The Reserve Bank of India (RBI), on February 8, 2017, kept its policy rate unchanged at 6.25%. This decision has been greeted with surprise, by the real estate fraternity.
“While the recent demonetisation drive has brought in the necessary liquidity into the banks, lowering the repo rate would have helped ease borrowing costs. This would have provided an added thrust to the government’s initiatives for affordable housing and fuelled demand,” CBRE India and south-east Asia chairman, Anshuman Magazine said.
RICS Global managing director (emerging business) Sachin Sandhir said that the decision of not cutting the repo rate was disappointing, as such a step could have helped in bringing down home loan interest rates. “The real estate sector could have benefited with a rate cut. Banks may have passed on the rate cut to home loan borrowers.
“Nevertheless, considering that home loan rates are at the lowest in six years, the status quo in repo rates will not hurt the real estate sector,” he said.
Echoing similar views, PropEquity Founder and CEO Samir Jasuja said that the sector needed some boost, in terms of lower borrowing costs, especially when remonetisation may lead to higher borrowing costs. “Housing demand (absorption) across key cities, has already declined by 31%, largely on uncertainty post demonetisation, which led to very few transactions materialising in the primary and secondary markets in the October-December 2016 quarter. As the sector is sensitive to rate cuts, which leads to lower borrowing costs for home buyers and triggering demand, this announcement will further impact the ailing realty sector,” Jasuja added.
Commenting on the RBI’s policy, Knight Frank India’s chairman and managing director Shishir Baijal said, “With controlled inflation and the government showing fiscal prudence, one expected the Monetary Policy Committee to have cut the policy rate by a minimum of 25bps. This would have offered banks leeway, to further lower lending interest rates, to increase capital expenditure and spur growth in employment and boost the sentiment prevailing in the economy.”