RBI could have done much more: Real estate industry
Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan’s decision to maintain status quo on policy rates in his sixth by monthly monetary policy review, keeping key policy rates unchanged at 6.75%.
The decision to keep key policy rates unchanged did not meet expectations of the real estate industry.
Though real estate developers and experts welcome this dovish movement, they expect RBI would relax its monetary policies in near future and would boost sales in the realty market. The real estate industry also hope that government would announce some reformatory measures in terms of tax in the upcoming Union Budget to give some breather to manufacturers and developers so that they may also slash cost of their products. Moreover, Structural reforms in the forthcoming Union Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of 2016-17.
Let’s go through the industry reactions on RBI Policy:
Amit Modi, Director ABA Corp and Vice President CREDAI Western UP
“Since January, the RBI has reduced the repo rate by 125 basis points in four separate cut this year. However, the banks have not been generous enough to pass on the entire benefit of this reduction to end consumers and less than half of the cumulative policy repo rate reduction of 125 bps has been transmitted by banks. The median base lending rate has declined only by 60 bps.
While RBI has taken steps to considerably reduce rates, the interest rate transition from banks to the consumers has been gradual. Across the year, the total of 125 bps cut in the rates has been already done and now much depends on how banks transmit the benefit to home buyers.
We sincerely hope that both Finance Ministry as well as the RBI push all the Banks to transfer the benefits to the end consumer, else these moves will severely stop short of benefiting the consumer and only help in buffering the bottom lines of the bank.”
David Walker, Managing Director of SARE Homes
“Keeping the repo rate unchanged at 6.75 per cent was an expected move considering the current challenging economic environment. Growth seems to be slowly picking up and there is a growing sentiment of stability in the market. Notwithstanding the monetary framework, the government needs to steer focus towards bringing about reforms and a policy makeover to revive the ailing sector. We are expecting that the government would take considerate steps closer to the budget and provide further rate cuts to channelize economic growth.”
Aman Agarwal, Governing Council Member NAREDCO & Director, KV Developers
“With the ongoing weakening of activity in major emerging market economies (EMEs) outweighing the recovery in some advanced economies (AEs). World trade has remained subdued, held down by anaemic demand, new lows in commodity prices and currency realignments. However, on the domestic front economic activity lost momentum in last quarter. Post evaluation of all these micro and macro economic situation, RBI has kept status quo this time to control the economic situation.”
Ashwin Sheth, CMD, Sheth Corp Ltd.
“Though taking a conservative path, RBI could have done much more. A rate cut at this stage 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 boost the growth of the real estate sector.
The Government has taken the lead in trying to implement policies that will propel growth of the sector. In the same vein, RBI too should have looked at the real estate sector with new optimism.”
Manoj Gaur, President CREDAI NCR and MD Gaursons India Ltd.
“It was an expected move that RBI will keep the rates unchanged in this bi-monthly policy. Rising inflation is a reason; RBI is holding back the rates and maintained status quo. The upcoming budget is also being considered a reason for RBI to adopt a wait and watch approach. The annual budget will throw light on microeconomic matters which is significant to decide if the there is a scope of rate cut in future. Structural reforms in the budget will give more space to monetary policy for growth by the end of the current financial year. However, we were looking for some more reduction in interest rates as a rate cut would have boosted the demand in housing sector.”
Deepak Kapoor, President, CREDAI Western UP
“A cut of 25bps was expected as RBI was approaching the end of rate cut cycle. It has been done after wait and watch policy few days before the budget in the coming quarter. A cut of 25 bps was possible as economic indicators such as fiscal deficit is under control, oil prices are already down, GDP growth rate is as expected and the inflation is in control. Although the real estate sector did grow after the last cut but we feel that the growth remains weak and a rate cut would provide an additional impetus towards the recovery of the sector. We would also request the RBI to push banks to lower the interest rates as benefits of previous cuts have not reached the customer fully. We are also expecting a cut in the next policy review as a lower interest rate is important for the growth of the sector.”
Prashant Tiwari, Chairman, Prateek Group
“Maintaining status quo is a missed opportunity for real estate sector as reduction in rates might have improved the market scenario and triggered the demand and sales process. Still, in the longer run we foresee enough room for more rate cuts which would spur growth in realty market. Real estate sector being a major contributor to India’s GDP needs enough backing from RBI to give out positive signals considering the present property rates and stagnant market conditions.”
Gaurav Gupta, General Secretary, CREDAI Raj Nagar Extension
“One of the reasons Reserve Bank has kept the rates unchanged is to keep inflation under control. While, RBI has given more than enough rate cuts in the previous year and forthcoming budget is also being eyed to get cues about the economy. Therefore, keeping the rates untouched was a very much predictable move. The current instability in market and reluctance of banks to pass down the rates to borrowers may also be a reason for RBI to leave the rates unchanged. This is a kind of recovery path being followed by the central bank and if things work well we can expect rate cut in the next policy itself.”
Sanjay Rastogi, Director, Saviour Builders Pvt. Ltd.
“The realty sector was looking forward for rate cut as inflation is not very much worse and crude oil prices are also coming down. Any cut in rates would have given sufficient boost to the sector facilitating growth and building up customer’s confidence. Controlling inflation may be a long term goal of the government but bringing down rates might have infused positive vibes in the realty market which is already undergoing recovery phase.”
Anil Kumar Tulsiani, CMD, Tulsiani Constructions and Developers Pvt. Ltd.
“RBI already slashed down 125 basis point in the previous year and so to keep the rates unchanged was a very much anticipated and a balanced move. RBI is also waiting for the fiscal roadmap to be presented in the forthcoming budget which would affect the further course of action of government. We are hopeful that RBI will take effective measures to aid the process of growth and development of all the major sectors including real estate. Furthermore, lending banks also need to take initiatives to ease the burden of home buyers and pass on the benefits of earlier rate cuts to borrowers.”
Shishir Baijal, Chairman & Managing Director, Knight Frank India
“As an industry, we are disappointed. The real estate industry is going through very tough times and needs a fillip in both lowering the cost of funds and increasing liquidity. The only hope now is that the banks transmit more of the 125 bps policy rate cut (in the last one year) at the earliest to the end-consumers. With the Union Budget coming up, I hope there are some sops announced that will give this stressed sector the much-needed impetus to see a turnaround.”