In a much anticipated and steadied move, the RBI kept rates unchanged today in its last bi-monthly policy review for the calendar year. The key rate (Repo Rate) remains at 6.75 percent, Reverse Repo Rate at 5.75 percent, Cash Reserve Ratio (CRR) at 4 percent and Statutory Liquidity Ratio (SLR) at 21.5 percent respectively. Since its first policy review for this year back in January, the apex bank had reduced the key rate by 125 basis points or 1.25 percent allowing a significant room for the banks to reduce lending rates for the buyers.
Mr. Pradeep Aggarwal, Chairman, Signature Global reacting to today’s Monetary Policy Review, “Following the surprise 50bps rate cut in September, it was expected that RBI would maintain a status quo. However, in the context of recent amendments in FDI policies a rate cut would have further boosted the sentiments and might have encouraged buyers. The real estate sector desperately needs reforms and regulations. Though the government is showing its intent to correct the measures, it needs equal backing from RBI to draft a balance between fiscal and monetary frameworks. However, as Dr. Rajan has assured relaxation in rates as per the scope, we are hopeful to see positive moves in times to come.”
The RBI Policy announcement by Dr. Raghuram Rajan, RBI Governor keeping key policy rates unchanged at 6.75% did not meet expectations of the real estate industry said, Mr. Ashwin Sheth, CMD, Sheth Corp Ltd.“Though a balanced move, RBI could have done much more. However, the rate cut would have helped in lowering the home loan interest rates making home buying a reality for most buyers who have been eagerly waiting for the rates to cut down. This would have also helped to accelerate the growth of the real estate industry.”RBI has also been cautious ahead of an expected rate increase by the US Federal Reserve, which meets in mid-December. There is a possibility that interest rates in the US might eventually go up for the first time since the global economic crisis of 2008. Keeping this in mind, RBI has played a wait and watch game. RBI must look at the real estate sector with new sanguinity, added Mr. Sheth.
“RBI’s rate reduction by 50 basis points in its previous policy review in September coupled with early signs of economic recovery and inflation following a well-directed downward trajectory, this is a much balanced and expected review decision. This recovery path, if gets followed, we might witness a rate cut in the next policy review”, states Mr. Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz.
“This calendar year itself, RBI had reduced the repo rate by 125 basis points, the benefit of which had not been duly forwarded by banks to customers. As much as only 50 percent of the 125 reduced basis points have been absorbed by the banks, still leaving a huge scope of reducing their lending rates for the customers. Thus, this time RBI’s firm move was quite predictable with still chances of rate cut in the next review if things follow a growth pattern”, explains Mr. Rupesh Gupta, Director, JM Housing.
The real estate industry is disappointed with the announcement of Dr. Raghuram Rajan, RBI Governor on unchanged monetary policy, said Mr. Rajesh Prajapati, MD, Prajapati Constructions. “The industry was hoping for a marginal rate cut which was the need of the hour, even a small rate cut would have given a right signal about downward trend in interest rates and created an optimistic environment among buyers and encouraged the fence sitters to take a positive decision. At current level of property prices and interest rates, buyers are finding difficult to cope up with the pressures of home loan. This was the time when RBI should have taken a positive move and reduced the interest rate. I think it’s a missed opportunity, added Mr. Prajapati.
Mr. David Walker, Managing Director, SARE Homes says with the uptick in inflation in the last two months and the RBI front end loading of rate cuts last month, the chances of further rate cuts this month were remote. As less than half the 125 bps rate reduction by the RBI have been passed onto customers by banks, action by the RBI to standardize the methodology for determining base rates which all banks will move to is welcomed. Whilst the growth forecast of 7.4% has been kept unchanged, lackluster construction activity is a weight on the overall outlook.
Ms. Manju Yagnik, Vice Chairperson, Nahar Group the RBI Policy announcement today by Dr. Raghuram Rajan, RBI Governor keeping key policy rates unchanged at 6.75% was not as per the expectation of the real estate industry. The real estate sector was expecting a further rate cut at this stage which would have helped in improving market sentiments, bringing some respite to customers with home loans as well. Given the current property rates and stagnant market conditions a rate cut would have sent out a positive signal to home buyers and industry alike and would have given the much needed thrust to the realty sector.
Mr. Kushagr Ansal, Director, Ansal Housing says “The apex bank has used a steady approach this time looking at how inflation has been performing. The inflation rate has been constantly looking at a downward course and pretty much enroute to attain the 6 percent targeted number by next month. Hence, next policy review might present the country with good news if inflation and fiscal deficit are kept under check”.
“The surprise rate cut by RBI of 0.5 percent back in September was making this review’s decision quite clear to keep the rates unchanged and monitor current inflationary and fiscal developments. The banks are still to pass on these benefits to the customers in comparison to repo rate reductions by RBI till date, thereby giving the RBI reasons to hold back. If the commodity prices, including food and oil are kept under leash, rate reduction in next policy review is sure to follow”, elucidates Mr. Mukesh Khurana, MD, Rudra Buildwell.
Mr. Sushant Muttreja, CMD, Cosmic Group concludes “No change in repo rate was very much on the cards considering the big surprise last time. Cash reserve ratio could have been reduced a bit to allow banks to increase their liquidity and pass on the benefits of earlier reduced repo rates. Although, with inflation rate maintaining a decent fall on the graph, it will be important for RBI to monitor the activities and leave scope for future rate cuts open that will lead to a positive impact on the economy and realty sector”.
Mr. Vikas Bhasin, MD, Saya Group avers “With the seventh pay commission’s plan of 23.55 percent hike in salaries making rounds, it was extremely crucial on RBI’s behalf to come out with a no-change review keeping in mind its anxieties on the inflation rate in future. Accordingly, RBI might have to follow a suitable budgetary tightening approach to reduce its impact on the economy”.