Builders disappointed over RBI’s status quo on policy rates

NEW DELHI: Real estate developers and experts seem disappointed from the Reserve Bank of India’s decision to maintain a status quo on policy rates, but are hopeful of banks cutting lending rates due to high liquidity.

RBI in its fifth bi-monthly policy review on Wednesday surprised everyone and kept the repo rate unchanged at 6.25%. The central bank in its last review in October had reduced the repo rate by 25 basis points to 6.25%.

“A rate cut could have been encouraging at this moment. However, it is disappointing that RBI decided against it. We were expecting a 25 bps cut, which could have given an impetus to the beleaguered real estate sector,” said Shishir Baijal, chairman and managing director, Knight Frank India.

Amit Modi, director, ABA Corp and vice president, CREDAI Western UP, feels since now the banks are flushed with cash and don’t have to worry about reviving their bottom lines, they should now be passing the benefits of the previous rate cuts to the end consumers.

RBI also kept the cash reserve ratio unchanged at 4%, but removed the incremental cash reserve requirements that it had imposed in November from December 10. RBI had asked domestic lenders to keep all the deposits they received between September 16 and November 11 under cash reserve requirement.

While Bank of India and Bank of Baroda already lowered lending rates by 5 to 20 basis points just before the RBI policy review, State Bank of India (SBI), the country’s biggest lender, had also shown interest in lowering its lending rates if the RBI withdraws the additional CRR.

Vineet Relia, Managing Director, SARE Homes, said, “A reduction could have had a positive impact for the real estate sector which is troubled by the increasing burden of development and borrowing costs.”

Here’s how the other builders and experts reacted to the RBI’s status quo:

Samir Jasuja, CEO & Founder, PropEquity

It is a surprise move by the RBI to not cut repo rates as realty sector was expecting a cut which may have slightly offset the impact post demonetisation announcement by the government. However, there is extreme uncertainty in the sector which has led to almost a standstill situation of sales pan India as many customers are on the fence to see how the situation pans out. As real estate sector in India is sensitive to repo rate cuts which leads to lower borrowing costs for home buyers and triggering demand, we expect rate cut in the next monetary policy review

Rattan Hawelia, Founder & Chairman, Hawelia Group

No reduction in repo rate is not a favourable decision for overall economy growth keeping in view the softening of inflation and also as banking sector has manage excessive liquidity that has entered the banking system due to spike in bank deposits following the demonetization drive. Real estate sentiments will remain unchanged. Further reduction was expected which could have significantly impacted the revival & growth of the market at this juncture of struggling real estate sector.

Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP

It is an expected move taken by the RBI Governor. Now that the banks are flushed with cash and don’t have to worry about reviving their bottom lines, they should now be passing the benefits of the previous rate cuts to the end consumers. It will be indeed the single biggest factor in kick starting the economic activity in this stagnant faces. Hence we sincerely hope that both Finance Ministry as well as the RBI push all the banks to transfer the entire benefit to the end consumer for whose benefit it is meant, else these moves will severely stop short of benefiting the consumer.

Shishir Baijal, Chairman & Managing Director, Knight Frank India

A rate cut could have been encouraging at this moment. However, it is disappointing that RBI decided against it. We were expecting a 25 bps cut, which could have given an impetus to the beleaguered real estate sector.

Credits ET Realty

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