From ET Realty
NEW DELHI: Real estate developers and experts are disappointed with Reserve Bank of India leaving interest rates unchanged and urged the central bank to reduce key policy rates around the Union Budget to infuse growth in the real estate sector.
The apex bank kept its policy rate on hold at 6.75% on Tuesday, opting to wait until after the government’s annual budget statement at the end of February.
“As an industry, we are disappointed,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India, adding, “The only hope now is that the banks transmit more of the 125 bps policy rate cut (in the last one year) at the earliest to the end-consumers.”
David Walker, Managing Director of SARE Homes, said notwithstanding the monetary framework, the government needs to steer focus towards bringing about reforms and a policy makeover to revive the ailing sector. “We are expecting that the government would take considerate steps closer to the budget and provide further rate cuts to channelize economic growth,” he said.
While RBI has taken steps to considerably reduce rates, the interest rate transition from banks to the consumers has been gradual. Since January, the apex bank has reduced the repo rate by 125 basis points in four separate cut this year. However, median base lending rate has declined only by 60 bps.
“We sincerely hope that both Finance Ministry as well as the RBI push all the Banks to transfer the benefits to the end consumer, else these moves will severely stop short of benefiting the consumer and only help in buffering the bottom lines of the bank,” said Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP.
Devina Ghildial, managing director – South Asia, RICS, said, “With today’s status quo on rates, we foresee market to take longer than usual time to show signs of revival.”
The residential real estate has been the worst affected due to high interest rate and slow sales for the past couple of years. Current unsold residential inventory levels across India stands at over 6.9 lakh units and this would take more than 2.5 years to exhaust.
In last policy review, the apex bank has kept status quo to balance the economic growth meter but this time expectations from the apex body was not mere a rate cut but a plenty of other measures to in still growth in a neglected sector.
“The status quo is a demotivating factor for loan borrowers and for investors who want to hedge financial institutions for growth in their realty portfolios,” said Amit K Lalit, Founder and CEO, VALION P.R.E.F.O, a property advisory firm.
Industry body CII also hopes that the RBI would resume the rate cutting cycle in the subsequent monetary policy, soon after the Union Budget, to complement the government’s efforts to revive private investments and bring the economy back to the path of sustained growth
Aman Agarwal, Governing Council Member NAREDCO & Director, KV Developers said, “We also hope that government would announce some reformatory measures in terms of tax in the upcoming Union Budget to give some breather to manufacturers and developers so that they may also slash cost of their products.”
“A rate cut would have helped in improving market sentiments bringing relief to developers as well as home buyers. The struggling real estate sector will look forward to the upcoming Union Budget to boost housing demand,” said Anil Jindal, Chairman, SRS Group.