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Industry hails the rate cut, says “Yeh Dil Maangay More”

Industry hails the rate cut, says “Yeh Dil Maangay More”
Raghuram Rajan, governor of the Reserve Bank of India (RBI), speaks during a news conference at the central bank's headquarters in Mumbai, India, on Wednesday, Sept. 4, 2013. Rajan, a former chief economist at the International Monetary Fund who has been the top adviser in India's Finance Ministry since 2012, took over as the new RBI governor today from Duvvuri Subbarao for a three-year term. Photographer: Dhiraj Singh/Bloomberg *** Local Caption *** Raghuram Rajan

Souma Mukherjee/RealtyMyths

The real estate sector was looking at the RBI governor with eyes wide open. The sector is reeling under tremendous pressure. The sluggish demand coupled with costlier loans has broken developers’ confidence. Investors too, have been shying away. Though the recent budget announcements have raised some hope, it all came back to RBI and its governor Raghuram Rajan. Industry was little skeptic, will Raghuram cross the ‘Lakshman Rekha’ this time! Finally, to everyone’s surprise, RBI cut its REPO Rate by 25 bps and brings it down to 6.5%. A first rate cut of FY17, it came after 6 months. The last rate cut had happened on September 29, 2015 when RBI had slashed the repo by 50 bps.

Let’s hear how the industry reacted it this:

Anil Kumar Sharma, CMD, Amrapali Group – The rate cut by RBI at this time is really a great kick start to the stagnant 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.

Manju Yagnik, Vice Chairperson, Nahar GroupWe welcome the 0.25 basis point rate cut to 6.50 % announced by the RBI Governor today. This will create positive sentiments and spearhead growthfor the realty sector, bringing some respite to customers with home loans during the upcoming festival of Guddi Padwa and Akshayatritiya. Happy times to continue for the home loan seekers.

Ravi Saund, JMS Buildtech: With the repo rate cut by 25 % RBI has maintained its accommodative stance. It was quite up to the expectations of the industry and traders. The decision is in tune with developments in both international and domestic markets.Lower cost of borrowing is bound to give a fillip to capital expenditure of companies and industries, which are struggling with cash flows and trying to manage their balance sheets. Sectors such as infrastructure, real estate and housing are expected to benefit from the rate cut.

Deepak Joshi, President and CBO, Religare Housing Development Finance Corporation Ltd: As expected it’s a welcome move of RBI by cutting repo rate by 25 bps. This coupled with Marginal Cost of funds based Lending Rate – (MCLR) on which SBI has already taken a lead, will further reduce the lending rates in the market and increase credit off take. Also EMIs on retail consumer loans will further soften which will increase demand for auto and home loans.

Chintan Sheth, Director, Sheth Corp: The increase in Ready Reckoner rates could have been avoided considering the current market sentiments in the Mumbai realty market. This increase will have a huge impact on the property prices across segments.

Nidhi Narang, CFO, Hindustan Power: The reduction would help in making more affordable credit available to the borrowers, if passed through. However, the need of the hour is to make sure that the banks are able to achieve the required good quality credit growth. Further, the banks need to ensure availability of credit with the rate reduction pas thru to the industry / infra companies.

Gaurav Mittal, MD, CHD Developers Ltd: 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.

Ashok Gupta, CMD, Ajnara India Ltd: The RBI has given positive signs wherein the CPI inflation is assumed to come down to 5% and the GDP is expected to rise to 7.6% by the end of the current fiscal year. These show that the market is on an improvement spree, however, against 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. With so many infrastructure developments lined up, one cannot take the risk of fluctuating domestic market.

Vineet Relia, MD, SARE Homes: 
In line with the decisions taken by the Government in recent times by way of clearing the Real Estate Bill and passing the Model Building ByeLaws to improve ease of doing business in the real estate sector, the decision of RBI to reduce REPO rate by 25 basis points today is a welcome move and is likely to spur demand in the housing sector. The real estate sector has seen sluggish demand in the last few years and the reduced rate cut will allow banks to offer loans at more attractive rates. Cheaper loans for home buyers will reduce EMI burden on buyers which is likely to see renewed interest in residential property purchase. Overall, the rate cut will positively impact sentiments surrounding the real estate market.”

Ashish Raheja, MD ,Raheja Universal: Specifically from the real estate sector perspective we believe that there will be some renewed interest from prospective home buyers who were hit recently by the ready reckoner rate hike across Maharashtra. While this move is positive it is left to be seen whether banks will pass on these benefits to their customers.

Deepak Kapoor, Director, Gulshan HomzThe move to cut down on the basis points is deemed to be very well received in the real estate sector. Last year as well, there were substantial rate reductions but the benefits were not passed on to the end users in full capacity. But, 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.

Vikas Bhasin, MD, Saya Group: RBI has not only cut down on the REPO rates but also increased the Reverse REPO rates which mean a win win situation for the banks. 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% at all times. The basic benefit being, banks will borrow from RBI at a lower rate courtesy the decreased REPO rate and will lend to RBI at a higher rate thus increasing their profits on a twofold basis. This will help lower the prevalent lending rates in the market.
Rupesh Gupta, Director, JM Housing: 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 sectors. Additional sectors and industries are also to benefit which will add to the benefits being directly received because the realty sector is in itself an end user for over 30 allied industries.
Amit Modi, Director, ABA Corp.: Easing interest rate will help revive health of businesses like Real-Estate which are highly sensitive to interest rate movement. We also sincerely hope that both Finance Ministry as well as the RBI asks all the Banks to transfer the benefits immediately to help  the end consumer, rather than help in buffering the bottom lines of the bank.”

Rajesh Prajapti, Managing Director, Prajapati Developers: “Yeh Dil Maange More” says Prajapati on RBI rate cut. It would have been much more beneficial had the RBI reduced the repo rate by 50 bps, which in turn would have facilitated the banks to further reduce the rate of interest,” he said. Mr. Prajapati expressed the hope that hopes that the National housing Bank , PSU banks as well as Pvt banks will reciprocate by reducing its rate of interest to ensure lower EMIS on loans.

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