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RBI’s status quo on rates disappoints realty sector

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Though the Reserve Bank of India acted on the expected line and kept both the repo rate and CRR unchanged, the real estate industry was disappointed with the status quo.

In its sixth bi-monthly monetary policy review, 2015-16 on Tuesday, RBI Governor Raghuram Rajan declared that the repo rate will be maintained at 6.75 per cent, with CRR at 4 percent. The reverse repo rate was held at 5.75 per cent.

This is largely in line with the market expectations, as the central bank keeps a keen eye on the Union Budget due on February 29, before taking any decision that would rattle the market participants.

Expressing the real estate industry’s sentiment, Shishir Baijal, Chairman & Managing Director, Knight Frank India, said, “As an industry, we are disappointed. The real estate industry is going through very tough times and needs a fillip in both lowering the cost of funds and increasing liquidity. The only hope now is that the banks transmit more of the 125 bps policy rate cut (in the last one year) at the earliest to the end-consumers.”

According to Devina Ghildial, MD- South Asia, RICS, “Housing demand in India has not picked up to the desired levels as oversupply, delay in deliveries and fund crunches are putting downward pressure on property prices across India with Mumbai and NCR facing the major brunt. Interest rates for home loan borrowers are still not attractive enough for them to invest in their shortlisted properties. Even in its last review, RBI did not change the repo rates and with today’s status quo on rates, we foresee the market to take longer than usual time to show signs of revival”.

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Amit K Lalit, Founder and CEO, Valion P.R.E.F.O., said, “In the last review, the apex bank had kept status quo to balance the economic growth meter but this time expectation from the apex body was not mere rate cut but a plenty of other measures to instill growth in a neglected sector.” Saying that a rate cut was very much required, he said, “the status quo is a demotivating factor for loan borrowers and for investors who want to hedge financial institutions for growth in their realty portfolios.”

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