The Reserve Bank of India (RBI) in its MPC meeting held on Friday kept the policy price unchanged at 4.%, though sustaining an accommodative stance. With customer inflation nonetheless trending at the upper finish of the apex bank’s band, and the policy repo price also getting substantially lowered by 115 basis points due to the fact February 2020, the RBI kept the prices on hold, with an eye on how the inflation and the financial recovery pan out in the coming months. Advance estimates indicate that the Indian economy may perhaps contract as considerably as 7.7% in FY2020-21 due to the pandemic.
“In such a scenario, one would usually expect the RBI to cut the repo rate in order to boost consumption. Certainly, the real estate industry always aspires for reduced interest rates. Housing demand is reviving, and this demand needs to be fostered. However, the RBI’s current stance is absolutely justified, given the unique circumstances. We are certain that rates will be adjusted favourably once the pandemic exigencies ease,” stated Anuj Puri, Chairman, ANAROCK Property Consultants.
Developers stated the selection to preserve the repo price unchanged will make sure that dwelling loan interest prices will not harden anytime quickly and continue to stay eye-catching. This ought to augur nicely for dwelling shopping for sentiment.
However, “going further, the real estate sector still requires further relaxation in policy rates and a cut in interest rates as these measures will reduce the overall cost of buying a property, which will be a direct stimulus for homebuyers. It is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption. We are upbeat as consumer sentiment is high, especially after they witnessed the brittle nature of other investment vehicles compared to real estate. We also hope that the government looks into specific measures to enhance ease of doing business for the developers and boost residential uptake in the upcoming months,” stated Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.
With a development-focussed price range lately presented by the finance minister, that additional supports the government’s aim of nurturing the economy, this status quo will additional enable demand creation, which includes for higher involvement goods like true estate.
“As most global agencies have touted, India is expected to recover faster from the COVID-induced slowdown mostly based on the restoration of the domestic consumption – which has greatly benefitted from the benign interest rate regime and infusion of liquidity. As seen in the past few months, housing markets in the country have responded well to low home loan interest rate. Given the interlinkages of the housing market with other sectors of the economy, we believe that low interest rate for a sufficiently long period of time will help build a strong and broad-based demand momentum in the Indian real estate market,” stated Shishir Baijal, Chairman & Managing Director, Knight Frank India.
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com, stated, “The decision of RBI to keep the repo rate unchanged along with accommodative stance is understandable at this juncture, although a further cut in the key rates would have given a boost to current demand uptick that we have seen recently. The measures announced by the RBI Governor today for liquidity enhancement in the economy is indeed a good step and was much required. Real estate has been badly hit during the pandemic and the recent Budget announcements and the RBI’s decision today will help the sector to cope up with markets’ uncertainties better in the near future.”
RBI measures on enhanced bank funding window for NBFCs will also advantage the stressed sectors, which includes true estate.
“The real estate sector has always been looking for easy liquidity, and the RBI has decided to raise it by allowing more funds to NBFCs, which would keep liquidity in the market and may also help the real estate sector. While real estate needs several measures, it is good enough to implement the announcements made in the last few months to achieve progress. We expect banks to disburse loans more quickly to ensure that the sentiment of buyers remains high,” stated Uddhav Poddar, MD, Bhumika Group.
Ashish Bhutani, MD, Bhutani Infra, stated, “The last significant announcement for the commercial segment was in February 2020, when the RBI allowed project loans for commercial real estate to be extended to the date of commencement of commercial operations (DCCO). The segment is in desperate need of liquidity, which also depends on the status of the priority lending, and we hope that the segment will get sufficient liquidity as the RBI said TLTRO is available for NBFCs.”
Apart from the present measures, realtors can also rely on the the initiatives previously announced by the RBI.
Ashok Gupta, CMD, Ajnara India, stated, “Backed by the growth forecast, the real estate sector can rely on the initiatives previously announced by the RBI. Over the past few months, the apex bank has taken a range of steps targeting the real estate market, such as rationalising risk-weighting criteria, connecting home loans to LTV, and reforming project-based loans. As home loan interest rates are already low, the growth curve is likely to be sustained by demand in the residential sector. With banks launching onboarding digital customers, the quicker disbursement of loans would also help the sector quickly close deals. To attract borrowers, several banks have already declared exemptions on transaction fees and other related costs.”