In a time when the whole country is juggling with the old and new currency, RBI, in it’s fifth bi-monthly policy review for the year, today, kept the rates unchanged, falling against the expectations of the market, especially after demonetisation. Real estate sector in particular was in dire need of a rate cut as the sales had suddenly taken a sharp fall with the market not showing any signs of growth in near future. This being the last policy review for this calendar year, the first one post-demonetisation and second review by Dr. Urjit Patel; hopes were very high as a repo rate deduction was observed last time as well. Due to the demonetisation effect, secondary real estate market had taken a hard hit and the onus had completely fallen upon the primary market to perform and revive the realty sector. A rate cut at this point of time could have provoked the end users to invest in the market and help it gain momentum. Although, banks are still to pass on the benefits of previous rate cuts to the consumers, a hope on which the market is still relying.
With today’s announcement in the monetary policy review, the Repo Rate remains unchanged at 6.25 percent, Reverse Repo Rate under the LAF at 5.75 percent, Statutory Liquidity Ratio (SLR) at 21.5 percent, Cash Reserve Ratio (CRR) at 4 percent and Marginal Standing Facility (MSF) at 6.75 percent respectively. After today’s no change in the monetary policy review, realty experts are projecting the growth graph to move uniformly with the end users playing the cards by reaping out the benefits of reduced EMIs and property prices. Investors market though stands in the mid-way with no such guarantee of returns looking, as the prices are at its bottom, country going cashless on higher denominations and not many signs of appreciation in the upcoming 6-9 months.
Avneesh Sood, Director, Eros Group
Since demonetisation, it was quite evident that real buyers will become prominent in the market and end users will be in majority. Banks had already reduced their interest rates, post the previous policy review; and a rate cut in today’s policy review would have further motivated these potential primary buyers to make full use of the reduced EMIs. With ready to move in properties high in demand, property prices already at its lowest, a rate cut at this point of time could have pushed the sales further; either for long term retention or end use.
This move by RBI has come out against the market projections and a rate cut at present was of utmost importance, as the buyers were unsure about investing in the realty sector, post demonetisation. Demonetisation has allowed clarity for the buyers along with transparency in the sector, and the developers are well geared up for the end users to take the momentum forward. A rate cut in the present scenario could have pushed the banks to drop the interest rates further, the benefit of which would have been directly helpful for the buyers and the realty market.
Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group
Real estate sector in India is on a growth spree and since demonetisation, the footfall of end users has increased manifolds. Banks have started to reduce the lending rates which was expected to drop further, had the RBI announced a rate cut today. Now, this decision might drive the market away from investing in property for the next few months, until the Budget announcement offers some relief for the buyers.
Dhiraj Jain, Director, Mahagun Group
For the economy, this decision is a highly thought off one, considering the short term effects of demonetisation. The CPI inflation has been kept on check for three consecutive months, whereas the GVA came out to be lower in Q2. But for the real estate sector, it is a setback, as already the sales had dropped significantly post demonetisation and the fraternity was expecting a repo rate cut or a drop in CRR, which would have ultimately benefitted the end users interested for investing in the property market.
Ashok Gupta, CMD, Ajnara India Ltd.
The market and economy will take some time to balance the affects arising out of demonetisation and hence, the decision today by RBI stands as neutral. Realty sector has just witnessed the exit of numerous secondary real estate buyers and a rate cut at this time would have helped the primary sales to grow. As we are on the edge of this year end, all eyes will now fall upon the next year’s monetary review and the union budget, where much is again expected out of the government, especially for the Indian realty sector.
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