RBI supports governments growth stance with Repo Rate cut
For the third time in a row, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) today cut interest rates by 25 basis points, as was widely expected.
At the end of a three-day MPC meeting, RBI Governor Shaktikanta Das announced its second bi-monthly monetary policy statement for 2019-20. In a unanimous decision, the MPC also decided to change the stance of monetary policy from neutral to accommodative.
Amid slowing economic growth and rising global uncertainty, the RBI had decreased the short-term lending rate (repo rate) by 25 basis points each in its last two policy reviews.
What the industry has to say:
Niranjan Hiranandani- Naredco President and Sr.VP Assocham, “We are happy with the rate cut. Buyers who are coming back after the GST rate cut announcement, on under-construction and affordable properties, would be encouraged further with the reduction in the bank rates. However, we feel that it is basically not enough to address the issue faced by all the other industries. It is not about ‘Dil Maange More’, but more about the need of the hour.”
Khushru Jijina, MD, Piramal Capital and Housing Finance, “The downward revision of growth projection by the Reserve Bank of India (RBI) from 7.2 % to 7% in 2019-20 calls for the implementation of additional rapid policy interventions by both RBI as well as the Government. NBFCs are instrumental in providing credit to MSMEs and real estate sectors, that are significant to India’s GDP. MSMEs contribute 31% of the GDP, 40% of exports and hires 25% of the labour force while real estate contributes more than 5% to GDP and hires 17% of the labour force directly or indirectly. We anticipate more decisive and pro-active policy measures to address the current liquidity crisis, that will enable NBFCs to restore lending activities, especially to these critical sectors.”
“The third rate cut by RBI in 4 months, along with change in policy stance to accommodative from neutral is a clear sign that the Government is committed to reviving growth. In the backdrop of global trade wars and muted consumption demand, the real estate sector can be a catalyst for economic recovery, job creation and foreign investment. The RBI’s key challenge will be to ensure that banks pass on the benefits of these rate cuts to end borrowers and ease the liquidity crunch impacting the sector” said Aashish Agarwal, Senior Director, Valuation & Advisory at Colliers International India.
Ramesh Nair, CEO & Country Head, JLL India, “The monetary policy decision to cut the policy rate is laudable. As the residential sector is already at inflexion point signalling a sustainable recovery, this decision will support the trend. This repo rate cut is likely to have a direct impact on the real estate sector, provided the banks, in turn, transmit the same by a corresponding reduction in lending rates.”
Rajan Bandelkar, President, NAREDCO Maharashtra, “RBI has changed its stance from ‘Neutral’ to ‘Accommodative’ which also possibly provide banks the required contextual setting and cushioning to provide funds to NBFCs and thereby, have capital influx in the entire financial system, arresting the liquidity crunch. A good monsoon will lay the context for further rate cuts during the year. The recently revised GST rates coupled with 5.75% and stable government look potentially rewarding with a promising future for home sales in the coming second half of the year.”
Manoj Gaur, MD, GAURS GROUP and Chairman of Affordable Housing Committee, CREDAI (National), “The benchmark lending rate cut by 25 bps to 5.75 percent is a positive move for real estate sector before the union budget for FY 19-20. This move will surely benefit banks which eventually can ease Lending in the real estate sector.”
Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Limited and Tata Housing Development Company, “The RBI’s decision to cut repo rate by 25 basis points to 5.75% is a welcome step and would definitely prove beneficial for the real estate sector as it paves way for increased investments. The change in stance of the RBI from “Neutral” to “Accommodative” is expected to help the economy revive its growth rate that softened in the last quarter of FY19.”
“The consecutive drop in repo rate has further amplified positive sentiment in the real estate sector. We urge banks to reciprocate the same by reducing home loan interest rate which will benefit home buyers. We also hope that the upcoming budget announcement in July is also in sync with RBI monetary Policy’s cut in repo rate so that it provides the necessary push to the liquidity crisis struck sector.” expresses Amit Ruparel, MD, Ruparel Realty.
“Such consistent initiatives play a significant role in not only bringing down the home loan rates but also ease the liquidity crunch thereby reviving the overall health of the sector. We hope that banks pass on the benefit to consumers. Most importantly, we anticipate that the announcement will encourage buyers to buy their dream home.” Chintan Sheth, Director, Ashwin Sheth Group.
Rakesh Reddy, Director, Aparna Constructions & Estates Pvt. Ltd, “The rate cut is expected to lower EMIs on home loans, and reduce the debt repayment burden on developers. This presents a great opportunity for the sector as the ease of financing should translate into increased sales and project launches. The lowering of interest rates combined with recent policy interventions including the implementation of RERA and GST rationalisation will go a long way in reforming the sector and inspiring consumer confidence.”
Samyak Jain, Director, Siddha Group, “The RBI’s decision to reduce the repo rate has paved the way for the improvement of the Indian Economy. The third consecutive rate cut this year is expected to provide the desired impetus to the residential segment of the realty sector through low-cost home loans. We hope that banks pass on the benefit to homebuyers and also expect this initiative to boost credit growth and revive the inactive nature of the economy.”
Manju Yagnik, Vice Chairperson, Nahar Group, “As the monetary policy committee today announces a cut down on the interest rates by 25 basis points, this movement has set in motion the ever awaited change in the real estate sector. The following rate cut will certainly lead to reduction in interest rates charged by banks on home loans which will furthermore reduce EMI on housing.”
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM, “The RBI policy rate cut will not only be a positive outcome for the sector, but also for the eligible new home borrowers who can take advantage of the subsidies scheme under PMAY. This move will be a big boost for the affordable housing segment.”
Prashant Tiwari, Chairman- Prateek Group & President – CREDAI Western UP, “We were expecting a 50 basis rate cut to motivate the progress this will help in the medium term to improve sentiments which will further encourage the demand for real estate. Reduction in the repo rate of 25 basis points is a welcome step and banks should follow it with a reduction in home loan interest rates. If this happens then the real estate sector will get a little boost that it was looking for.”
Amit Modi, Director- ABA Corp, President (Elect) CREDAI (Western UP), “We 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 estate 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.”
Anupam Gupta, Director – Sales & Marketing, GBP Group, “Three consecutive repo rate cuts this year is not only 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). More money available in banks at a lower cost will result in increased purchasing power.”
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd, “The reduction in the repo rate is essentially driven by the broad-based deceleration in the economy in recent months. This shows the commitment of the RBI to ensure the transmission of rate cuts to the end consumers. There is a slight reform in liquidity issues in the sector after two back to back rate reductions, and a cut-down for the straight third time will definitely undertake the liquidity shortfall in the sector at large.’
Ashish Bhutani, CEO, Bhutani Infra, “It is a good move by the RBI to cut repo rate and it is commendable that it is doing its part to accelerate the economy. However, the banks have not yet passed on the benefits to the consumers, which is not benefitting the real estate sector that in turn is affecting the allied industries too.RBI should take action so that banks pass on the benefits to the buyers.”
Farshid Cooper, MD, Spenta Corporation, ” Given the ongoing economic slowdown, with both the consumption and investment engines wavering, the third cut in the repo rate by 25 basis points is an encouraging move to stimulate the economy and will immediately spur growth for sectors like real estate. Banks should reduce the lending rates and ensure that the home loan borrowers reap the benefits of this move.”
Ashok Mohanani, Chairman, EKTA World, “There have been many meaningful interventions by the government and the regulator which has provided a positive boost to the buying sentiment among the home buyers. Rate cuts will ensure affordability in terms of home loans and hence, dropped EMI, lesser GST, tax rebate for income up to Rs 6.5 lakhs for the middle class. All these shall give some sales impetus to real estate.”
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.”
Kushagr Ansal, Director Ansal Housing & President CFREDAI 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. 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. ”
José Braganza, Joint MD, B&F Ventures (P) Ltd, “Low inflation and subdued growth are the drivers of the move. Such steps play a crucial role in consonance with reducing the rates of home loan and ease the liquidity crunch in the sector. As developers, we hope and urge the banks to pass on the benefits to the homebuyers.”
Mayur Shah, MD of Marathon Group, “After a huge public mandate for the current government, the much-needed push to the economy was eagerly awaited. After the expected tax reduction in GST, the cut in the repo rate is yet another positive step for the real estate sector.”