With the Goods and Services Tax (GST) completing its first month of operations, today’s RBI bi-monthly policy review offered a huge sigh relief as the apex bank cut down the Repo rate by 25 basis points, bringing it down to 6 percent from 6.25 percent previously. Riding high on the decreased inflation for the last couple of quarters, a rate cut was pretty much on the cards today. This review by RBI was the third for this financial year 2017-18 and fourth for the running calendar year.
After today’s monetary review, Repo rate drops to 6 percent, Reverse Repo rate reduced to 5.75 percent from 6 percent, Marginal Standing Facility (MSF) adjusted at 6.25 percent, Cash Reserve Ratio (CRR) remains unchanged at 4 percent and Statutory Liquidity Ratio at 20 percent respectively. Real estate sector, in particular, was in dire need of a rate cut as the buyers are waiting for the home loan rates to come down further and developers are gearing up to offer the benefit of the input tax credit to them. The overall prices or the impact of the cost on the buyers is projected to come down because of GST, and interest rates are expected to be dropped by the banks, the combined effect of which will be fruitful for the sector. With the festive season fast approaching in a month’s time, today’s rate cut will allow the banks to pass on the benefit to the customers soon which will result in greater footfall in the months to come.
Kumar Saurabh, Founder & Editor, Realty Fact
The RBI decision to cut the repo rate by 25 bps to 6% is lowest since 2010 is a right decision taken at the right time and it is a positive decision for the real estate Housing sector. With the rate cut at this festive season, the sluggishness in the real estate sector would come to an end and as a result of the implementation of the new Real Estate Regulatory Act coupled with the rate cut; more new projects would come up.”
The repo rate has been reduced by 25 bps to 6.0 per cent, reflecting the slightly accommodative stance that the Monetary Policy Committee has taken as it agreed that headline inflation has come down significantly. While many inflation upside risks have not manifested themselves as yet, the MPC feels that inflation may trend upwards going forward based on farm loan waivers, states passing on increased salaries/allowances and expected pressures on food inflation. The RBI remains more committed to keeping inflationary pressures under check.
It also highlighted how longer approval process under RERA is likely to delay launches and have an impact on growth of construction and ancillary activities. It is also relevant to note that there may not be another rate cut during the remainder of the year as the RBI will continue to look at inflation headwinds. This stance of the MPC will also be important for global investors as the current stable interest rate regime in India will allow for better investor returns in India for global investors. This should keep investors reasonably attracted towards India.
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.
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. The 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 strongly 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 into 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 of 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.
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