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RM Reports

Real Estate Gets Double Dose Of Happiness, Hails RBI’s Repo Rate Cut After Budget Bonanza

In an unexpected move, at least the market experts would agree to it, the Reserve Bank of India today cut the key Repo Rate by 25 bps, bringing it down to 6.25 percent. RBI was doing the 6th bimonthly monetary policy review, and first under its new Governor Shaktikanta Das, who replaced Uriji Patel after the latter’s sudden exit from the post.

With this rate cut, the Apex Bank also changed its policy stance to “neutral” from “Calibrated Tightening” as inflation continued to remain under 4 percent target since last 4 quarters. Clearly, the market cheered for the rate cut as it was first rate cut after April 2017. Moreover, the market is still in the budget hangover, last Friday the government announced many soaps that would bring positive impact to the market.

The real estate market, in particular, is overwhelmed with this double dose of happiness. During Budget 2019, the Finance Minister announced many reformatory measures and tax relaxations for the developers as well as the investors and the end consumers. With this sudden rate cut announcement, the homebuyers would further be encouraged to make their decisions as the home loans would get cheaper.

As expected, the real estate industry hailed the rate cut. Anuj Puri, Chairman, ANAROCK Property Consultants termed it as “an unexpectedly positive move”. He said, “RBI’s decision to slash the repo rate by 25 basis point to 6.25 % is a welcome and unexpectedly positive move, given the sops that the recent expansionary budget gave to farmers at an additional cost of Rs 75,000 crore per annum. It was also overdue, as this has been the first cut in a long time. It definitely augurs well for the real estate sector which also received a budget bonanza in the previous week”.  On the other hand, Dr. Niranjan Hiranandani, President, NAREDCO termed this move by RBI as ” the perfect follow-up to the Budget Speech”. Dr. Hiranandani said, This is the perfect follow-up to the Budget Speech by Finance Minister Piyush Goyal, and this will not just enhance liquidity in the economy but also boost investment and give the economy a positive growth phase. The option for further rate cuts in forthcoming reviews remains an option, and I hope we will see more such ‘positive moves’ from the RBI. From a real estate perspective, this will impact home loan interest rates, and reduced EMIs are among the best harbingers of positive sentiment, leading up to further off-take of real estate across India.”

CREDAI also sounded hopeful that the momentum put by the RBI will further be carried by the banks. Manoj Gaur, MD, Gaurs Group and Vice President, CREDAI National said, “With RBI reducing the repo rate after keeping it unchanged since last two monetary policy reviews, it 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 5 lac, I am sure the end users would now be more motivated, to purchase their homes, post the repo rate cut.”

Carrying similar sentiments, the real estate industry leaders also hailed the rate cut by RBI. Here’s what they said.

Khushru Jijina, MD, Piramal Capital, and Housing Finance –  

“The 25 bps cut in policy rates is a welcome move and in line with industry expectations as well as with central banks in advanced economies. Resulting lower cost of funds would help the NBFC sector to recover faster and its positive effects would trickle down to the larger sections of the economy namely real estate and MSMEs. NBFCs would also benefit from RBI’s decision to link bank risk weights on NBFC exposures to the rating of such instruments. This would improve the flow of bank credit to the better-managed NBFCs, helping segregate the men from boys. This along with the harmonization of Asset Finance Companies (AFC), Loan Companies, and Investment Companies, into a single category would fastrack the process of consolidation in this space, as we have been expecting for some time.

Additionally, we also welcome the relaxation in FPI limits investing in corporate bonds and feel that this is the right step towards deepening the Indian debt markets.”

Manoj Paliwal, Chief Financial Officer, Omkar Realtors –

“Apex bank’s move to soften the interest rates by 25 basis points is a good move, a much-needed impetus in the real estate sector. The move will ensure softening of lending rates and EMI’s will see some reduction whereby attracting more buyers to own the house. Secondly, the RBI’s decision to cut rates at regular intervals will improve the affordability quotient of Indian home buyers.”

Hiral Sheth – HOD, Marketing, Sheth Creators –

“The rate cut will definitely help in bringing down the home loan interest rates and would bring some amount of relief to the homebuyers. Also, banks should pass down the benefit to the homebuyers as this will encourage the buyers to buy their dream home.

The interest rate is one of the important factors that one looks at while buying a home as loan equated monthly installments (EMI) depend on that. So, as EMIs fall due to a drop in interest rates, the demand for housing should rise.”

Amit Raheja, MD, Wealth Clinic –

“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 favor the homebuyers by lowering the EMI burden.”

Deepak Kapoor, Director, Gulshan Homz & Former, President, CREDAI Western UP –

“This is a surprisingly good development and indeed a step in the right direction. The repo rate that was left unchanged since October 2018 has now been cut by 25 bps, thus giving a sigh of relief to the real estate sector.  It will help to ease the pressure off the market by attracting more number of buyers to invest in the real estate sector.”

Gaurav Gupta, President, CREDAI Ghaziabad, and Director, SG Estates –

“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 first time in FY 2018-19 that the rates have been cut by 25 bps changing the repo rate at 6.25 % and reserve repo rate at 6%. The marginal cost of fund based lending rates is expected to be low which in turn infers the availability of more money the banks thereby benefiting both the end-users and the developers.”

Nipun Gaba, Senior Vice President, Fairwealth Group –

“This is a good development, since easing interest rate will help revive 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, 25 basis points cut may not be enough to spur the investment cycle, there is definitely more required, to improve the sentiment towards investments in the country and will boost the mid-segment housing sales.”

Dhiraj Jain, Director, Mahagun Group –

“This is really good news especially for home loan borrowers with the RBI bringing down the key policy rate by 25 bps in its monetary policy review, signaling lower interest rates. With lower repo rates banks would be able to set the direction and reduce the level of interest rates, which eventually witness the increase of demand for homes in real estate sector.”

Prateek Mittal, Executive Director, Sushma Group –

“The real estate segment is expected to pick up with RBI monetary policy’s rate cut. The repo rate cut of 25 bases points will not only benefit the developers but will also favor the homebuyers. More money available in banks at a lower cost will result in increased purchasing power as there will be a lower EMI burden on the buyers. It will also lighten the liquidity crunch and lower the cost of finance for the developers. Such a positive announcement by the RBI was much needed for the realty sector to take off.”

LC Mittal, Director, Motia Group –

“After the Interim budget 2019, RBI monetary has come up with even greater relief to the real estate sector. The repo rate which was kept stagnant from October 2018, has now been reduced by 25 basis points which will ease the pressure off the market and accelerate the investment cycle. Post the implementation of GST & RERA this rate cut is going to help the realty sector flourish.”

 Kushagr Ansal, Director, Ansal Housing –

“Since last one & half year on every policy review we were expecting the cut in repo rate but finally, the government reduced repo rate by 25 basis point after the interim budget. Post implementation of GST & RERA real estate sector is on the revival path and decreased repo rate will be additional support for the buyers.”

 Ashok Gupta, CMD, Ajnara India –

“Developers are working hard to bring real estate back on track and Government is also supporting us in every possible way. We believe that the decision to reduce a repo rate by 25 basis point will prove beneficial from a consumption and lending perspective, thereby boosting economic growth. This was a much-awaited announcement for both developers and buyers.”

Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM –

“The RBI policy cut rates will not only be a positive outcome for the Real Estate sector, but also for the eligible new home borrowers who can take advantage of the subsidies scheme under PMAY (Pradhan Mantri Awas Yojana). This move will be a big boost for affordable housing and help for first time home buyers also the rate cut brings fetches confidence for the market as this will make the availability of more money at the banks thereby lowering the EMI burdens. And to add icing to the cake, the government has also extended the time-limit of the PMAY scheme to March 31, 2020, for middle-income group buyers.”

 Rajesh Goel, MD, RG Group –

“With the cut in Policy rates by 25 basis points, there are aspirations for the Real Estate Sector to pick up their businesses in the market. This step will surely assist in keeping the marginal cost of fund based lending rates (MCLR) low which means there will be more money available at the banks at a much lesser cost lowering the EMI burden. Though this is positive progress for the market, still it needs more to stimulate the investments in the country.”

Vikas Bhasin, CMD, Saya Group –

“It’s a welcome step and was long awaited move this will help to boost the sentiments in the real estate sector. We sincerely hope that both Finance Ministry as well as the RBI asks all the Banks to transfer the benefits to the end consumer, else this move will severely stop short of benefiting the consumer and only help in buffering the bottom lines of the bank.”

Dhiraj Bora, General Manager, Corporate Communication, Paramount Group –

“MPC has changed its stance to neutral and apex bank finally cut interest rates, in line with what the sector was expecting. Now the repo rates are brought down by 25 basis points to 6 percent from 6.25 percent, we are assuming the banks would pass on the rate cut in a similar direction. From the point of view of the real estate sector, the lowered interest rates on home loan EMI is likely to give another sign of relief after the Interim budget.”

Sagar Saxena, Project Head, Spectrum Metro –

“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 favor the homebuyers by lowering the EMI burden.”

Anil Saraf, CMD, ASF Group –

“Given the evolving macroeconomic situation in India, the rate cut is an expected but encouraging move by the RBI. After a pro-middle class interim budget, reducing the Repo rate by 25 bps will, without a doubt, bring cheer to the real estate sector. Considering the inflation trends and CPI, this decision, while reducing the home loan rates, will also help in improving the liquidity in the market.  This move apart from providing the much-needed impetus to the real estate and infrastructure sector is  expected to encourage home buyers, especially the fence sitters, to finalize their purchase decisions.”

Hari Prakash Pandey – Executive Director, Finance & Corporate Strategy, Runwal Group –

“The RBI’s move on slashing the repo rate by 25 basis points focuses on driving growth and is expected to infuse liquidity in the system. This will be a much-needed relief for the real estate sector as it will lead to lower interest rates for homebuyers. RBI’s decision will not only increase positive sentiments in the real estate sector but will also boost the residential demand going forward.”

Sarojini Ahuja – VP, Sales & Marketing, Transcon Triumph –

“The RBI’s decision on reducing repo rate by 25 basis points will make home loans cheaper, and also increase liquidity in the banking system. RBI has given positive signs showing that the market is improving and finally the financial institutions can now start on to pass the benefits to the end-users. Cheaper loans for home buyers and rising demand will create renewed interest in residential property purchase from end users.”

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