Realty goes with RBI stance on key rates

NEW DELHI: The Reserve Bank’s India’s decision of not tinkering with key policy rates has been well taken by various stakeholders in the realty segment.

The RBI in its third bi-monthly monetary policy statement for 2014-15 kept the repo rate unchanged at 8 per cent. The reverse repo rate was kept unchanged at 7 per cent and Cash Reserve Ratio (CRR) was maintained at 4 per cent.

The SLR was cut by 50 bps to 22 per cent to infuse liquidity in the system. “RBI won’t hold rates any longer than necessary. We will have room to cut rates if disinflation continues,” said RBI Governor Raghuram Rajan after unveiling the policy statement.

Anuj Puri, Chairman & Country Head, JLL India, said the monetary policy “indicates that the RBI is keeping a close eye on inflation rather than facilitating growth just as yet. This makes sense.”

Puri said “in line with the recent initiatives of the Government as well as the RBI to push for growth in infrastructure and real estate, specifically affordable housing,- the additional funds allocated in the hands of commercial banks through a SLR cut is positive for both these sectors.” The investment cycle, he said, was picking up, as was evidenced by the recent Index of Industrial Production (IIP) and Purchasing Managers’ Index (PMI) numbers.” Therefore, banks’ willingness to lend the excess liquidity generated to these priority sectors is likely to be high. As far as interest rates are concerned, the real estate sector will have to wait a little longer for a rate cut”, Puri added.

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Aman Agarwal, Director, KV Developers, said the apex bank’s move in keeping   key rates unchanged was “in line with the Government’s objective of taming inflation to 6 per cent by 2016.” However, he said, in its efforts control inflation, the RBI should not restrict flow of funds in the market. A cut of 25 bps would have actually infused some fund and would have resulted in boosting sentiments, he added. “This would have encouraged sales as well for real estate sector in particular,” Agarwal concluded.

David Walker, Executive Director, SARE Homes, has said, “As expected the RBI has decided to keep rates unchanged as inflation remains on the high side of targets.  This means no immediate relief for homebuyers in the form of cheaper loans, however we welcome the Governments focus on infrastructure development which through boosting supply and in turn that will help to bring inflation down.  As inflation and rates fall, homeowners will benefit from lower EMI’s and also appreciation in the capital value of their homes”

Abhay Kumar, CMD of Griha Pravesh Buildteck, was of the view that the RBI’s decision to keep the rates unchanged was pretty in line with the market expectations “as the central bank plans to tackle inflation which is slightly on the higher side.” The SLR cut, he said, suggested that the RBI wanted to infuse a significant amount of liquidity in the system and ease the lending norms for the banks. “Overall the third bi-monthly policy review is aimed at bringing about long- term prosperity and reviving the sentiment on domestic economic activity”, he added.

P Sahel, Vice-Chairman, Lotus Greens Developers, had the following to say on the RBI’s policy review: “RBI’s stance to keep key policy rates unchanged should basically be seen as a hedge to check against any backsliding should there be a spike in inflation due to a deficient monsoon and food price volatility. Although the real estate sector would love to see interest rates cut so as to allow for lower cost of borrowing and repayment on home loans, I think the wait won’t stretch too long before the central bank deems it fit and proper to bring down rates.”

Sanjay Dutt, Executive Managing Director- South Asia, Cushman & Wakefield, said the steps taken in the policy review “clearly indicate that the central bank is keen on freeing up more money for lending and injecting liquidity into the system, and is thus a positive for the real estate development companies.” In the absence of a clear direction of interest rate tapering, he said, “we expect that developers will be cautious in the upcoming festive season. We reiterate that this might be hence, a good time for consumers to bargain for sweet deals. In our assessment, once interest rates come off its current levels, fresh demand will be generated for housing sales, leading companies to step up launches.”

According to Vijay Jindal, CMD, SVP Group,: “After the shining Budget by Government, the real estate sector received another positive push by RBI, as RBI kept repo rates unchanged at 8 per cent” Jindal said, “Keeping repo rates on the same page is neither good nor bad for the sector. In fact this move will increase positive market sentiments as both investors and buyers will not have to open their pockets for extra.”