The RBI kept the policy rates unchanged in its latest monetary policy review meeting on Friday, which evoked mixed response from industry experts and developers as well.
Budget 2021 Expectations: The Government may also widen the definition of affordable housing by increasing the limit of affordable housing from Rs 45 Lakh to Rs 75 Lakh.
As widely expected, the Reserve Bank of India (RBI) kept the policy rates unchanged in its latest monetary policy review meeting on Friday, which evoked mixed response from industry experts and developers as well. They, however, said the decision was on expected lines owing to the rise in inflation in recent months.
The threat of inflation, in fact, looms large and the apex bank is tasked with reining it in while simultaneously fostering the green shoots of resuming consumption. On the positive side, an unchanged repo rate will ensure that home loan interest rates will not harden anytime soon. It is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption.
However, “there is no denying that consumer inflation is at the upper end of the apex bank’s band, and the policy repo rate has already been substantially reduced by 140 basis points in 2020. It goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. This would be enabled by reducing the repo rate – a least in theory, given that transmission of reduced repo rates to bank interest rates has been slow at best. With real estate demand gradually returning, especially in the wake of developers’ discounts and freebies and reduced stamp duty charges (in Maharashtra), reduced repo rates would have given an added boost to the ongoing festive season,” said Anuj Puri, Chairman, ANAROCK Property Consultants.
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com, said, “The RBI move to maintain status quo on policy rates was expected in the face of persistently high retail inflation and an already record low repo rate of 4%. Even as signs of recovery appear in Asia’s third-largest economy, the RBI has said that it would be open to cutting rates if the economy needs support, which is a very positive signal for the future. The earlier measures announced by the RBI, including the rationalization of risk-weightage norms for home loans linking it to LTV and restructuring of loans to developers on a project basis, will continue to help the housing sector. Interest rates on home loans are already at sub-7% level, with banks offering further sweeteners such as processing fee waivers among many others. We hope banks will continue to lend vigorously to the real estate sector, the second-largest employment generating sector in India.”
Developers say that the affordable housing segment is already enjoying the increased demand, and the latest unchanged stance of the RBI will not have much impact on the demand per se.
“In fact, the growth projections of the RBI will instil positive sentiment in the market, which will translate into good numbers for the real estate sector too. If the economy recovers, which is likely after the RBI said in the MPC review that it would maintain liquidity in the market, and the job market remains vibrant, then the affordable housing segment buyer will expedite the process of owning a property. Right now, we would say that we completely understand the stand taken by the RBI in this MPC, and hope that growth projections improve leading up to a vibrant market for the real estate sector,” said Pradeep Aggarwal, Founder & Chairman – Signature Global Group & Chairman – ASSOCHAM National Council on Real Estate, Housing and Urban Development.
Some developers say the RBI decision to keep the rates on hold is good news for homebuyers and the housing sector as home loan interest rates are expected to remain at current levels this fiscal.
Parag Munot, Managing Director, Kalpataru Ltd, said, “The RBI decision to keep the policy rates unchanged is welcome and signals the government’s focus on fueling consumption. It is good news for homebuyers as home loan interest rates are expected to remain at current levels in the fiscal. Continuation of low rates, along with reduced stamp duty and various developer schemes, will keep up the robust momentum. Importantly, it will serve as the springboard for real estate growth in the next fiscal, as the economy recovers from pandemic’s impact.”
“The decision to keep the RBI repo rate and the reverse repo rate unchanged is again a great step by the government. With the economy growing post unlock, the housing sector is utilizing the opportunities due to various RBI decisions over the past few months. As a result, the sector has witnessed favourable market sentiments and increased sales in the past quarter. This will further continue to encourage banks to lend money to the housing sector and ensure improved credit flow. We hope to see further seamless support to the sector in the post-COVID era. This will revive cash flow in the country and maintain financial stability,” said Santosh Agarwal, CFO, AlphaCorp.
Backed by government measures, the economy is also likely to display resilience and get its mojo back.
Mohit Goel, CEO, Omaxe Ltd, said, “The RBI’s outlook of a positive GDP in Q3 and Q4 of 2020-21 reiterates the fact that the economy is bouncing back faster than expected. We have seen demand returning to the pre-COVID level in some micro markets in the real estate sector on the back of the measures announced by the government and the RBI and I am hopeful that the economy will display extraordinary resilience and get its mojo back. The RBI maintaining an accommodative stance hopefully into the next financial year is a welcome step.”