Real estate players remain unsurprised with the repo rate

Real estate players remain unsurprised with the repo rate
07/04/2017 , by , in News/Views

Real estate players remained unsurprised as Reserve Bank of India kept the repo rate unchanged at 6.25%.

“The decision to keep the repo rate unchanged at 6.25% is on expected lines because of the liquidity scenario and inching up of inflation,” says Shishir Baijal, Chairman & Managing Director, Knight Frank India.

The real estate players however welcome the central bank’s move to allow banks to invest in Real Estate Investment Trusts (REITs) and infrastructure Investment Trusts (InvITs) within the 20% umbrella limit. They expect that the move will bring-in much needed liquidity in the commercial real estate segment.

“It will allow banks to invest in an important asset class thereby providing much needed boost to this segment. Owing to better liquidity, the cost of capital for developers in the commercial segment will come down in the future,” says Surendra Hiranandani, Chairman & MD, House of Hiranandani.

According to Sachin Sandhir, Global Managing Director – Emerging Business, RICS, India’s REIT potential is quite large but it has not yet taken off. Bank’s involvement will help the commercial real estate segment by bringing in much needed liquidity. It will set the momentum going for REITs.

There were however few developers who wished for a rate cut in order to give a fillip to the real estate market.

Pratik K. Mehta, MD, Unishire, Bangalore avers, “The status quo on repo rate will be a dampener for real estate. Input costs are rising and margins are shrinking for developers and affordability is being hit for end users who might have to pay higher prices for homes with the increase in raw material cost and unless borrowing costs don’t come down, there will be a challenge for buyers to make the investment. Already the real estate market is affected with the demonetisation effect and sales have slowed down to an all time low and added to the affordability and higher costs, will make it even more difficult for an end user to afford a home.”

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