RBI extends EMI moratorium period, slashes Repo Rate to 4%

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The Reserve Bank of India (RBI) on Friday announced a cut in repo rate by 40 basis points for a second time this year.

RBI governor Shaktikanta Das said the short-term lending rate now stands at 4% down from 4.4% earlier. The reverse repo rate was also reduced by 40 basis points to 3.35%.

After this move, borrowers will stand to gain as the EMIs on their home loan are expected to fall.

The apex bank has also extended the moratorium period of term loans by 3 months till August 31. Earlier, it had announced a three-month moratorium on all term loans outstanding as on March 1, 2020. During the moratorium period, the borrower can opt for not paying the EMIs but accrued interest during the period will have to be paid later.

Realty sector stalwarts, on the expected lines, welcomed the RBI move –

Anurag Mathur, CEO, Savills India.
The RBI has underscored the magnitude of stress that has crept into the economy as a consequence of the global pandemic. By forecasting a negative GDP growth, as well as highlighting sharp shrinkage in industrial production and export, the RBI governor gave several indicators outlining the difficult path ahead.

Further, by extending the moratorium by another three months, it aims to ease the financial burden of several mid to small-sized businesses, which are faced with negligible cash inflows. Both of these are commendable, under the circumstances.
Lowering the rates may help accelerate the decisions of a section of home buyers, in the next few months, if not immediately. It will also help in reducing the EMI burden of customers during such grave times, provided the banks pass down the rates. However, these measures alone may not create a demand base for the overall revival of the real estate market. A significant advancement on financial, economic and social security will be needed in the medium term.

Manoj Gaur, MD, Gaurs Group and Chairman, Affordable Housing Committee, CREDAI (National)

The latest 40 basis point reduction and the earlier rate revisions by RBI are a welcome move for sure which should help the real estate borrower in the long run if passed on and implemented by all banks and financial institutions. But, We are seeing that the benefit is not  being passed on and the effect on actual lending rate is little or almost negligible. So, till the time RBI makes it mandatory for banks to reduce lending rate at the same time, these reductions will have negligible effect on real estate market which is reeling under COVID-19 situation.

Anshuman Magazine, Chairman & CEO – CBRE India, South East Asia, Middle East & Africa

The RBI’s move to cut repo rate by 0.4 basis points will have a positive effect on the residential property market. This is a clear step towards reducing lending rates, encouraging liquidity, preserving financial stability and supporting overall economic growth. The reduction in reverse repo rate will encourage banks to lend more and extension of moratorium on EMIs on term loans by another six months and steps to ease cashflow burden on borrowers will improve overall sentiments and market performance. It will also encourage consumers to borrow more from banks due to the lowering of lending rates.  We welcome these announcements as they are directed towards infusing liquidity and strengthening consumption, thereby giving a push to economic recovery.

Anuj Puri, Chairman – ANAROCK Property Consultants

Anuj Puri,chairman-ANAROCK Property Consultants

The RBI’s repo rate cut of 40 bps – from 4.40% to 4% now – is a welcome move.
The rate cuts combined with the further extension of loan moratoriums by 3 months up to August 31, 2020 augurs well for the real estate sector in the times to come.
This move is a major booster shot aiming to cushion the impact of COVID-19 on the Indian economy. Beyond doubt, repo rate cuts do uplift the sentiments of home buyers even further. Home loan interest rates have already gone down substantially over the last year, and are presently at an all-time low averaging between 7.15% to 7.8%.
Today’s repo rate cut will further help banks to lower home loan interest rates, which may get several more fence-sitters onto the market. Moreover, the repo rate cut may compel banks to reduce the interest rates for FDs even further – this could result in even more people leaning towards housing as a better investment option.

Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com:

With a view to supporting the economy in general and real estate in particular in the wake of Covid-19, the government has in the recent past made a series of announcements. The RBI decision to further reduce the repo rate to 4% is a major step in that direction. The move will not only help developers but also homebuyers who have been under extreme pressure due to the prolonged lockdown which has impacted their income. This along with the move of extending loan moratorium for another three months will be extremely helpful in lowering the burden for those who are paying EMIs or using credit cards and lower financial stress. What needs to be seen is how quickly the banks reflect this change in their respective rates.

Amit Modi, President-Elect CREDAI Western UP and Director ABA Corp

RBI’s recent announcements will further provide more relief to several Indians who have been forced to sit home in the wake of the novel coronavirus outbreak, but first, all the banks need to make sure that there is a quick transmission of the announced rate cuts to the end consumer, else the whole effort will be futile. We also wholeheartedly welcome the extension of 3 month moratorium on EMIs till 31 August and this should be applicable right away to bring relief to millions of homebuyers across the nation. We feel that RBI and the Government should proactively make sure that these benefits reach the end consumer, especially now that there is a 40 basis point cut and in the cash reserve ratio to ensure sufficient liquidity in the system.

Dr. Niranjan Hiranandani – President – NAREDCO

Measures like the reduction in repo rate by 40 basis points, the extension of term loan moratorium till August 31 is an honest step to support several sectors hit by contraction of economic activity. These measures will help revive demand crippled by the lockdown. Industry though awaits one time debt restructuring as a holistic measure to give breather to the industries across the board and help in its quick revival.

Yash Miglani MD Migsun Group

We are happy to see that the government and apex bank are making efforts like never before to overcome the damage done to the economy due to Covid-19. Reduced repo rates are likely to benefit borrowers and developers. The extension on loan moratorium will support the people in these trying times. But as real estate is passing through a challenging phase, one time loan restructuring that has been a long standing demand is warranted at the earliest.

Arjunpreet Singh Sahni, Executive Director, Solitaire Group said: 

The Reserve Bank of India has sprung a pleasant surprise by reducing the repo rate by 40 basis points which we expect will immediately translate into reduced home loan rates and improved liquidity scenario in the industry. A much-needed relief at this time when the real estate sector is severely hit by the nationwide lockdown due to Covid-19 crisis, it will surely help revive market sentiments.

 

Ankit Kansal, MD & CEO, 360 Realtors

The RBI measures to reduce the repo rate & reverse repo rate is in continuation of the govt. policies to build liquidity & enhance its circulation in the system. The Real Estate welcomes the prudent step. It will help in managing supply-side bottlenecks by providing better and easier credits to the developers. Likewise it will boost demand in the form of cheaper home loans. The timing is also apt as everywhere we can see the partial suspension of the lockdown and things are gradually coming back to normal. In such circumstances, a positive step like this can give further confidence & foster faster revival.

Prateek Mittal, Executive Director, Sushma Group

We welcome this announcement by the RBI governor to reduce the repo rate by 40 bps to from 4.4 % to 4 %. Holding such a prominent position in in building the country’s economy, the realty sector will garner extensive benefits and the reduced repo rate will hugely support the buyer and boost the demand . Along with that the extended term loan moratorium period will provide the relief towards liquidity for developers to focus on faster execution of projects.

Uddhav Poddar, MD, Bhumika Group

We welcome the further reduction of policy rates by 40 basis points announced today, with this round of reduction the lending rates are like to be at the lowest in 10-15 years. The extension of loan moratorium by another 3-months will help a vast majority of people tide through this period. However, we were expecting RBI to allow a one time restructuring of loans seeing the pain across sectors, and we hope to hear some announcement in that regard soon.

Harvinder Singh Sikka, MD, Sikka Group

This time it is likely that banks will transmit the benefits to customers quickly as RBI is likely to keep a watch on it. In the current scenario it was important to take steps that can make the economy start recovering. The latest announcements indicate that RBI is likely to ease it’s monetary policy to financial system. Banks also should take a leaf out of this and extend loans to real estate sector, which in turn will play a role in the economy growth.

 

Vikas Bhasin, CMD, Saya Homes

Vikas BhasinRBI on its part is showing seriousness towards the health of economy. Now we hope that banks should pass on the benefit to the buyers in quick time. The demand for homes will increase further as home loan interest rates will come down to a historic low. It is good news for the real estate sector.