Low interest rate regime to be a game changer for realty sector, say developers

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Updated: October 08, 2021 5:26 PM

Developers believe keeping the repo rate unchanged will help a lot in terms of retaining buyer sentiment and customers should take advantage of the current situation.

Some consultants, however, said it would have been better for real estate if the RBI had announced a rate cut to support the demand in the sector during the upcoming festival season.

The RBI in its monetary policy meet on Friday kept the repo and reverse repo rates unchanged at 4% and 3.35%, respectively, and decided to continue with its accommodative stance to revive and sustain growth as well as to mitigate the impact of COVID-19 on the economy.

Hailing the RBI move to keep key policy rates unchanged, real estate experts and developers said interest rates on home loans will continue at historical low during the festive season, which is crucial for revival of the housing sector as well as the Indian economy.

“Bank lending to NBFCs for priority on-lending is extended for 6 months, which will ease out the liquidity situation. Low mortgage rates coupled with developers’ festive offers will drive demand in a big way this quarter. We request all State governments to reduce stamp duties on registration of properties till December. This could turn out to be a game changer. Nevertheless, low home loan interest rates, stable housing prices and developers’ offers in the form of freebies and relaxed payment plan make this festive season the best time to buy a property,” said Vikas Wadhawan, Group CFO, Housing.com, Makaan.com and Proptiger.com.

Ram Raheja, Director, S Raheja Realty Pvt Ltd, said, “This status quo will further allow demand creation, including for high involvement products like real estate. RBI’s resolve to keep easy system liquidity and low interest is key to the recovery of the real estate industry and the overall economy. 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. The optimism of RBI regarding economic growth is welcome. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times. The demand for homes is likely to continue to gain momentum going forward.’’

Industry experts observed economic growth alongside reining any uptick in inflation is the key priority of the government and the central bank of India. Hence, no change in the repo rate (and reverse repo rate) was expected.

“After the downcycle caused by the 2nd wave, the Indian economy is once again looking upbeat. FICCI has projected a 9.1% growth in FY 22 pinned on 12.9% & 8.6% expansion in the industrial and service sector, respectively. A resurgent real estate sales and growth in agriculture output will further give a boost to the economy. However, the government bodies should also ensure to keep the lending rates low, as it will continue to dovetail the economy in a positive direction and create the ground for faster recovery,” said Ankit Kansal, Founder & MD, 360 Realtors.

Developers are of the view that keeping the repo rate unchanged will also help a lot in terms of retaining buyer sentiment and customers should take advantage of the current situation.

Amarjit Bakshi, CMD, Central Park, observed, “The RBI ensured appropriate liquidity in the system when everyone is struggling with it; liquidity injected into the system in the first six months of the current financial year was Rs 2.37 lakh crore. Though we had hoped for real estate related announcements, we recognise that the RBI needs focus on all sectors to achieve economic development. Maintaining the repo rate in real estate will help a lot in terms of retaining buyer sentiment.”

Pradeep Aggarwal, Founder & Chairman, Signature Global Group & Chairman – National Council on Real Estate and Housing, ASSOCHAM, said, “The apex bank’s sustained accommodative attitude is greatly appreciated. Low home loan interest rates are already helping the sector, and the RBI has helped the sector by maintaining the status quo. Customers should take advantage of the current situation because prices may rise in the future owing to higher raw material costs.”

Developers believe the low interest rate regime is going to be a game-changer for the real estate sector, especially at a time when the economy is on a recovery trail.

“Residential demand is reviving in the pandemic context and this needs to be fostered. We have already seen early signs of improvement in economic activity following the easing of restrictions post the peaking of the second wave. Given the upcoming festive season, which is considered auspicious by a large number of Indians to make big-ticket purchases, the timing of reduction in interest rate by banks recently couldn’t have been better and will lead to a substantial increase in sales. The low interest rate regime is going to be a game-changer for the whole real estate sector especially at a time when the economy is on a recovery trail. For any investor, it’s a time of great opportunity and for the end-customer, it’s a good time to buy,” said Lincoln Bennet Rodrigues, Chairman & Founder, the Bennet and Bernard Company, known for luxury holiday homes in Goa.

Pankaj Bansal, Director, M3M, said, “The RBI’s stand on keeping the repo rate unchanged at 4% will immensely help the real estate sector and the market to accelerate growth. The industry has received immense support from policymakers that has helped to fortify investments and consumers’ faith in the market. The recent quarters have brought great cheer for the sector and huge sales and enquiries are happening across sectors. The festive season, along with pent-up demand and low home loan rates, is setting a jubilant mood. As economic activities escalate further, promising results are expected in the coming quarters.”

“In the last couple of quarters, the real estate sector has witnessed great traction and performed really well. The improved market sentiments and increased traction indicate the sector is moving on an upward growth trajectory. Maintaining the accommodative stance will enable banks to lend home loans at the current level, which is a most encouraging factor in homebuyers’ decisions,” said Santosh Agarwal, CFO and Executive Director, Alpha Corp.

“The RBI’s accommodative stance on keeping the repo rate unchanged will add zest to the realty sector in this festive season. The industry has recovered from the pandemic shocks and has entered the growth phase. Real estate assets have always been the most favoured investment choice for stability and secured future, and this move will keep the momentum going. Backed by digitalisation and vaccination, the market is experiencing huge sales and enquiries across segments. Pent-up demand, low-interest rates, and most significantly the realisation of the importance of owning a home will put the housing market on an upward trajectory in the coming quarters,” said Mukul Bansal, Director, Motia Group.

Some consultants and developers, however, said it would have been better for real estate if the RBI had announced a rate cut to support the demand in the sector during the upcoming festival season.

Honeyy Katiyal, Founder of Investors Clinic, said, “As a consultant in real estate, we would have loved to see the RBI announcing a rate cut to support the demand in the real estate sector for the coming festival season. This would have been an economic booster for the real estate housing sector which has suffered a lot in the last two-and-a-half years. Policy rates at these levels are favourable as well. The demand for housing has shown initial signs of recovery and is expected to sustain, with price incentives provided to investors by real estate developers, which will definitely further support the economic recovery and improved job scenario. The sector runs on sentiment. A whiff of positivity will turn the tables this festival season for the developers and real estate players.”

Uddhav Poddar, MD, Bhumika Group, said, “We need to keep the buyers motivated, especially when the festival season is approaching. The requirement was to decrease the interest rates further to rekindle demand, making homes and real estate assets more appealing with low EMIs. However, retail will benefit from the proposal to introduce a framework for retail digital payments in offline mode, and the proposal to increase per-transaction IMPS limit to Rs 5 lakh from Rs 2 lakh currently. If introduced, these steps will help increase the spending that will add up to the positive growth of the economy.”

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