Interest rate cuts with firm liquidity measures need of the hour, say realtors

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Updated: Aug 06, 2020 6:05 PM

The RBI's decision to maintain status quo on policy rates has disappointed the real estate sector which has been badly hit by the Coronavirus crisis and was betting big on it for getting a further boost.

RBI policy, monetary policy, repo rate, real estate, National Housing Bank, NABARD, HFC, developersDevelopers say while the RBI has pumped a huge amount into the financial system to encourage banks to lend more, yet loan growth has been languishing because of the economy’s slump.

As widely expected, the Reserve Bank of India (RBI) kept the repo rate unchanged in its monetary policy announced on Thursday. However, the RBI’s decision to maintain status quo on policy rates disappointed the real estate sector which has been badly hit by the Coronavirus crisis and was betting big on it for getting a further boost.

Commenting on the RBI policy, industry experts said that much along the expected lines, the RBI kept repo rate untouched at 4% and reverse repo rate at 3.35% amid a recent rise in retail consumer prices. The RBI was expected to do all it can to keep the inflation rates reined in for the duration.

However, “the RBI announced several additional measures that will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities, among others. Commendably, its allotment of Rs 5,000 crore each to National Housing Bank and NABARD is a much-needed step for sectors, including real estate, reeling under the liquidity crisis. It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times,” said Anuj Puri, Chairman, ANAROCK Property Consultants.

Realtors believe that the additional special package of Rs 10,000 crore for NBFCs and National Housing Bank will go a long way in granting financial relief to the real estate sector which has been ailing for quite a while now.

“It will provide an impetus to the all-time low ebbing market sentiments, in dire need of support. The aid will provide developers with funds to complete delayed projects, leading buyers to receive delivery of their homes. Investors also stand to benefit from the choice of exiting their holdings in real estate as the market starts to rebound. It is important that the real estate developers now take concrete steps at their end, driven by professionalism and transparency to uplift the sector,” said Nimish Gupta, MD, RICS South Asia.

Subhankar Mitra, Managing Director-Advisory Services at Colliers International India, said, “Contrary to the wish list of the real estate sector, the MPC announcement kept the repo rate unchanged, which means it is unlikely that there would be any further interest rate cut for the home buyers. It may be noted that the banks were reluctant to pass on the full benefits to the borrowers during the earlier rate cut moves. The positive side of the announcement was giving Rs 5,000 crore to NHB to shield the housing sector from a liquidity crisis. However, liquidity will remain the core concern for the sector with an increasing number of stalled projects.”

Developers say while the RBI has pumped a huge amount into the financial system to encourage banks to lend more, yet loan growth has been languishing because of the economy’s slump. The interest rate should be reduced with firm liquidity measures as this is the need of the hour, backed by specific fiscal measures to give the much-required stimulus to the sector. However, a further cut in policy rates would have definitely resulted in the much-needed demand booster ahead of the festive season.

“The current scenario offers excellent investment opportunities in residential real estate as affordability is at an all-time high. The new-age millennials will want to shift to dream holiday homes that offer safety, privacy and luxury, all in one space. The post-pandemic world will be good for the real estate sector as it offers you the best bet – stability, security and safety. The real estate sector is one of the few sectors which have the potential to kick start a sluggish economy. Going forward, we hope that the government takes more developer and investor-friendly initiatives for the betterment of the real estate market in the near future,” said Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.

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