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Updated on: Friday, August 06, 2021, 07:54 PM IST

RBI MPC keeps repo rate unchanged at 4%: Realty sector wants banks to 'sweeten' lending rates

RBI Governor Shaktikanta Das | File Photo

RBI Governor Shaktikanta Das | File Photo

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Welcoming the RBI's decision to continue with their accommodative stance, Pritam Chivukula, Co-Founder & Director, Tridhaatu Realty and Honorary Secretary, CREDAI MCHI, urged the Central Government to address the deteriorating health of MSMEs and various other sectors which have been severely impacted by the second wave of the pandemic and are still struggling to get back on track. "The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. The buyers are already coming back to the market and we feel that the upcoming festive season will be a lot better than the previous years."

The Reserve Bank of India’s (RBI) Monetary Policy Committee decided to keep MPC rates unchanged for the seventh time straight and continued with an accommodative stance, citing the need to support ongoing growth recovery amid continued uncertainty and global financial market volatility. at its bi-monthly policy.

RBI Governor Shaktikanta Das said that the MPC has decided to leave repo rate unchanged continue with the accommodative stance as long as necessary to support growth​.

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, said "The RBI and especially the MPC are to be commended for maintaining an accommodative stance for the seventh consecutive time now... The reduction in stamp duty charges in some parts of the country along with the all-time low housing loan rates have given the much-required fillip to sales activity in the last few quarters. The expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels."

The prevailing low home loan rates are ' enticing' for homebuyers, said Bhushan Nemlekar, Director, Sumit Woods Limited. "It's high time the banks need to pass on the benefits to the homebuyers. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and alleviate COVID-19 impact."

Anuj Puri, Chairman, ANAROCK Property Consultants said, had it not been for the pandemic, the RBI could have taken a different stance for the benchmark rates today. However, the spectre of inflation in the country looms too large, prompting the RBI - as expected - to keep the repo rates unchanged at 4 percent and reverse repo rate at 3.35 percent, he said.

"The unchanged repo rate regime works well for home loan borrowers as the floating retail loan rates, which is directly linked to external benchmark repo rates, have been at the lowest level in the last two decades. The continuation of this low interest rate regime supports the environment of affordability which has become the new hallmark of the housing market - during the pandemic, and even before".

The extended period of low interest rate is to strengthen home buying premise and aid overall real estate industry revival, observed Shishir Baijal, Chairman & Managing Director, Knight Frank India. "Despite the inflationary pressures, RBI maintaining status quo on key policy interest rates and continuing with growth supportive policy stance was need of the hour. Extended period of historic low interest rates would ensure home loan rates remain at current benign levels and aid the revival of real estate sector. We have also seen many real estate developers refinancing their borrowings at lower interest cost and benefit from the lower interest rate regime, which is crucial at this juncture when business operations are facing the pandemic pressure."

Ashok Mohanani, President - NAREDCO Maharashtra, said, " The interest rates will continue to be at a record low for some time, however, the banks should pass on the benefits to the customers which will boost real estate demand. Although both the Central and the State governments are focusing on reviving the economy with various policy measures, a lot needs to be done to mitigate the adverse impact of the overall pandemic. We at NAREDCO have already urged the State Government to reconsider their decision and reinstate the stamp duty reduction till March 2022 so that home buyers continue to be encouraged and invest in their dream homes."

The RBI's approach to continue with a 'wait and watch' mode is on expected lines to enable the growth momentum that seems to have set in during the last 2 months, said Cherag Ramakrishnan, Managing Director, CR Realty. "With the COVID uncertainty looming, this seems to be a prudent move to allow growth to firmly set it. This has allowed for all-time historic low home loan rates which have played a significant role in reviving the housing demand as compared to the pre-COVID era. The pent-up demand, the opening of economic activities, and continuous Government interventions have also helped in lifting the market sentiments. We feel that the demand for homes will now gain momentum going into the upcoming festive season”

Shraddha Kedia-Agarwal, Director, Transcon Developers, said, ''RBI maintaining status quo on key policy rates was expected given the inflationary concerns in recent months. The low-interest rates for the last few months have already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers. The decision will help to sustain liquidity for some period as we are already witnessing the derailment of economic momentum due to the COVID-19 pandemic and lockdowns in different parts of the country. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times.''

More efforts are needed to restore the supply-demand balance in the real estate and infra sectors, said Rohit Poddar, Managing Director, Poddar Housing and Development Ltd. However, continuation of lowest lending rates will ensure that businesses get more window to cope up with the pandemic related challenges, said. "The decision comes at the peak of high inflation and slow growth with a concerning pandemic stitch around the globe. The yield curve and liquidity management were the central focus of the committee. However, we are evidently in a much better place compared to the past quarters. Nevertheless, we still need to be more cautious on the possibility of the third COVID wave and its overall impact on the consumption.”

Ramani Sastri, Chairman & MD, Sterling Developers Pvt. Ltd, said, "With economic recovery on a positive note following a second wave of COVID 19, growth needs to be carefully nurtured in the context of a relaxation in economic activities. This can be done by giving a fillip to the economy by incentivizing real estate. For this to happen, we expected a cut in rates which would have sent positive signals to economic and real estate players. Not only would the cuts have bolstered greater demand for homes as the interest regime would have been lower, there would have been greater infusion of capital in the market, enabling easier supply-demand transactions."

Kamal Khetan, Chairman and Managing Director, Sunteck Realty Ltd, said the Reserve Bank’s accommodative stance is ideal to sustain a broader economic recovery. "While the optimism about a steady economic recovery is gladdening, we believe that the recovery may need some more room from a good monetary-fiscal policy combination. The real estate industry is making recovery across many markets. With home loans still remaining at bottom levels, we believe the buying activity will soon be accelerated by those who have not used this favourable scenario to their advantage yet.”

Although the repo rates by the Reserve Bank of India have remained unchanged, the growth in India activity post the devastating second wave of COVID-19 is definitely an encouraging sign for the Indian economy, said Farshid Cooper, MD, Spenta Corporation. "RBI's GDP growth prediction for FY 21 - 22 and FY 22 - 23 of 9.5 percent and 17.2 percent respectively indicates India's future growth. Real estate demand is getting stabilized with new launches and consumer buying; however, new relief measures would help the sector to gain momentum ahead of the festive season."

RBI MPC's status quo will further allow demand creation including for high involvement products like real estate, said Ram Raheja - Director, S Raheja Realty. "The real estate sector is expected to continue benefiting from the pass-through of low benchmark lending rates to end consumers, especially in the residential segment. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset."

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani, said, "The Consumer Price Index inflation rate of more than 6% for May-June was beyond the Reserve Bank of India’s (RBI’s) tolerance mark. The RBI’s accommodative monetary policy and unchanged low-interest rates could become a challenge for it if inflation spikes again. While the status quo maintained by the RBI is appreciated, the focus should be on boosting growth with the right fiscal measures and policy support. This is especially important at a time when the International Monetary Fund has cut India’s growth estimate from 12.5% in April to 9.5% in July."

Anurag Mathur, CEO, Savills India, said, "While the governor noted that the phased reopening of economy, ebbing of daily infections and increasing vaccination have led to overall demand revival, the ongoing recovery needs to be vigilant for inflationary pressures and any future wave of infections. For real estate, the situation on lending front remains unchanged but recent stamp duty cuts in key states and historically low EMIs for home loans should continue to help the residential housing segment. However, developers across major cities are under pressure from increasing raw material prices and are unable to pass on the same to consumers in order to counter the sluggish demand as compared to the pre-pandemic era. Supply side relaxations such as GST rate reduction for key construction materials, can be a temporary relief measure and ease the financial worries of developers to a certain extent.”

The triggers that powered the surge in homebuying during H1 2021 are still existent with the lowest ever home loan interest rates, demand for larger spaced and self-owned properties combined with tempting offers by developers, said Shweta Thakker, Chief Sales & Marketing Officer, AhujaHIVE. These elements have boosted customer confidence and helped uplift the overall sentiment by aiding individuals to fulfill their dream of owning their homes thereby reviving the sector. "The support from the policy with measures like reduced stamp duty and circle rate has not only worked in favour of home buyers and real estate stakeholders but also powered the government’s revenues, giving a much-needed boost to the economy."

Reeza Sebastian, President, Residential Business, Embassy Group said, “The RBI’s decision on keeping the repo rate of 4% unchanged comes as a positive move at a time when the economy is on its road to recovery. For home buyers, this decision will help reinstate confidence and further the access to affordable home loans. The unchanged repo rate will also aid in infusing liquidity into the sector and in turn fast track the growth of the real estate market.”

Steady repo rate and reverse repo rate at 4 percent and 3.35 percent for the seventh time in a row shall take the real estate sector steadily to growth, said Sanjay Dutt, MD & CEO, Tata Realty and Infrastructure. With the COVID uncertainty prevalent and as the rising cost of steel, cement and labour threaten the viability of certain projects; this move will create optimism in the sector. Lower home loan rates have helped start a long-awaited revival, and the demand for residential properties is expected to gain momentum considering the festive season. This will encourage the fence-sitters to purchase their dream homes.

Amit Goyal, CEO, India Sotheby's International Realty, said, keeping interest rates benign will keep the housing momentum going. "With home prices stable for the last five years and home loan interest rates at a historic low, there's a clear revival of India's real estate cycle. The residential sector makes up for 75 per cent of the sector and a strong housing demand is GDP accretive."

Piyush Bothra, Co-founder and CFO, Square Yards, said despite increasing inflation, the RBI’s decision to maintain the repo rate status quo is a strong signal that growth is important. The soft interest rate environment will benefit home loan borrowers and sustain homebuying sentiments that have picked up post the second COVID wave.

Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group, said "Keeping in mind the current scenario, a slight reduction in the key rates would have been widely celebrated as low interest rates have been a crucial factor in the revival of the demand in the real estate sector overall. We have already seen early signs of improvement in economic activity following the easing of some restrictions post the peaking of the second wave. To bolster this growth and revive the economy, a rate cut would have further improved the liquidity situation, which is vital for the real estate sector. The luxury housing segment has remained largely insulated from the slowdown because the market is driven by end-users at the top of the pyramid who have not been deeply impacted unlike other housing categories, where they had to defer purchase decisions.

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Published on: Friday, August 06, 2021, 10:34 AM IST
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