The Reserve Bank on Tuesday cut key interest rate by 0.25 per cent and introduced a host of measures to smoothen liquidity supply so that banks can lend to the productive sectors and indicated accommodative stance going ahead. Given weak private investment in the face of low capacity utilisation, a reduction in the policy rate by 0.25 per cent will help strengthen growth, RBI Governor Raghuram Rajan said in the first bi-monthly monetary policy review for the 2016-17 fiscal. The repo rate, at which RBI lends to the financial system, has come down to 6.5 per cent, accordingly. Rajan also took a host of measures on the liquidity front, starting with the narrowing of the policy rate corridor to 0.50 per cent from the earlier 1 percent point, which resulted in the reverse repo rate — at which banks can park excess funds with the RBI — being reset at 6 per cent.
The RBI move was well received in the real estate sector with most developers applauding it. Deepak Kapoor, President, Credai Western UP & Director, Gulshan Homz, said, “With more rate cut announced in the first policy review of the financial year shows that the market is improving and finally the financial institutions can now finally start to pass on the benefits to the end-users.”
Ashok Gupta, CMD of Ajnara India Ltd,said, “The RBI has given positive signs wherein the CPI inflation is assumed to come down to 5 per cent and the GDP is expected to rise to 7.6 per cent by the end of the current fiscal year.” These, he said, show that the market is on an improvement side. however, Gupta said, “against the common speculation of 50 bps, the key rate was reduced by only 25 bps citing reasons of heightened global financial volatility which is a controlled measure making sure that the domestic market does not suffer.”
According to Vikas Bhasin, MD, Saya Group, the RBI has not only cut repo rate but also increased the reverse repo rates “which mean a win-win situation for the banks.” In Bhasin’s view, increased reverse repo will allow banks to keep their money with the Reserve Bank at higher rates than before. “One must not forget that the policy rate corridor has been reduced from 100 bps to 50 bps which will now mean that the key rates will differ by 0.5 per cent at all times”, he said.
Sudeep Agrawal, MD, Shri Group, said RERA was already doing rounds in the real estate sector and now with the Reserve Bank cutting down repo rates will only make the situation better than before. “Cutting down on the repo rates is sure allow banks more margin towards cutting down on the lending rates, hence increasing the purchasing power of the common man,” he said.
In Antriksh India Chairman Rakesh Yadav’ view, the projections are bright for the upcoming months and with this reduction, people are sure to be interested more towards investing in the market. “There might not be direct benefits visible at the very moment but definitely investments are sure to increase fund flow in the market which in some way will pump more funds in the real estate sector as well, he said.
Gaurav Mittal, MD, CHD Developers Ltd, said, “The central bank’s decision to reduce repo rate by 25 basis points will make home loans cheaper, and also increase liquidity in the banking system. We are hopeful that the increase in the liquidity along with the improvement in the health of the economy will boost demand. Cheaper loans for home buyers and rising demand will create renewed interest in residential property purchase from end users.”
Sam Chopra, Founder & Chairman- RE/MAXIndia, said, “In the first bi monthly monetary policy review for the year 2016-17 fiscal which began on April 1, RBI Governor Raghuram Rajan said that the reduction in REPO rate will help in strengthening the growth, given the weak private investment in the face of low capacity utilization.” Repo rate has been decreased by 0.25 pc and has now come down to 6.5pc. This move which focuses on driving growth is expected to infuse liquidity in the system which will be a much needed relief for the real estate sector. This will help the buyers turn favorable as it might lead to lower interest rates. The RBI’s decision will lead to increase in property demand in the days to come. This definitely is a good sign for our sector. The lowering of the repo rate will also help in lowering the negative sentiments in the real estate sector as a whole. In the last 18 months, RBI has lowered the repo rate by 1.5 pc. But the banks have further only given 0.5pc to the borrowers. Let’s see how much cut is given to the borrowers this time around. Since the current and the future market is promising for the end user, therefore such financial decision will definitely help the end user take a decision with the lowering of interest rates.
Arjunpreet Singh Sahni, ED, Le Solitairian, said, “With inflation under check and encouraging economic data, it is along the expected lines that the RBI has reduced Repo rate by 25 bps, but it would have been better if the apex bank had reduced the repo rate by 50bps to help the real estate market to achieve increased growth momentum after a balanced budget. However, the host of measures on increasing liquidity front taken by the RBI Governor, which also includes raising the reverse repo rate by 25bps is quite encouraging as it will lead to increased liquidity in the market and moreover, this brilliant move taken by the RBI will definitely result into reduction in home loan rates which will benefit the real estate sector.”
Pankaj Kumar Jain, Director, KW Group, said,” RBI has kept the growth momentum going with 25 bps repo rate cut which has come just after a positive budget that contained several incentives for the real estate sector and the successful passage of the Real Estate Regulatory Bill. We do hope the banks will generously pass on the benefits of the total 150 basis points of repo rate cut accumulated since the last year to the home buyers in the form of reduced home loan rates. All in all, it bodes well for the Indian real estate sector that has been facing tough times for a prolonged period.”
Pawan Jasuja- Director, Finlace Consulting,said, “Inputs- Rising inflation and higher interest rate has affected realty market but the latest repo rate cut of 0.25 points by RBI is sensible and will surely bring down interest rate of home loan but the banks should ensure to pass the benefit to the home buyers. Soon the 7th pay commission will also be reality and such moves will boost confidence of home buyers. At this time when developers are coming up with many offers and discounts to convert the leads, this will also push sentiments of home buyers.”
Manish Agarwal, MD, Satya Group and VP Credai, Delhi-NCR,said, “The 25 bps repo rate cut by the Reserve Bank of India (RBI) in the first bi-monthly policy review has set an auspicious tone for the new fiscal year for the Indian real estate sector. It comes after a balanced budget in which the government promoted real estate by announcing Smart City and incentives for affordable housing. This rate cut was much anticipated with inflation under control and the government pledging to stay on the fiscal consolidation path. We hope that the Banks will pass on the benefits in full to the consumers so that the economy as a whole benefits.
Manoj Gaur, President Credai NCR & MD, Gaursons India Ltd. said, “The revised repo rate by the Reserve Bank of India will definitely impact the sentiments of the real estate market in a positive manner. Banks will now be able to offer loans at more attractive rates. Cheaper loans for home buyers will prompt the interest of people in property purchase from end users and investors. Banks may revise the base rate too, which would benefit old home loan borrowers who are currently paying much higher interest rates than new borrowers would. We feel that this would be an important move by banks and help them contain client attrition. Side by side, this move seems to put positive impact for the real estate developers. The real estate developers might envisage a marginal reduction in the cost of funding, which would be a real relief from the incessantly growing development cost.”
Gaurav Gupta, General Secretary, Credai RNEsaid, “With the announcement of 25 BPS rate cut, the RBI has lessened down its rate corridor from 100 BPS to 50 BPS. With this the policy rates came down to 6.5 pc which has been the lowest since 2011. By reducing the cash reserve ratio to 90 percent which was earlier subjected to 95 percent are positive signals that economy is on the recovery path. With slew of measures like Ease in FDI norms, adoption of MCLR method to calculate rates, emphasis on affordable housing we are hopeful would bring good days for realty sector. In addition to all this, the reduced rates would have a positive impact on the real estate sector and build up the customer confidence to a large extent. We also expect that there could be further rate cuts ahead in the time to come.”
Prashant Tiwari, Chairman, Prateek Groupsaid, “The first bi-monthly policy of this new financial year has brought with it a rate cut of 25 basis points, which is a welcome move by RBI. The revision in rates would accelerate the economic growth and real estate in particular. Liquidity issues have been the focus of this monetary policy which in a way was very significant. Also the new maths of MCLR would make interest rates more sensitive to policy changes making borrowing cheaper than before. Although we are expecting more rate cuts in future, the competitive interest rates at present has brought win-win situation for both the buyers as well as developers.”
Sanjay Rastogi, Director, Saviour Builders Pvt. Ltd.said, “The rate cut was an expected move and it is clear that markets will rejoice the reduced interest rates. High interest rates could lead the economy towards sluggishness; therefore, it was a required step to aid economic growth. The cut was a balanced move considering the inflation trends and CPI. The reduction in rates would ease the liquidity issues eventually pushing sales and giving the much needed respite to the real estate sector. The move is expected to encourage home buyers to finalize their purchasing decision especially activating the fence sitters.”
Om Chaudhry, Founder & CEO of Fire Capital and Chairman & CEO of Astrum Value Homes, said, “The lowering of Repo rate to 6.50 pc is focused on infusing more liquidity in the system and also is a result of softening of core inflation. Led by our expectations the rate cut is favorable move for realty sector. With the current five year low interest rate, it is quite apparent that our economy is on the growth track. More positively, there are many initiatives which have already been taken to spur real estate growth. Now the reduced interest rates and new formula of marginal cost of funds for calculating interest rates will further benefit the end-users and real estate in general. We also expect that banks should also follow the RBI’s announcements and pass on the reduced rates to borrowers.”
Rupesh Gupta, Director, JM Housing, said with the repo rates being cut and reverse repo being increased, banks would be forced to cut on the lending rates. “Reduced lending rates are destined to bring in positive sentiments in the market which will induce increased investments in the real estate sector,” he said.
Abhishek Goyat, MD & CEO, The Antriksh Group, “We welcome the dynamic step by Reserve Bank of India to boost the liquidity and lead to the growth of infrastructure sector and fastest recovery of real estate sector. The cut of repo rate to 25 basis points will give a relief to the home loan borrowers. If a borrower has taken a loan of 50 lacs for 20 years he/she will get a deduction of Rs 900 in EMI from the previous value, ie around Rs. 11,000 in a year which is a healthy saving for a mid-segment buyer. It will provide the must required momentum to the industry. Further, it will indirectly benefits to the developers too, as they will get their fast inventory movements which is a major ongoing problem these days”.
Aman Nagar, Director,Paras BuildTech, said, “I consider a 25 bps policy rate cut as a huge opportunity for the real estate sector. I hope the banks pass the benefit over to home buyers, if so is the case it could help the struggling real estate industry to stand back on its feet.”
Anuj Goel, Executive Director, KDP Infrastructure, said, “The rate cut would help boost growth as it would lower the cost of borrowing. This could pull in more people who were waiting for a good opportunity to avail home loans. And this is a very great opportunity,one that cannot be missed.”
Dr. Anil Kumar Sharma, CMD, Amrapali Group, said, “The rate cut by RBI at this time is really a great kick start to the stagnant/ slowdown/ (Sust) Real Estate sector. With the cut in repo rate by 25 basis points, it will ease the flow of money in the Economy, the prospect of a cheaper home, lesser interest on loans etc. Now, banks will have to do a bit more by passing on the benefit to the common people as these things are the key drivers in the real estate industry.”
Dinesh Jain, MD, Exotica Housingsaid, “The cut was widely expected and I must say it is a good beginning for fiscal 2016-17 when repo rate is at its lowest. This is very positive for corporate and real estate industry is also going to affect because this will bring down monthly EMI of home loan too. Any relaxation in home loan will impact the buying decision of home buyers and increase the demand of homes. The industry is standing on the verge of Navratra season and this rate cut will directly affect the buying capacity of individual.”