1. Realtors hail RBI move, but say they expected a rate cut as RERA, GST may increase prices

Realtors hail RBI move, but say they expected a rate cut as RERA, GST may increase prices

With RERA already been implemented and GST coming up next, residential demand and prices are expected to move northward. Realty experts, therefore, feel that this monetary review should have provided a rate cut as prices are likely to go up.

By: | Updated: June 8, 2017 2:31 PM
With GST to become operational from July, prices for properties are expected to shoot up.

With the biggest tax reform in the country to be implemented from the first day of the next month, today’s bi-monthly monetary review came out with no surprises as India’s central bank governor Dr. Urjit Patel kept the key rate unchanged. With the apex bank currently holding excess liquidity and the economy unable to tackle the growth slowdown, keeping the rates unchanged was a balanced and cautious move, particularly in view of the implementation of the Goods and Services Tax (GST) from July 1.

With RERA already been implemented and GST coming up next, residential demand and prices are expected to move northward. Realty experts, therefore, feel that this monetary review should have provided a rate cut as prices are likely to go up.

“As widely expected, the RBI maintained status quo on interest rates for the fourth time in a row, but lowered its inflation forecast for the current fiscal. We feel that the central bank decided to wait for the July 1 rollout of GST and assess the impact of the new indirect tax regime on inflation before tinkering with the policy rates,” said Surendra Hiranandani, Chairman & MD, House of Hiranandani.

He, however, said that inflation has been under control for long and is likely to remain so on the back of good monsoon forecast. As per recent reports, consumer price inflation slowed down to 2.99 per cent in April and economic growth during the last fiscal was at its slowest pace in two years coupled with weakest loan demand since at least 1992. Hence, a reduction in the borrowing cost could have provided the much-needed impetus for growth in the near term.

Here’s what other realtors said:

Manoj Chaudhary, MD, Airwil Infra Ltd: We were anticipating a rate cut this time which would have pushed banks to further reduce the lending rates. Any reduction in lending rates allows the sentiment to improve as the net cost on the buyer for the housing unit gets decreased. With RERA and GST to have a joint impact on the realty sector, a rate cut this time could have provided a much-needed breather for the sector, its players and buyers as well.

Dhiraj Jain, Director, Mahagun Group: Even though the RBI has not cut the repo rate today, still there is a lot of room for banks to further reduce the lending rates. The previous repo rate reductions by the apex bank are yet to be passed on to borrowers; that is held by the banks. A lending rate of 6-7 percent is ideal for our realty sector as we are moving towards strong policy changes at the national level which will leave a long-term impact on the realty sector and its allied industries.

Kushagr Ansal, Director, Ansal Housing: A rate cut of 25 bps could have helped ease the pressure off the market which has been balancing itself through the confusion still pertaining with RERA. With GST to become operational from July, prices for properties are expected to shoot up. During such scenarios, a slash in the repo rate would have meant a drop in home loan rates by banks, which ultimately reduces the burden off the buyers. With no change today, we expect the market to run uniformly with a static demand in the short run.

Deepak Kapoor, President CREDAI-Western UP & Director, Gulshan Homz: This decision of the RBI to keep the rates unchanged will prove very substantial in the first quarter post implementation of GST. Before questioning the judgement of the apex bank on holding the rates, one must not forget that it has to keep sufficient cushion for the economy with the massive changes that will come about in the next few months in the form of REITs, InvITs, GST and SPVs.”

Prashant Tiwari, Chairman, Prateek Group: The announcement is according to the market dynamics and the rates will only be reduced once the inflation settles down. Although the government is taking corrective measures for economic growth and stability, there is a need to adopt a balanced approach considering the growth of key sectors like real estate.

Saurabh Jindal, Joint Managing Director, SVP Group: We believe that the RBI has kept the rates unchanged looking at the inflation factor and it is unlikely that the rates will be changed before the effects of GST come into effect or the better effects of monsoon are visible on the economy. However, in real estate we are hopeful that lending rates may still come down, looking at the government’s focus on housing for all.

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