The Monetary Policy Committee in its second meet in the current financial year continued with the status quo on rates. NewsBarons connects with Real Estate Industry Leaders to share their views and opinions on the MPC announcement.
• Repo rate retained at 4%
• Reverse repo rate retained at 3.35%.
• Growth projection for FY22 scaled down to 9.5%
• CPI inflation outlook:
o 5.1% in 2021-22
o 5.2% in Q1
o 5.4% in Q2
o 4.7% in Q3, and
o 5.3% in Q4
• Central Bank will buy INR 40,000 crore of government securities on June 17
• G-Secs worth NR 1.20 lakh crore will be purchased in total in Q2
• A separate liquidity window of INR 15,000 crore for the hospitality sector
The downward revision in FY22 GDP growth projection was also on expected lines: Dr. Niranjan Hiranandani
With the second wave impacting the economy in terms of a slowdown as also the rise in inflation, as expected, the RBI has maintained a status quo on the policy rates, as also continued the ‘accommodative’ stance. The downward revision in FY22 GDP growth projection (9.5 per cent) was also on expected lines.
It is the sixth time consequently that RBI has kept the benchmark rates unchanged. While it reflects a response to the COVID-19 pandemic challenges, it is ‘advantage home loan borrower’, with the floating retail loan rates continuing to be at the lowest level over the past two decades.
The low interest rate regime reflects ‘advantage borrowers’ and this is likely to continue for some more time. The RBI has pursued the broad intent of dealing with weak spots in the economy by providing on tap liquidity, with additional lending to distressed sectors.
[Dr. Niranjan Hiranandani is the National President of NAREDCO]
Demand stimulant measure like credit subsidy or tax waivers even for a limited period can play a transformative role: Shishir Baijal
We welcome the RBI’s move to maintain status quo on key policy interest rates. Although expected, the RBI has continued its growth supportive policy stance. Additional measures to enhance liquidity support to most vulnerable touch sensitive sectors and small businesses; and expanded credit exposure limit for resolution is a great move. As the nation attempts to recover from the second wave of pandemic, there is a dire need to provide monetary policy support – on account of both easy availability and lower cost of funds – to households and businesses alike. Besides the monetary policy intervention, as we come out of graded regional lockdowns and further resume economic activities, there is a greater need to provide adequate fiscal support to jump start consumption demand. Demand stimulant measure like credit subsidy or tax waivers even for a limited period can play a transformative role until we reach the pre COVID-19 normalcy thresholds.
[Shishir Baijal is the Chairman and Managing Director of Knight Frank India]
There was a need for stimulant policy measures that would enhance liquidity for the sector: Surendra Hiranandani
By keeping the repo rate unchanged, the central bank has taken the step towards the right direction in current circumstances. With this the policy stance there is a growth oriented approach, and is much needed as the second wave ebbs.
While the sector has been severely impacted in the second lockdown, the problems have been aggravated with a considerable rise in the cost of raw materials such as steel and cement. In such a scenario, an unchanged repo rate makes more sense than an increased one which would have added more pressure on the sector.
However, we also need to be mindful of the impact on prospective home-buyers due to the uncertain conditions. These set of buyers are apprehensive in coming ahead and have instead chosen to wait to buy a home. There was a need for stimulant policy measures that would enhance liquidity for the sector, ease credit provisions and increases buyer’s confidence. Any announcements in these forms would have been much appreciated.
[Surendra Hiranandani is the Chairman and Managing Director of House of Hiranandani]
This is the sixth time in a row that RBI has kept the benchmark rates unchanged: Anuj Puri
Had it not been for the pandemic the RBI would have definitely taken a different stance for the benchmark rates today. Considering the rate at which inflation is rising presently in the country, the RBI would have sought to increase the key rates. However, since the economy is still under pressure due to the pandemic and inflation is rising due to supply-side issues coupled with overall consumption sluggishness, it has maintained the status quo on benchmark rates.
This is the sixth time in a row that RBI has kept the benchmark rates unchanged, in clear response to the exigencies of the COVID-19 pandemic uncertainties. It is certainly positive for home loan borrowers as the floating retail loan rates (which are directly linked to external benchmark repo rates) has been at the lowest level of the last two decades. The continuation of this low-interest rate regime works very well for all borrowers as the environment of high affordability is likely to continue for some more time.
[Anuj Puri is the Chairman of ANAROCK Property Consultants]
Government should ensure that inflation is kept under check: Sanjay Dutt
It’s a good news that RBI continues to maintain the Repo rate unchanged at 4 per cent and the reverse repo rate at 3.35 per cent for the sixth time in a row. However, considering that the economic growth forecast for the current fiscal 2021-22 has been revised to 9.5 per cent from the earlier 10.5 per cent, Government should ensure that inflation is kept under check. The cost of steel, cement, labour cost and other items have gone up threatening the viability of certain projects especially those who are looking for last mile funding. The residential sector is slowly reviving as people seek to invest in safe havens for peace of mind and security amid this second wave. The rationale of lower interest rates/EMI, attractive prices, ready to move inventory, protection under RERA and attractive schemes from developers, encouraging homebuyers to invest now instead of waiting. While the government has been introducing several initiatives to help the sector, we request for some strategic support in the form of giving us industry status, input credit, allowing FDI in RTMI, single window clearance mechanism at State level, lowered GST on raw materials etc. for sustainable long-term growth and benefit of the developers as well as homebuyers.
[Sanjay Dutt is MD & CEO of Tata Realty and Infrastructure Limited]
Real Estate has been one of the most resilient industries even amidst the pandemic: Anshuman Magazine
RBI’s maintenance of an accommodative stance will help sustain homebuyer sentiments which were strengthening pre-second wave. Despite the present disruption, Real Estate has been one of the most resilient industries even amidst the pandemic and has been showing signs of recovery over the last few quarters. With the repo rate and reverse repo rate being maintained at a status quo of 4% and 3.35% respectively, banks and NBFCs will continue to render loans at reduced rates to homebuyers, thus supporting demand in the realty sector.
We also welcome RBI’s directed focus on infusing liquidity in the industry, specifically in sectors such as hospitality and tourism, which will further benefit the overall realty sector.
[Anshuman Magazine is the Chairman and CEO of CBRE India, South- East Asia, Middle East and Africa]
We expect the banking regulator to announce monetary support to the NHB to revive growth in the real estate sector: Dhruv Agarwala
The RBI move to hold the repo rate at 4% in its monetary policy review is along expected lines. Considering there have been widespread economic ramifications of the various lockdowns announced by states to contain the second wave of the virus, this was the appropriate thing to do. However, we expect the banking regulator to announce monetary support to the NHB to revive growth in the real estate sector, which is the country’s second-largest employment generating sector in India.
The developer community might find some support from the central bank’s decision to launch the Resolution Framework 2.0, under which the RBI will expand coverage of borrowers to INR 50 crore, from the earlier INR 25 crore. In a move that augurs well for small businesses in the country that are reeling under the impact of the second wave, the RBI has extended the special liquidity facility of INR 16,000 crore to SIDBI to support MSMEs
[Dhruv Agarwala is the Group CEO, Housing.com, Makaan.com and Proptiger.com]
Measures announced by RBI will help boost the market confidence: Rohit Poddar
With the mutated second wave and the fear of the third wave, the apex bank’s decision to keep the repo rate unchanged at 4% reflects the continuation of its accommodative stance ensuring the lowest lending rates to keep business operational across sectors. Policy has been in line with the market expectations , the only difference is G-sap being shared with SDLs. The enhancement in the restructuring limit and expanding the priority sector is a welcome move as it will largely help the entire MSME sector for credit borrowings. The reserves clocking 600Billion USD is a relief and will potentially help in dealing with global spill over challenges. Overall , measures announced by RBI will help boost the market confidence to push financial conditions of the business on the growth path. Consumption demand is the only way India’s economy and industry can thrive. The need of the hour is high-speed vaccinations, which will assist to stabilize business across the country, resulting in increased consumption.
[Rohit Poddar is the Managing Director of Poddar Housing and Development Ltd.]
For India’s Housing market, it’s a big positive that RBI has kept the benchmark repo rate unchanged: Amit Goyal
For India’s Housing market, it’s a big positive that the Reserve Bank of India has kept the benchmark repo rate unchanged for the fifth time in a row. This is despite the fact that the retail inflation reflected by the Consumer Price Index has remained elevated. From a home buyer point of view, this effectively means that the interest rates on loans will continue to remain at a historic low. We believe RBIs goal to maintain the liquidity and support economic growth in the country through lower interest rates will be crucial for recovery from the second wave of the pandemic.
[Amit Goyal is the CEO of India Sotheby’s International Realty]
Government will continue taking affirmative measures as long as it is necessary to revive the economy: Anuj Khetan
Due to the second wave of COVID-19 and the lockdown restrictions imposed in various States, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate the impact of the second wave of the pandemic.
[Anuj Khetan is the Director of Vijay Khetan Group]
A continuation of low interest rate regime works well for borrowers: Ram Raheja
While repo rate will continue at 4.00% and reverse repo rate at 3.35% amid Covid-19 uncertainty, most banks have used this as the benchmark for their loans. A continuation of this low interest rate regime works well for borrowers. With no hike in repo rate, homebuyers can plan for a home loan in the near future while also getting enough time for their home buying process and still can get loans at prevailing low rates. At today’s time as we are seeing RBI and banks are now focusing on other essential sectors to bring all sectors back in green which will work well in reshaping the economy
[Ram Raheja is the Director of S Raheja Realty]
Governing agencies should look into rising prices of key construction materials: Ankit Kansal
It was expected that RBI will keep the Repo Rate unchanged and avoid temptations to further inject liquidity due to the downside risk of inflation. As steel, cement, and crude oil prices are increasing, there is a mounting pressure of inflation and maintaining an accommodative stance is a benign choice. Coming to real estate, pent-up demand, structural transformations, and a healthy economic outlook ( ~ 8-9% for FY 22) will drive the market in a positive direction. However, governing agencies should look into rising prices of key construction materials such as cement and steel. Prices have hiked exorbitantly in recent months and if not contained, it will undermine and stall a lot of construction activities.
[Ankit Kansal is the Founder and MD of 360 Realtors]
A slight reduction in the key rates would have been widely celebrated: Kaushal Agarwal
The RBI and especially the MPC are to be commended for maintaining an accommodative stance for the sixth consecutive time now. Their approach towards tackling the situation created by the pandemic and steps taken to help revive the economy will go down in history as being one of the finest. Keeping in mind the disastrous COVID-19 second wave, a slight reduction in the key rates would have been widely celebrated. The reduction would have helped spur growth in demand for real estate assets, which has been severely hit as a result of the pandemic and subsequent lockdowns. Apart from the reduction in stamp duty charges in some parts of the country, the all-time low housing loan rates have given the much-required fillip to sales activity in the last couple of quarters. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels.
[Kaushal Agarwal is the Chairman of The Guardians Real Estate Advisory]
We urge the State Government to reconsider their decision on the stamp duty waiver: Pritam Chivukula
We thank the RBI for continuing with their accommodative stance. The second wave of the pandemic and intermittent lockdowns across major cities has led to economic uncertainties across the country. There is also uncertainty around the vaccination and the increasing input costs is having a catastrophic impact on the survival of few businesses. Therefore, we urge the Central Government to address the deteriorating health of MSMEs and various other sectors which have been severely impacted by the second wave of the pandemic. The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. Looking at the record transactions in the previous quarters where the homebuyers took advantage of the stamp duty benefit before the March deadline, we urge the State Government to reconsider their decision on the stamp duty waiver in interest of the homebuyers again.
[Pritam Chivukula is the Co-Founder & Director of Tridhaatu Realty and Hon. Secretary, CREDAI MCHI]
A rate cut would have been beneficial for the consumers: Lincoln Bennet Rodrigues
A rate cut would have been beneficial for the consumers and would have given a boost to current demand uptick that we have seen recently. Residential demand is reviving in the pandemic context and this needs to be fostered. However, the prevailing home loan rates which are a record low are already enticing for homebuyers. For any investor, it’s a time of great opportunity and for the end-customer, it’s a good time to buy. Going forward, we would also like to see reduction in stamp duty & registration charges to push demand further in the real estate sector that forms the backbone of several other sectors. We urge the government to introduce measures that truly uplift the real estate sector which also contributes significantly to the country’s economic growth.
[Lincoln Bennet Rodrigues is the Founder and Chairman of Bennet & Bernard Group]
The real estate industry’s perennial hope is fixed on lower interest rates: Ramani Sastri
It goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market. However, home loan interest rates have already gone down substantially in the recent past, and are presently at an all-time low. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset and many fence-sitters will take the plunge and make the purchase once the situation normalizes. There was a major revival in the residential sector recently despite the pandemic last year. The second wave of the pandemic may have disrupted the recovery of the real estate sector to some extent but we expect a strong revival in the second half of this fiscal and the long-term outlook remains healthy. As the states are in the process of easing lockdowns, the real estate industry would need all-around support and quick assistance to pick up their business thread again.
[Ramani Sastri is the Chairman and MD of Sterling Developers Pvt. Ltd.]