The commendable move by the RBI notwithstanding, developers believe that the government needs to take some more steps for the realty sector.
Although the RBI has maintained ‘status quo', it has taken reassuring steps to infuse additional liquidity into the housing sector.
The Reserve Bank of India kept the repo rate unchanged at 4% and also retained its ‘accommodative’ stance in its first policy review of the new fiscal, which was mainly done with a view to cushion the economy in the light of the pandemic resurgence.
According to industry experts, the resurgence of the pandemic and resultant concerns of its impact on the economy and businesses demanded a resilient approach. The RBI has responded by taking an accommodative stance, and keeping the repo rate unchanged. The health of the economy has now become more contingent on the progress of vaccination and control of the pandemic. In such a scenario, holding the repo rate at 4% is likely to cushion the impact on the economy due to intermittent and regional lockdowns. The government’s decision to retain the inflation target of 4% with a tolerance band of +/- 2 percentage points for the coming five years provides continuity to the stance of the monetary policy committee.
“Demand for residential real estate has revived as homebuyers took advantage of the lowest mortgage rates along with realistic pricing and various freebies and options rendered by developers. Residential sales in Q1 (Jan-March) 2021 recovered to more than 90% of the volumes witnessed during the pre-Covid times across the top 7 cities. The sustained growth in sales presents clear signs of demand and buyer confidence coming back to the market. The recent surge in the spread of the pandemic is likely to impact the home buying sentiment for a few months. However, we believe that overall residential sales are likely to surpass the pre-Covid levels in the coming quarters,” said Dr Samantak Das, Chief Economist and Head of Research & REIS, JLL India.
Although the RBI has maintained ‘status quo’, it has taken reassuring steps to infuse additional liquidity into the housing sector through the interventions of increased financing to National Housing Bank and extension of the priority sector tag for bank funding to NBFCs for housing loans.
“Given the inflationary concerns in recent months, the RBI has maintained the status quo on key policy rates. At a time when the rising second wave of COVID infections and subsequent lockdowns are derailing economic momentum, the RBI interventions will help maintain adequate liquidity as well as prevent hardening of yields in the bond market. These measures will ensure economic stability as well as keep the real estate sector stay afloat during such precarious times. Hopefully, benign retail inflation on account of better monsoon and easing of crude oil prices, coupled with accommodative stance, would translate into lowering of policy rated in the near future,” said Rajani Sinha, Chief Economist & National Director – Research, Knight Frank India.
Experts also believe that in view of the RBI move, the historically low interest rate regime will continue for some more time.
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com, said, “Even though public lender SBI recently announced a hike in its home loan rates, triggering expectations that other banks might follow suit, we hope that lenders in India would take a cue from the RBI move to leave rates unchanged and continue to offer homebuyers the benefit of a historically-low interest rate regime. This is the first review of the monetary policy in the new fiscal year and it is likely that the RBI will carefully monitor how the COVID-19 situation evolves and change its stance later in the financial year as the need arises.”
However, the commendable move by the RBI notwithstanding, developers believe that the government needs to take some more steps for the realty sector.
Ankit Kansal, Founder & MD, 360 Realtors, said, “The Indian economy is making faster recovery and maintaining an accommodative stand will build the ground for a quicker bounce back. Moreover, as Covid cases have jumped in recent weeks, the psychological scar will persist and there will be some amount of uncertainty in the market. Amidst such situations, to arrest any possible fatigue in the market, the government should take an accommodative stand pinned on more liquidity infusion, demand boosting, and higher growth.”
Besides, “the real estate industry will also look forward to sector-specific package and coordinated policies such as reduction in stamp duties, new Alternate funds for stuck-up projects, and recapitalization of NBFCs and HFCs. The recent reduction of 50% premium for developers in Maharashtra, lowering of stamp duties in Karnataka & Maharashtra, and single-window clearance in UP is commendable. However, more needs to be done,” he added.
Manoj Gaur, CMD, Gaurs Group & Vice President – North, CREDAI National, said, “While it is understandable that the repo rate remains unchanged, the need for special steps cannot be overlooked. Although the government has taken some steps to support the sector in recent months, such as implementing stress funds and stimulus packages, further reforms are needed to help the sector expand. It would be difficult to sustain the demand in real estate without adequate government support to the developers. It is time that the government pays attention to the long-standing demand of industry status to the sector.”
Yash Miglani, MD, Migsun Group, said, “The Reserve Bank of India is doing its best to keep the economy on track. To address the liquidity crisis, the RBI has provided additional fund to NHB, and extended timeline for TLTRO. As the situation following Corona is dire, the recovery will not be possible unless and until banks make a firm commitment to support the sector, which includes many allied industries.”