish since last few years due to low demand.

"Good news has started coming for housing and construction sector. Interest rates cut by all the banks will lead to demand being raised substantially," DLF CEO Rajeev Talwar told PTI commenting on the lowing of interest rates.

"If project finance is also extended by the banking sector and moratorium on repayment of principal is also allowed, then there will be a huge jump in the number of projects being completed and new supply coming into the market.

"This would ensure that housing prices, which has already fallen by 25-30 per cent in last 3 years, will continue to remain at the lower levels," he added.

Property consultant JLL India Chairman and Country Head Anuj Puri said: "Banks have brought down the interest rate significantly. That will definitely help in improving the sentiments as well as purchasing power in the hands of home buyers. Initiative like this will help in improving the demand in residential segment across various cities".

Commenting on the lowering of interest rates on home loans, Sobha Ltd VC & MD JC Sharma said: "The steep cuts announced in the home loans, up to 90 basis points, will be a shot in the arm of the home buyers as their borrowing costs will come down significantly and their affordability factor improves simultaneously. It is expected that demand for homes will get significant boost with this welcome step".

Online realty brokerage firm PropTiger Chief Business Officer Ankur Dhawan said: "It is one of the best gift industry could have got in the new year. This is one of the largest cut in interest rates we have seen in the recent past and will improve eligibility of home buyers significantly." 

Besides SBI, other lenders like ICICI Bank, Kotak Mahindra Bank, Dena Bank, Bandhan Bank, Andhra Bank and Oriental Bank of Commerce have slashed MCLR. Yesterday, PNB and Union Bank of India had also reduced the lending rate.