Monetary Policy August 2019: Real Estate Outlook

The third bi-monthly policy announced a rate cut of 35 basis points in its benchmark repo rate. NewsBarons presents the view of real estate leaders on the impact it would have on the sluggish real estate sector.

The benchmark rate is now at its lowest since April 2010: Niranjan Hiranandani, Hiranandani Group

www.newsbarons.comFor the Reserve Bank of India, The GDP growth target has been reduced to 6.9% from 7%, hence growth is now the highest priority.

The fourth straight cut in the benchmark repo rate is a welcome step which will make borrowings cheaper and would help boost in demand in several sectors like real estate and auto which has been sagging since last several quarters. It would also help in bringing about some balance between growth and inflation.
We believe that the credit policy announcement is an extension to what was already initiated by the central government in the Union Budget 2019-20 for giving fiscal stimulus to NBFCs.

The industry which is facing huge challenge in terms acute shortage of liquidity would get respite with banks now allowed to lend more to Non-Banking financial companies (NBFC). As the RBI Governor said, a 35 basis point repo rate cut would lead to credit demand picking up and reviving growth. The benchmark rate is now at its lowest since April 2010.

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Rate cut of 35 bps won’t boost housing much: Anuj Puri, Anarock

www.newsbarons.comThe hard facts of declining consumption and a deepening economic slowdown in India are inescapable, and real estate has been severely impacted by them. To this gloomy backdrop, the RBI’s repo rate cut of 35 bps to 5.4% announced in the latest monetary policy is obviously welcome. This rate cut, the fourth consecutive cut since February 2019, is meant to boost consumer sentiments once commercial banks transmit the benefits to actual consumers.

For real estate, a rate cut of 35 bps is however insufficient to significantly improve buyer sentiment in the mid-income segment, which still has a staggering unsold inventory of 2.17 lakh units in the top seven cities. On the other hand, demand for affordable housing, which accounted for 2.40 lakh unsold units in these cities, may see improvement as this highly budget-sensitive segment already has the benefit of other incentives.

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Rate cut welcomed but more needs to be done: Shishir Baijal, Knight Frank India

www.newsbarons.comIn light of the present economic distress in the country, we welcome the move to bring down REPO rate by 35 bps however, we would have really expected to see a more substantial cut is the need of the hour for its effective transmission to end users. While it is the fourth consecutive rate cut this year and is in line with RBI’s recent shift to an accommodative monetary policy stance, it may not be sufficient to give the required impetus to the stalling consumption numbers. Of the 75 bps rate cuts thus far, only up to 35 bps have been seemingly transmitted to end users and with this backdrop, another similar rate revision is not expected to trickle down much. Further, after RBI’s announcement of a shift in policy stance, markets were already expecting a 25 – bps cut from the August MPC, although the present announcement is only moderately higher than expected. On this backdrop, RBI’s 35 bps rate cut is only marginal, more so for the real estate sector. The NBFC liquidity crisis has severely choked credit availability for the industry, especially developers, as they struggle to raise even construction finance. While the limit for priority sector lending for housing has been enhanced from INR 10 Lakhs to 20 Lakhs, the scope of this move is limited to affordable housing segment. More needs to be done to provide a liquidity stimulus to the broader real estate spectrum. As the threat of a slowdown looms large on the Indian economy, strong measures such as substantial rate cuts and meaningful sector specific policies need to be taken.

It is imperative for banks to reduce the lending rates now to boost growth in real estate sector: Surendra Hiranandani, House of Hiranandani

www.newsbarons.comWe definitely welcome this move which will lift industry sentiments. The real estate sector has been looking forward to such initiatives to boost sales. It will support growth and ease the liquidity crunch in the economy. We hope that the current rate cut would translate into lower EMIs and help soften home loan rates and also boost sales. It will help to ease the pressure off the market by attracting buyers to invest in the real estate sector. Real estate sector is one of the few sectors which have the potential to kick start a sluggish economy. The forthcoming festive season will further boost real estate sector.

A wave of next gen reforms has set the stage for years of high growth for the real estate sector. Today’s rate cut of 35 bps is yet another initiative that is propelling real estate sector on a new growth trajectory.

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Consecutive rate cuts to translate into residential sector growth: Ramesh Nair, JLL

www.newsbarons.comIn line with the general market sentiment, the cumulative 110 bps rate cut in the last four p policy reviews favours the Indian economy. The rate cut of 35 bps delivered by the RBI is likely to bring in a balance between growth and inflation. Riding along the same track, the real estate sector too will gain momentum owing to favorable policy reforms. However, the growth shall also depend on whether there is a proportional transmission of rate cuts to the end consumer.

The rate cut has a direct bearing on the real estate sector considering that residential sales rely to a large extent on the availability of credit in the form of home loans and buyer sentiment. The improved market sentiments due to the tax deduction schemes, modified tenancy laws, focus on implementation of PMAY, investment in infrastructure announced in the Union Budget 2019-20 coupled with interest rate deductions is likely to boost sales in the residential segment. Moreover, credit re-structuring measures such as the introduction of repo-linked loans by select banks will positively impact the homebuyers’ purchase decisions while ensuring enhanced transparency.

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Rate cut should help revive private investment: Jayant Mehrotra, Lodha Group

RBI has announced rate cut by 35 bps, for fourth time in a row this year. This bold step confirms RBIs accommodative stand. This should help revive private investment and provide a much needed boost to the overall business sentiment, subject to speedy and sufficient transmission by banks. The effective lending rates by banks to corporates and individuals need to meaningfully align to the signal given by the RBI through this policy action.

RBI’s move will reduce the outgo in terms of EMI for the borrowers: Manoj Paliwal, Omkar Realtors & Developers

Mr. Manoj Paliwal, CFO- Omkar RealtorsAs the residential sector is already under distress with slower sales, RBI’s decision to bring down the lending rate by 35 basis points is resultant ought of concern about real estate sector growth, its performance, and outlook, and the urgency to take measures to revive growth in the real estate sector. RBI’s move will reduce the outgo in terms of EMI for the borrowers benefitting the home-buyers’ which will surely boost confidence in the segment bringing in the much-awaited momentum in sales.

Cut in lending rates will bring confidence in the market of tier II cities: José Braganza, Joint MD, B&F Ventures

www.newsbarons.comThe fourth consecutive rate cut of the year by 35 bps to 5.4% along with the possibility of the cut in lending rates will bring confidence in the market of tier II cities if the benefit is transmitted by the banks to the end consumer. A massive advantage could be observed especially in the tier II and III cities as the markets in these cities stand to flourish from the increased liquidity. This move could also boost the affordable housing segment and would ease the burden of first time home buyers in the metro as well as tier-II cities. In coming months, it can emphasize the recent smoothness in the momentum of the country’s domestic economy.

Rate cut will accelerate momentum in the real estate sector: Amit Ruparel, Ruparel Realty

Amit RuparelRBI’s rate cut of 35 basis points has given a much needed breather to the liquidity and consumption volatility in the Indian economy. This move will definitely help to ease the burden on the current as well as the prospective home buyers, provided the banks reciprocate it and lower their respective marginal cost of funds based lending rate (MCLR), which directly impacts the interest rate cut of the home loan. It will also provide a relief to the piled up inventory of the developers considering the recent move by the NHB of restraining the subvention schemes for under-construction projects. We anticipate that with the onset of festive season, EMIs and home loan interest rates shall become cheaper and boost investment in the sector. Overall, this move will have a positive impact and thus accelerate momentum in the real estate sector. However developers also expect RBI to take some bold step towards NBFC’s crisis and make some arrangements to increase liquidity in the sector.

Rate cut has sent a strong indicator to domestic banks to cut lending rates before the festive season: Farshid Cooper, Spenta Corporation

www.newsbarons.comThe fourth straight cut in the Repo rate by 35bps addresses growth concerns by boosting demand in private investment while remaining steady with the inflation directive. In order to curb the ongoing NBFC crisis, RBI has further prioritized the housing sector lending to INR 20 lakh from INR 10 lakh per borrower. This move will surely help in uplifting the sector which has been going through a slowdown. Additionally, the rate cut has sent a strong indicator to domestic banks to cut lending rates before the festive season kicks off which might prove to be beneficial to the sector.

The 35 bps rate cut is great news: Parth Mehta, Paradigm Realty

www.newsbarons.comThe 35 BPS rate cut is a great news tad more than our expectation of 25bps. This shall help faster transmission of rate cuts as already banks are standing with excess liquidity and now will be compelled to Deploy in good assets for which rate cuts benefits need to be passed on in the form of cheaper consumption finance loans linked to auto , home loans , personal loans etc. The credit growth is very important for inducing investment cycles to return back. With surplus liquidity in hand and repo rate standing almost 110 bps lower at 5.4% from start of 2019, the transmission of aggressive rate cuts by banks should follow and spur credit growth propelling consumer spending hence bringing back healthier economic growth.

Rate cut is a positive decision: Ravindra Sudhalkar, Reliance Home Finance

The Reserve Bank of India’s decision to cut rates by 35 basis points is a positive decision. The move to allow banks to lend to priority sectors, including to housing sector of up to Rs 20 lakh loans, through NBFC arms will kickstart credit flow especially to affordable housing sector. For the consumers to feel the benefit of lower rates, the RBI will now need to step in for accelerating transmission of the rate cut.

A welcome move by the RBI: Rohit Poddar, Poddar Housing and Development

www.newsbarons.comThis is a welcome move by the RBI as growth has totally stagnated and in fact, there is deflation in several sectors. The RBI has cut the rate on the backdrop of evolving growth-inflation dynamics with the objective to fill the output growth gaps. Raising bank’s exposure limit to single NBFC is a prudent structural development. Bank’s lending to registered NBFCs for housing up to Rs 20 lakh per borrower is a positive news for the real estate sector. Transmission of the rate cuts to borrowers is important as wielding scissors on repo rate alone won’t be enough. Additional interventions will also be required to try and provide a boost to the economy.

Rate cuts will guarantee affordability in terms of home loans: Ashok Mohanani, EKTA World

www.newsbarons.comFor the fourth time in a row, the RBI cuts the repo rate, this time by 35 basis points. The RBI has pumped lot of liquidity into the banking system which should make a clear pledge to keep the banking system glow with liquidity. While the cost of capital is headed lower, we trust future commencement will be in baby steps, motivated by lowering of inflation expectations, a global recession notwithstanding. It will definitely spur growth for the real estate sector specifically. There have been many meaningful interventions by the government and regulator which has provided a positive boost to the home buying sentiment among the potential homebuyers. Rate cuts will guarantee affordability in terms of home loans and thus lowered EMI, lower GST, tax discount for the middle class as per as interim budget. Furthermore, we are also hopeful that the financial institutions will reduce the interest rates on construction finance. All this will give some sales momentum to real estate.

We hope that the benefits are passed on to end consumer: Kamal Khetan, Sunteck Realty

www.newsbarons.comThe fourth consecutive cut in repo rates show the urgency of the central bank to give impetus to economic growth. With a view to increase the credit flow to real estate, the RBI’s recognition of loans up to Rs. 20 lakhs as Priority Sector Lending would provide support to boost the affordable housing segment. We hope that the benefits are passed on to end -consumer for home loans by the banks, making it easier for them to make their purchase decisions.

Repo rate cut by 35 bps is good news for borrowers: Mayur Shah, Marathon Group

www.newsbarons.comThe Reserve Bank of India (RBI) announcing another repo rate cut by 35 basis points (bps) is good news for borrowers, especially in light of the sluggish economy. This is also a very comforting for the market and the overall economic activities. Construction activities showed slackness, with contraction in cement production and slower growth in finished steel consumption in June month. The reduction in the repo rate is expected toboost the sentiments of the developers as well as customers. After the expected tax reduction in GST, the further cut in the repo rate is yet another positive step for the real estate sector. Overall, this is going to have a positive impact on the housing market and we expect sales and launches to gain further momentum in the current financial year. RBI’s fourth consecutive rate cut augurs well for the economy and the apex bank needs to ensure that banks pass the benefits to the customers which will finally reflect sales picking up in the current financial year.”

Banks now have the opportunity to revive growth: Rohit Kharche, The Baya Company

The cut in repo rate announced by the RBI is a great first step towards regaining momentum across all sectors. By passing on the benefit to home buyers and corporate borrowers, banks now have the opportunity to revive growth and provide a boost to the real estate industry.

Repo rate cut by 35 bps to 5.4% comes as an optimistic step for the Indian economy: Nabil Patel, DB Realty

www.newsbarons.comThe repo rate cut by 35 bps to 5.4% comes as an optimistic step for the Indian economy as a whole. Being the fourth consistent rate cut of the year, this will play a significant role in bringing down the home loan rates and help ease the liquidity crunch in the sector. We anticipate that this announcement will encourage people to buy their dream homes.