Real estate developers and experts feel the reduction in lending rate by the Reserve Bank of India (RBI) just ahead of the festive season will help in boosting housing demand, especially in the affordable housing segment.
A good monsoon in progress, low inflation numbers, favorable global environment and an overall uptick in industry sentiments seem to be the catalyst for this rate cut, according to them.
RBI reduced the short-term lending rate, or repo rate, by 25 basis points to 6% at its third bi-monthly policy review.
Vineet Relia, Managing Director, SARE Homes feels 25 bps reduction in the repo rate will go hand in hand with favorable government measures like RERA and GST which will boost housing demand benefiting both developers and buyers.
"This should also give the required boost to the Realty sector, especially in the affordable housing market," said Abhimanyu Londhe, CEO, SMC IM+ Realty Fund.
However, Shishir Baijal, chairman & managing director, Knight Frank India, said a healthier lending rate could have provided the much-needed thrust to fuel India’s growth story.
"Considering the battery of new reforms in force, a good monsoon in progress, benign inflation numbers, favorable global environment and the overall uptick in industry sentiments a healthier lending rate could have provided the much-needed thrust to fuel India’s growth story," he added.
The central bank has now reduced the repo rate by 175 basis points since December 2014, however, reduction in lending rates by banks have not been in line.
RK Arora, chairman, Supertech feels with the rate cut prior to the start of festival season, the sluggishness in the real estate sector would come to an end.
This is how other industry stakeholders reacted to the RBI rate cut:
Rajeev Talwar, CEO, DLF
The Monetary Policy Committee’s (MPC’s) decision to cut the benchmark repo rate by 25 basis points could not have come at the more appropriate time. The Indian economy is at a point of inflection. Easing procedural bottlenecks, speedier project clearances and reviving credit flows to the productive sectors such as real estate are critical for the economy to decisively move to a higher growth trajectory. Another small rate cut in the coming months should not be ruled out.
Samir Jasuja, CEO & Founder, Propequity
Post demonetization, the real estate sector had witnessed a slowdown in terms of demand. A repo rate cut is prudent because the current inflation rate in the economy is hanging at low levels of less than 2%. A repo rate cut would have a positive impact on the overall economy and the realty sector since it leads to lower borrowing costs for home buyers. With low construction costs borne by developers post GST, a regulated market with the introduction of RERA, and a repo rate cut making the home loan market even cheaper, going ahead the real estate sector is ripe for a positive comeback .”
Manoj Paliwal, CFO, Omkar Realtors & Developers
RBI rate cut by 25 basis points for repo and reverse repo was long overdue since 2016. The rate cut will pump in much needed confidence in the real estate sector due to softing of interest rates which have been stable for quite some time now. With the cost of burrowing coming down EMI’s will see further reduction indirectly increasing affordability attracting more buyers to invest in real estate. RBI move is indeed a good move at the right time.
Brotin Banerjee, MD & CEO Tata Housing Development Company
We anticipate that the rate cut announced today by .25 BPS, coupled with commensurate benefits for borrowers, will impact home loan rate positively and enhance the consumer sentiment. With the market view calling for measures that encourage investment to boost growth numbers, and with the installation of a regulatory regime for the real estate sector, we expect this move to keep the stimulus on for potential home buyers to invest, and to benefit current borrowers.
Anuj Puri, Chairman, Anarock Property Consultants
There is already enough surplus liquidity in the system and the policy change may not result in a greater impact on real estate sentiment. However, it must be remembered that buyer sentiment has been impacted by a number of variables, including overall lack of affordability in the larger cities and the slowdown in IT/ITeS-driven employment. RERA has also induced a go-slow in fresh launches, which means that there will be less fresh supply on the market. Consequently, prices are unlikely to reduce further - and more than interest rates, it is property prices which affect buying decisions. Nevertheless, this monetary policy announcement sends out positive signals to global investors, who are already showing renewed interest in Indian residential real estate on account of the transparency reboot brought on by RERA and GST deployment.
Anshuman Magazine, Chairman, India and South East Asia, CBRE
The RBI's decision to cut the repo rate by 25bp to 6% - a 7 year low – is in line with industry expectations amidst low inflationary trends. We believe that this cut will result in making housing loans cheaper and help credit offtake in the housing sector. In the long run this will provide further impetus to the segment and help in rejuvenating housing sales. Coupled with the other structural reforms introduced in the recent past, this announcement will further enhance activity levels in the real estate and construction sector.
Ashish Sarin, CEO, Alpha Corp
The banks should now pass on the benefits of this rate cut by lowering the mortgage rates thereby making home loans more affordable for the buyers. The slew of policy reforms undertaken by the government in the recent past have been instrumental in reviving the sentiments of customers in sector and further reduction in the interest rates would be influential in propelling demand for real estate products.
Surendra Hiranandani, Chairman & MD, House of Hiranandani
The rate cut of 25 bps today to 6% was on expected lines given the low inflation levels in the economy. We had hoped for a 50 bps cut as good monsoons, favorable global environment and new reforms provided the perfect platform to aggressively cut rates. However, it seems that the Governor wants to look closely at the impact of the recent economic policies before trimming rates further. While the demand for real estate in India remains huge, actual consumption has remained sluggish. Given the liquidity situation prevailing in the market post demonetization, there is scope for banks to cut their lending rate further. The amalgamation of lower interest rates coupled with various progressive measures taken by the government will hopefully help buyers ahead of the festive season.
Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP
Reducing the repo rate by 25 bps from present 6.25 per cent to 6 per cent which is the lowest in six and a half years is a welcome move by RBI as easing interest rate will help revive health of businesses like Real-Estate which are highly sensitive to interest rate movements. While it is indeed a step in the right direction and also after the demonetization now the banks are flushed with cash and don’t have to worry about reviving their bottom lines, they should be passing the benefits of the rate cuts to the end consumers. This initiative has to be transferred to its end beneficiary for any positive effect on ground to the ongoing economic cycle as it will be indeed the single biggest factor in kick starting the economic activity in these stagnant phases.
Shashidhar Pai, MD, Citrus Ventures
For Real estate industry that is going through a major shake-up due to weak demand, tough regulatory changes and ever increasing costs of inputs like steel, cement, tiles etc., a significant reduction in interest rate could have acted as a booster dose. A 25 bps rate cut is like a temporary plaster for a bad wound.
Abhishek Bansal, Executive Director, Pacific Group
Inflation is recording new lows with the last two quarters, observing a great feat. The stock market on the other hand is achieving greater heights, thus signalling a strong market response and getting ready for the long run. Today’s rate cut will only add more weight to the sentiments and push the customers to move towards investments where real estate sector will greatly benefit. As GST is settling down and RERA gaining momentum, real estate sector is projected to become the investment hub very soon.
Avneesh Sood, Director, Eros Group
Implementation of GST has completed its very first month and a great response can be already observed as the buyers’ queries are increasing day by day. A rate cut at this moment will boost these sentiments further where footfalls and conversions are bound to increase. Final festive season of this calendar year is nearing and this rate cut can allow the banks to cut down on their lending rates further. Economy is shaping up well with a growth trajectory becoming visible for the real estate sector as well.
Gaurav Gupta, General Secretary CREDAI-RNE & Director, SG Estates
Indian real estate market is moving strong towards a new era where GST and RERA are leading the way from the reforms front. Pricing, on the other hand remains a vital player for Indian consumers and any dip there is inversely proportional to the demand for property. A reduction in Repo rate today, happening after October 2016, will push the banks to further reduce the lending rates. With transparency increasing in the sector, the low pricing factor will help boost the property demand and further clear the inventory in macro real estate regions.
Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz
The realty sector welcomes the repo rate cut by RBI today which is further expected to fuel the demand as the EMIs are expected to fall even more. This rate cut has come at a time when GST and RERA have entered in to a settled phase and the sector is observing a transition where the buyers are increasing their activity and developers eagerly waiting to satisfy the demand. GST’s input tax credit feature coupled with lowered EMIs will further reduce the burden off the buyers and pave way for strong demand-supply matrix in the sector.
Rakesh Yadav, Chairman, Antriksh India Group
The sector was hopeful for a rate cut today and after almost 9 months, RBI has decreased the key rate by 25 basis points. Banks must follow suit in order to pass on the benefit to this sector’s customers. This rate cut has happened in the post GST and RERA era, where customers are looking towards a much transparent and simplified sector where any fall in the cost to the buyers will further enhance the demand for property.
Gaurav Marya, Managing Director, RE/MAX
This announcement by RBI will definitely bring a respite to home loan borrowers and would somewhat help in reviving real estate demand in India. We believe India right now is at inflection point for revival of the real estate sector as sentiment has drastically improved over the last few months and we will finally see uptick in transaction activity, especially in the affordable housing sector as borrowing rates for home loans reduce.
Sanjay Shenoy, Joint Managing Director, Legacy Global Projects
Reduced cost of credit is excellent news for the real estate industry. Eased inflation and GST has brought about the very impact we were looking forward to. The real estate sector has been working hard to bring about increased transparency and ease of doing business with months of toil to implement RERA. The announcement is the very catalyst required to attract investors and spark about a surge in demand, ahead of the auspicious season of festivities to start post August.
Vinod Rohira, MD & CEO, Commercial Real Estate & REIT, K Raheja Corp
The RBI policy review of the financial year 2017-18 has witnessed a change in the repo and the reverse repo rate which will give a much-needed impetus to the realty sector. With the recent change in reforms and policies, this rate cut comes as a blessing improving buyer sentiments. The steps taken are on the right path to address the economy, and we are optimistic that the banks will also pass on the benefit to the consumers, which in turn will help propel the growth of the industry.
Pankaj Bansal, Director, M3M Group
RBI’s decision to lower the REPO rate is on expected lines. Inflation is at its lowest in five years and economic growth is picking up. This revision will positively impact the sentiments surrounding the real estate sector. Banks will now be able to offer loans at more attractive rates. Cheaper loans for home buyers will promote a renewed interest in residential property purchase from end users and investors. The cost of funding for real estate developers should also now reduce. Overall, this move definitely indicates a positive direction for the economy in general and therefore also for the real estate sector, as its performance is directly linked to the basic economic fundamentals.
Ravish Kapoor, Director, Elan Group
We appreciate the decision for reduction in the repo rate as this would boost the liquidity in the system. Easing interest rate will help revive Real-Estate sector which is profoundly sensitive to interest rate movement.
Ssumit Berry, Managing Director, BDI Group
RBI’s decision to reduce the repo rate will surely improve the economy. The lowering of the Repo rate will spur growth of the real estate sector with sentiments of buyers turning favorable. This will ensure uplifted property demand in near future and also boost the affordable housing segment.
Rahul Singla, Director, Mapsko
With RBI’s decision of offering reduction in the repo rate, we can expect further rate cut for home loans. Reasonable loans for home buyers will give a boost to the real estate sector favorably. Industry trends are already pitching for upward growth trajectory, companies are focusing on deliveries & liquidity of their projects, making it the right time to invest in the sector.
Sachin Sandhir, Global Managing Director-Emerging Business, RICS South Asia
The central bank has cut repo rates by 25 basis points to 6 per cent, which is good news for the real estate industry. This is the first rate cut by the RBI in about ten months. The slash in repo rate is on expected lines considering that inflation is under control. The cut will lower interest rates and make home loans and auto loans among others cheaper. Reforms in the real estate sector (RERA/GST) coupled with the rate cut will encourage home sales and we are glad that this cut has come just ahead of the festival season, which usually sees brisk home sales. It will help break the lull in the sector. We are also glad that the RBI governor has taken note of the need for a time-bound single window clearance at the state government level for faster approvals for affordable housing projects. This has been a demand of the industry and RICS for a long time. A delay in securing approvals adds to the cost of a project, so any move towards faster approvals will benefit the affordable housing sector.
Gaurav Shah , Director, Ravi Group of Companies
It is a welcoming step taken by RBI Governor of cutting the repo rate by 0.25 bps to 6% today. This will improve and bring in positive sentiments and spearhead growth for the realty sector, bringing some relief to customers with home loans. Also post RERA and GST, the real estate sector is going through a makeover and these sops by government will surely boost the sector. The move to reduce the rate by the RBI was greatly awaited by the industry and potential home owners alike. This change is well-timed with many looking at the festive and auspicious season as a time to make substantial purchases. We are optimistic about the good sales during festive season.
Also this move of RBI will give a thrust to government’s ‘Housing for all’ initiative that has potential in job creation, improve social infrastructure and give a boost to the Indian economy as a whole. Especially for affordable housing segment, it will prove to be a game changer.
Ashwin Sheth – Chairman & Managing Director, Sheth Corp
The reduction in the repo rates will help in bringing down the home loan interest rates which in turn is likely to bring in some amount of relief to the homebuyers. But, the banks will also have to pass down the benefit to the homebuyers to encourage the prospective buyers to move a step closer to purchase their dream home. Interest rate is one of the important factors as the equated monthly installments (EMI) is directly linked to it. Therefore, if the banks pass on the benefits and the EMIs fall, we feel the demand for the housing should witness momentum as far as buying new properties are concerned.
Pradeep Aggarwal, Co-Founder & Chairman, Signature Global
Implementation of GST has completed its very first month and a great response can be already observed as the buyers’ queries are increasing day by day. This rate cut has come at a time when GST and RERA have entered in to a settled phase and the sector is observing a transition where the buyers are increasing their activity and developers eagerly waiting to satisfy the demand.
Rohit Gera, Managing Director, Gera Developments and VP Credai Pune Metro
The reduction of the repo rate by 25 bps is a welcome step. We look forward to the banks and Financial Institutions transmitting this to home buyers at the earliest. This reduction when passed on will improve the affordability for all segments. The overall affordability for homes over the last 3 years has increased substantially on account of even moderate salary increases, a reduction in the real rates of homes as well as a reduction in the interest rates. This increased affordability is sure to have a positive impact on home buying sentiment in the near future and help convert the need for housing into demand.
Tushad Dubash, Director, Duville Estates
The RBI governor cutting the repo rate by 25bps to 6% today is a welcome step for the real estate sector. Lower interest rates coupled with progressive measures like GST and RERA will improve and bring in positive sentiments and spearhead growth for the realty sector. It is now important that banks now offer home loans at more attractive rates which will incentivize customers to buy their dream home.
Sanjay Jain , Group Managing Director, Siddha Group
The 25 basis point slash in the repo rate and the reverse repo rate in the third bi-monthly policy 2017-18 will have a positive impact on the real estate market. This move is expected to make home loans cheaper if the banks pass on the benefits to the consumer improving the buyer’s sentiment to invest in the market. The Government and RBI are working closely to provide a major thrust to housing for all. Faster GDP growth and declining interest rates will collectively help boost the growth of the real estate industry.
Rattan Hawelia, Founder & Chairman, Hawelia Group
Because of GST impact a sudden dip in real estate sales especially in the affordable category has hit the banking sector home loan business. For long real estate market was looking for measures that encourage investment to boost growth numbers, and with the on set of a regulatory regime for the sector, we expect this move to keep the stimulus on for genuine end user home buyers, and also to benefit current borrowers. At this juncture of struggling real estate sector reduction in repo rate can surely have a revival impact and such move will help to drive the sector sales if the banks will pass on the benefit to home loan seekers.
Pankaj Bajaj, President, CREDAI NCR
It is a welcome cut. More importantly, we hope that the banks will pass on the rate cut to the retail borrowers. Given that the demand for housing is weak at the moment with the current home loan rate of around 8.5% per annum, we are looking at deep cuts in the rate to revive the demand. We hope that the banks will transmit the past and current rate cuts by RBI to bring the home loan rates to between 7 and 7.5% per annum. We think that that will be the inflection point for revival of demand.
Prashant Tiwari, Chairman, Prateek Group
Reduction in the repo rate was an awaited move which will improve the overall market sentiments. The result of this rate cut will be reaped by home-buyers in the form of reduced home-loan interest rates. Moreover, with fall in interest rates, the demand for home loans will also continue to grow stronger. We hope home buyers will take full benefit of this golden opportunity as there couldn’t be a better time than this to invest in property market.
Owais Usmani, MD, Presidency Infraheights
We hope that market will see an upsurge of buyers willing to enjoy the likely rate cuts by the banks. Until and unless banks decide to pass on the benefits it would be difficult to gauge the effects of RBIs step, which came at a time when economic growth is slow. Another aspect is that right now real estate developers are focusing on RERA and GST compliance, projects are not being launched and many projects are stuck. In such a scenario, it can be said that effects will be visible only after some time.
Saurabh Jindal, Joint Managing Director, SVP Group
It was an anticipated move by the RBI as economic activity was at a low for the past two years. By reducing the rates RBI has given a window to the banks to pass on the benefit to the home loan seekers. Hopefully, this step will make more buyers to come forward and realise their dream of owning a house. We should also understand that real estate prices are at all time low and if banks passes the benefits to home loan seekers then this would be the best time to invest in property.
Ravindra Pai, MD, Century Real Estate Holdings
It is a welcome move, especially to combat the odds industry was seeing in recent times. Cheaper home loan definitely will boost positive sentiments amongst the home buyers and in turn will help the developers to gain the momentum. With RERA ushering in, budget housing getting infrastructure status and RBI rate cuts, we certainly feel good times for the industry are just a stretch away and a matter of a very short time.
Source- ET Realty
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