RBI Policy: A missed opportunity for the realty sector
RBI’s decision to keep the repo rates unchanged has attracted varied reactions from the real estate industry. While some seem disappointed by the move, some had anticipated this balanced judgement.
After declaring a Repo rate cut of 125 basis points until September 2015, the Reserve Bank of India (RBI) decided to keep it stagnant in the December’s policy review. The real estate fraternity considers it a missed opportunity for the sector as a further rate cut could have instilled confidence amongst the wary home buyers.
Manju Yagnik, Vice Chairperson, Nahar Group says, “Keeping key policy rates unchanged at 6.75 per cent is not as per the expectations of the real estate industry. A further rate cut at this stage would have helped in improving market sentiments. Given the current property rates and stagnant market conditions, a rate cut would have sent out a positive signal to home buyers and the industry alike.”
The major concern with industry experts seems to be the high rate of interest on home loans, which is one of the major factors holding the home buyers from purchasing a property. Expressing concern regarding this, Rajesh Prajapati, MD, Prajapati Constructions says, “At current level of property prices and interest rates, buyers are finding it difficult to cope up with the pressures of home loans. This was the time when RBI should have taken a positive move and reduced the interest rates.”
However, many also think that it is not the government but the banking institutions which have failed to pass on the benefits to the borrowers. Shishir Baijal, Chairman and Managing Director, Knight Frank India explains, “We do not see any dampening of spirits in the real estate sector as a total reduction of 125 bps in the rates has already happened this year. Now, it is up to the banks to transmit the benefit to home buyers. Further, regardless of this cumulative cut, banks on their own should be able to transmit more benefit to the end consumers as the cost of funds is becoming cheaper with improved liquidity conditions. Factors like a relook at the pricing strategy by the developers and abiding by project completion timelines and the overall economic growth also stand crucial.”
While the industry hoped for a rate cut, many also anticipated a status quo from the RBI. “Though the government is showing its intent to correct the current economic situation, it needs equal backing from RBI to draft a balance between fiscal and monetary frameworks. We are hopeful to see positive moves in times to come, adds Pradeep Aggarwal, Chairman, Signature Global.
Here’s what a few more experts have to say about the RBI’s policy review