RBI disappoints realty sector

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RbinoteThe Reserve Bank of India’s decision to keep the repo rate unchanged at 6.25 per cent has not gone with the real estate industry and a majority of stakeholders has expressed disappointment with the move.

Post the monetary policy review on Wednesday, the reverse repo rate remains unchanged at 5.75 per cent, and the marginal standing facility rate and the Bank Rate at 6.75 per cent. RBI Governor Urjit Patel also announced that the central bank has decided to withdraw the incremental Cash Reserve Ratio (CRR) from December 10.

The RBI lowered the GDP growth estimate to 7.1 per cent in 2016-17 from an earlier projection of 7.6 per cent.

7593_Anuj Puri_headshot copyReacting to the RBI announcement, Anuj Puri, Chairman & Country Head, JLL India, said for the real estate sector, which is currently reeling under pressure from the recently-announced demonetization, a rate cut could have allayed fears of a near-term loss of momentum.

However, he said even before the RBI’s announcement, some banks have gone ahead and announced interest rate cuts on the back of improved liquidity in the system.” This gives a lot of emphasis on the fact that the demand for mid-segment housing will continue to remain strong, since the salaried class predominantly uses bank loans to finance their home purchases,” he added.

Calling it “rather unfortunate”, Pratik K. Mehta, MD of Bengaluru-based real estate developer Unishire, said, “The PratikK.Mehta_MD_Unishiremuchanticipated 25 bps would have changed perception especially for the real estate market which has already been in low side for almost two years.” Mehta said post demonetisation, market sentiments are very low and speculations are ruling the market. “The only way to improve the consumption is by improving perception and this would have been possible by reduction of rates”, he said.

Gaurav-jain-jindalAccording to Gaurav Jain, MD & CEO, Jindal Realty Pvt. Ltd., it’s surprising that the RBI has kept its repo rate unchanged. “We were hoping that there would be some relief. Rate cuts were required to spur investment in real estate sector.  No reduction in repo rate will keep the real estate sentiments unchanged. Further reduction was expected which could have significantly impacted the revival and growth of the market at this juncture,” he said.

Shishir Baijal, Chairman & Managing Director, Knight Frank, said, “A rate cut could have been encouraging Shishir Baijal, Chairman and Managing Director, Knight Frank (India) Pvt. Ltd.at this moment. However, it is disappointing that RBI decided against it.” Baijal went on to say, “We were expecting a 25 bps cut, which could have given an impetus to the beleaguered real estate sector”.

Samir JasujaSamir Jasuja, CEO and Founder at PropEquity, said, “It is a surprise move by the RBI to not cut repo rates”.According to Jasuja, there is extreme uncertainty in the sector which has led to almost a standstill situation of sales pan-India as many customers are on the fence to see how the situation pans out. “As real estate sector in India is sensitive to repo rate cuts which lead to lower borrowing costs for homebuyers and triggering demand, we expect rate cut in the next monetary policy review”, he said.

Since demonetisation, it was quite evident that real buyers will become prominent in the market and end avneesh-soodusers will be in majority. Banks had already reduced their interest rates, post the previous policy review; and a rate cut in today’s policy review would have further motivated these potential primary buyers to make full use of the reduced EMIs. With ready to move in properties high in demand, property prices already at its lowest, a rate cut at this point of time could have pushed the sales further; either for long term retention or end use. Avneesh Sood, Director, Eros Group

Mr.Deepak Kapoor,Director,Gulshan HomzDeepak Kapoor, President, CREDAI Western UP said, “As a sector we were not expecting any slash down in rates owing to the recent demonetisation step taken by the government. However, we were hoping that some relief might come that can help in providing boost to the sector going through struggling times. The risk of inflation which continues to be on an upper side is a reason that rates haven’t been reduced. However, real estate sector was very much in need of a rate cut even if it was to be of 25-50 basis point. But, similar to last time, this policy review also did not brought any relief to the real estate sector as status quo was maintained. The realty sector is already under immense pressure due to negative market sentiments and lost demand. Besides this circle rates in NCR parts like Noida, Greater Noida and Ghaziabad have been increased. Also Registry charges in Noida have gone up this year. Therefore, in such a scenario, rate cut was the need of the hour to provide the much needed boost to the sector and to facilitating growth on the other hand”.

Real estate sector in India is on a growth spree and since demonetisation, the footfall of end users has increased manifolds.Rajesh Goyal RG Group Banks have started to reduce the lending rates which was expected to drop further, had the RBI announced a rate cut today. Now, this decision might drive the market away from investing in property for the next few months, until the Budget announcement offers some relief for the buyers. Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group

Dhiraj-Jain-Director-Mahagun-Group-200x300For the economy, this decision is a highly thought off one, considering the short term effects of demonetisation. The CPI inflation has been kept on check for three consecutive months, whereas the GVA came out to be lower in Q2. But for the real estate sector, it is a setback, as already the sales had dropped significantly post demonetisation and the fraternity was expecting a repo rate cut or a drop in CRR, which would have ultimately benefitted the end users interested for investing in the property market. Dhiraj Jain, Director, Mahagun Group

The market and economy will take some time to balance the affects arising out of demonetisation and hence, the decision ashoktoday by RBI stands as neutral. Realty sector has just witnessed the exit of numerous secondary real estate buyers and a rate cut at this time would have helped the primary sales to grow. As we are on the edge of this year end, all eyes will now fall upon the next year’s monetary review and the union budget, where much is again expected out of the government, especially for the Indian realty sector.                             Ashok Gupta, CMD, Ajnara India Ltd.

Anshul-JainAnshul Jain, Managing Director, India, Cushman & Wakefield“The RBI has kept the Repo Rate unchanged at a time when the market expected a 25-50 bps cut in light of the recent demonetization. In the past it has been seen that commercial banks do not completely transmit the benefits of lower Repo Rate to customers. Since 2015, the RBI has cut Repo Rate by 150 bps, while banks have transmitted only a fraction of it – a cut of 26 bps in home loans to end users. However, the impact of the recent demonetization has resulted in excess liquidity with banks as they are flush with funds. This has prompted several banks to already reduce their term-deposit rates, which will bring down the cost of funds. Therefore, we expect commercial banks to transmit the reduced cost of funds in the form of cheaper home loan rates to customers over the next few months. The residential realty sector, which has been impacted by demonetization, would see some optimism driven by credit availability, which may result in higher number of enquiries in the coming months. The residential market will see a pick-up in demand if the availability of home loan at lower rates is accompanied by rationalization in home prices. However, the extent to which banks pass on the rate cut would determine the actual magnitude of benefit to home buyers. Going forward we expect to see a rate revision in the Jan – Mar quarter in 2017.” Anshul Jain, Managing Director, India, Cushman & Wakefield

Although a rate cut would have been an idle move to energize the real estate sector but this seems very intelligent step because Ashudeep Batra, ED- Exotica HousingRBI had urged the banks to pass benefit of earlier cuts to common people. I hope this move will remove the misconceptions from people who were talking about further price cut in real estate projects which is impossible.

The RBI should seriously push the banks to pass on the previous benefits to customer. With such a huge deposit  due to demonetization it was expected that the banks would lower down the interest rates. After RERA proposed from next year now the sector desperately needs some big announcements from RBI and Government.  Ashudeep Batra, ED- Exotica Housing 

Pawan Jasuja,MD, FinlaceThe unchanged repo-rate is little disappointing from RBI  as  the  real estate sector  was expecting a rate cut after process of demonetization of the currency because the recent phase has affected the real estate sector hardest where many things are based on cash. The sector is struggling at the current moment and a rate cut would have been a breather.  Also the banks are now cash rich after the process of demonetization and could have offered home loans at lower interest rate. Pawan Jasuja- Director, Finlace Consulting

 ‘It was expected that the Repo rate shall be lowered after demonetization as the fund flow has beenMr. Praveen Jain, President NAREDCO increasing tremendously in the banks. It is still expected that the Repo rate should be brought down which shall prove to be one of the positive effects of demonetization and shall be beneficial for the real estate sector giving it a tremendous boost.’          Praveen Jain, President of NAREDCO 

Mr. Brijesh Bhanote

‘We were expecting a 25 basis point rate cut to alleviate the short term impact of demonetization on realty market. It seems RBI is still studying the impact of demonetization as the economy is still unraveling.  Though we don’t foresee any long term impact of demonetization on our business prospect, we are hopeful that banks would be able to reduce home interest rates once the economy settles down.’ Brijesh Bhanote, CMO- Paras Buildtech