Moving on the expected lines, the Reserve Bank of India (RBI), country’s apex bank, today reduced the Repo Rate by 25 basis points. This way, RBI reduced the key lending rate for the second time in a row, bringing it down to 6%. RBI also cut the reverse repo rate by 25 basis points to 5.75%. The move is going to have a direct impact on the bank’s interest rates. All the banks are expected to reduce their lending rates significantly. This will lower the EMI burden on home loans for many. It is, therefore, that the experts are calling it as the ‘perfect start’ of the financial year for the real estate sector.
“Back-to-back repo rate cuts by the RBI are indeed the perfect start to a new financial year, resulting in overall reduction of 50 basis points since February 2019”, said Anuj Puri, Chairman, ANAROCK Property Consultants. He further said, “As it is, the sector already saw an uplift in homebuyer sentiment due to the multiple sops offered by both the Government, these measures have contributed to a 12% increase in housing sales in Q1 2019 across the top 7 cities.”
RBI, in its statement, also informed about forming a committee to assess the state of housing finance securitisation markets and proposed measures to develop the same. Such steps are expected to secure investors’ sentiments. “It is necessary to resurrect India’s consumer demand and economic growth before a synchronous downturn in advanced economies heighten market volatility. Today’s rate cut and moderation in liquidity coverage ratio coupled with recent instances of liquidity injections indicate that RBI is cognizant of these risks. These measures would certainly help ease liquidity and improve access to cheaper credit by India Inc as well as retail consumers. The focus to align the Indian housing finance securitisation market, as well as the secondary market for corporate loans with international best practices as announced today, will essentially deepen these markets and ensure better price discovery”, said Khushru Jijina, MD, Piramal Capital and Housing Finance
Experts take on today’s RBI Policy Review:
Niranjan Hiranandani, National President, NAREDCO
“India Inc. got positive news as regards a rate cut in the first monetary policy of the current fiscal, on 04 April 2019. The need for flexibility with the evolving situation in India, given that both, inflation and growth have slowed, was reflected in the RBI’s move. Economic growth weakened to 6.6 per cent at end-2018, the slowest in five quarters; while annual retail inflation was low, at 2.57 per cent in February following five months of deflation in food prices.
The sentiment in India Inc. is that from the Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) having granted the 25 basis points (bps) rate cut in today’s policy review would be followed by another 25 bps in the near future. The Indian economy needs liquidity as fuel to power the growth engine. The RBI move is expected to lift industry sentiments, as also provide relief to various stakeholders like corporates as also in real estate, home buyers. We expect that banks further pass down the benefit for the rate cut to the home buyers which shall further trigger the home buying into the actual sales”
Manoj Gaur, MD, Gaurs Group
“The benchmark lending rate cut by 25 bps to 6 per cent is a positive move for real estate sector. This move will surely benefit banks which eventually can ease Lending in the sector. The second consecutive reduction shows positive signs which can surely enhance the demand for housing, marginally.
Though the last cut wasn’t passed on to the consumers so we would have to wait and watch whether this time the consumers get the benefits or not”
Amit Modi, Director- ABA Corp, President (Elect) CREDAI (Western UP)
“This is a good and much-awaited development since easing interest rate will help revive the investment cycle, especially in sectors like Real-Estate which are highly sensitive to interest rate movements. RBI’s decision of reducing its key policy rate by 25 basis points for the second time in a row shows a softer stand towards lending. It’s good news especially for home loan borrowers with the RBI bringing down the key policy rate by 25 bps in its first bi-monthly monetary policy review of the financial year 2019-20, signalling lower interest rates. Hence we also hope that with this development, the banks will immediately pass on the cut to the home buyers, since that’s the confidence booster for the real buyer, and will finally lead to much-needed investment spur in the sector, which will not only culminate in more launches in real estate sector, but more importantly timely project completions as well”
Prasoon Chauhan, CEO, HomeKraft
“This is fantastic news as this 25 bps cut would even further boost the realty sector, especially affordable and mid-segment housing, which is a what the govt. wants under its Housing for All policy. We can expect banks to pass on this cut to home loan borrowers in the coming weeks, which will provide added incentive for homebuyers. We can now confidently say that end-user buyers are now back in the market to not just enquire but buy their selected homes”.
Deepak Kapoor, Director, Gulshan Homz & Former, President, CREDAI Western UP
“With RBI reducing the repo rate back to back this financial year, shows a softer stand towards lending. I am sure Bank’s would surely reduce the lending rates, though marginally, which can boost the sentiments in the market. Also with the push which the government showed towards affordable segment in the budget 2019 where the income tax rebate was extended to Rs 5 lakh, I am sure to end users would now be more motivated, to purchase their homes, post the repo rate cut.”
Ashok Gupta, CMD, Ajnara India Limited
“The 25 basis point policy rate cut is anticipated to rejuvenate the real estate market as this step will give assistance in lowering the marginal cost of fund based lending rates (MCLR) thereby bringing in more availability of money at the banks. The RBI Policy rate cut will not only benefit the developers but also will favour the homebuyers by lowering the EMI burden”
Kushagr Ansal, Director Ansal Housing & President CREDAI Haryana
“A constructive progression for the real estate sector is counted on with the RBI policy rate cut by 25 basis points. This is surely going to boost the market as this is the second time in FY 2018-19 that the rates have been cut by 25 bps changing the reserve repo rate at 5.75%. The marginal cost of fund based lending rates are expected to be low which in turn infers the availability of more money the banks thereby benefiting both the end-users and the developers”
Rajesh Goyal, MD RG Group and VP CREDAI NCR
“This is a good development, since easing interest rate will help revive the health of businesses like Real-Estate which are highly sensitive to interest rate movements, but while it is indeed a step in the right direction, there is definitely more required to improve the sentiment towards investments in the country. The back to back repo rate cuts will boost the affordable and mid-segment housing sales”
Vikas Bhasin, CMD, Saya Group
“This is surprisingly a good development — two back to back repo rate cuts this year — and indeed a step in the right direction. It will help to ease the pressure off the market by attracting more number of buyers to invest in the real estate sector. It will accentuate the recent softness in momentum in the domestic economy”
Surendra Hiranandani, Founder & Director, House of Hiranandani
“The reduction in rate cut is a welcome move which will give a boost to the economy through higher consumption and investments. It is encouraging that the overall focus is on supporting growth and infusing liquidity in the system. Hopefully, consecutive rate cuts will lead to lower lending rates which augur well for the real estate sector as it will bring back fence-sitters in the market. It is now up to the banks to pass on these cuts and ensure that the common man reaps the benefit of this move.”
Sarojini Ahuja – VP, Sales & Marketing, Transcon Triumph
“The second consecutive rate cut of the calendar year 2019 by RBI will have a positive impact on the Indian economy. The decision is expected to bring down home loans, solving the liquidity crisis of the banks and other lending bodies. Presuming that the banks will pass on the benefit to the customers which will lead to lower EMI and higher purchasing power capacity of the home buyers. Declining interest rates along with new reduced GST rates which are effective from April 01, 2019, collectively will encourage the buyers to buy their dream home.”
Rakesh Singh, CEO – Aditya Birla Finance Ltd
“The second rate cut in this calendar year from RBI is good news for the NBFC sector as it will increase positive sentiments in the markets. The lending rates could become more attractive thereby increasing the end user demand of retail borrowers and MSMEs. The NBFC’s that are better rated and focused on retail segments should get an additional boost. This rate cut would stimulate growth and encourage consumption. Hence it is yet another step towards fulfilling the Government’s agenda of ‘affordable housing’ and ‘Housing for All’. The rate cut also means that inflation is lower than anticipated which is a positive sign.”