The Reserve Bank of India (RBI), in its third bi-monthly monetary policy review for 2017-18 on August 2, 2017, slashed its benchmark lending rate by 0.25 per cent to six per cent. This rate cut, its first since October 2016 has brought interest rates to a six-year low and could make home loan EMIs cheaper. The real estate industry, by and large, has welcomed the move.
Surendra Hiranandani, chairman of House of Hiranandani, however, sounded a bit disappointed and said that the industry was expecting a 50 bps cut given the good monsoons, favourable global environment and new reforms.
On the Reserve Bank asking states to ensure speedier clearance to affordable housing projects, which have been a long standing demand of the industry, Hiranandani said, “We must remember that deregulation will be the key to the success of various government initiatives. A major impediment to real estate development, remains the approval process. We are ranked at 185 out of 187 countries by the World Bank in ease of obtaining construction permits. It effectively means that we are in the same club as war-torn countries, where institutions have collapsed. The government must look at addressing the shortcomings plaguing the real estate sector at the earliest, if it wants to realise the dream of Housing for All by 2022.”
Welcoming the RBI move, Tata Housing’s managing director, Brotin Banerjee said, “We anticipate that the rate cut, coupled with commensurate benefits for borrowers, will impact home loan rates positively and enhance the consumer sentiment.” With the market calling for measures that encourage investment, to boost growth and with the installation of a regulatory regime, this move is likely to encourage potential home buyers to invest and it will benefit current borrowers, he added.
Knight Frank India’s chairman, Shishir Baijal said, the industry was looking forward to a much more aggressive rate cut. “Considering the new reforms in force, a good monsoon, benign inflation numbers, favourable global environment and the overall uptick in industry sentiment, a healthier lending rate could have provided the much-needed thrust, to fuel growth,” he said. Welcoming the move, CBRE India’s south-east Asia chairman, Anshuman Magazine said, “In the long run, the rate cut will provide further impetus to the segment and help in rejuvenating housing sales. Coupled with the other structural reforms, this will further enhance activity in the sector.”
Maintaining that the rate cut was long overdue, since October 2016, Omkar Realtors’ chief financial officer, Manoj Paliwal said, “This will pump in much-needed confidence in the realty sector, due to the softening of interest rates, which have been stable for quite some time now.” Vinod Rohira, managing director of K Raheja Corp, agreed that the repo rate cut would give a much-needed impetus to the sector. With the recent change in reforms and policies, this rate cut comes as a blessing to improve sentiment. We are optimistic that banks will also pass on the benefit to consumers, who in turn, will help propel the growth of the industry, he said.
Mid-market-focused developer Citrus Ventures’ managing director, Shashidhar Pai, too, sounded disappointed with the 25 bps cut, saying, “This is like a temporary plaster for a bad wound, as the sector is already going through a major shakeup due to weak demand, tough regulatory changes and ever increasing costs of inputs like steel, cement and tiles. A significant reduction in interest rate, can have a booster effect.”
Ashwin Sheth, chairman of Sheth Corp, welcomed the rate cut. “Although the RBI has maintained its neutral stance, the indication towards easing of policy rates and the upcoming festive season, will renew further interest in the real estate sector,” he said. “The repo rate cut will have a positive impact on the overall economy and the realty sector in particular, since it leads to lower borrowing costs for home buyers,” Propequity founder, Samir Jasuja said. “Lower interest rates encourage faster buying decisions, as it becomes affordable to a majority of consumers looking to buy a property,” SMC IM+ Realty Fund’s chief executive, Abhimanyu Londhe said.