“The decision to keep the repo rate unchanged comes as a surprise. While the recent demonetization 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 fueled demand. A low inflation rate amidst slowdown in projected economic growth provided a conducive environment to reduce rates.”
Looking at the current market scenario, we were anticipating a repo rate cut by at least 25 basis points as the banks were already holding high liquidity and the benefit could have been passed onto the buyers. Lowered interest rates just ahead of the financial year closing could have allowed the buyers to plan their future investments, and realty sector would have benefitted the most especially after the recent lending rate deductions by the banks. RBI has played a wait and watch approach and might be waiting for the remonetisation drive to conclude properly and should cut the rates in April.
Kushagr Ansal, Director, Ansal Housing
We had pretty much entered a rate reduction cycle which was bringing back the demand for property investments in the market. After such a populous budget, a rate cut should have been there but the RBI has gone against the market forecasts. A rate reduction today could have allowed the realty buyers to plan property purchase as EMIs could have further eased. Banks are still to pass on the benefits of the previous repo rate cuts and a deduction today could have escalated the matter further.
Vikas Bhasin, MD, Saya Group
The government borrowings had reduced to INR 3.48 lakh crore from 4.25 lakh crore as presented in the Budget, which meant that a rate reduction was quite evident. Earlier this year, the government had provided subsidy on interest rates for affordable housing segment and banks had also reduced the general home loan interest rates by upto 50-60 basis points. A rate cut today could have allowed the potential buyers to invest in property as the EMIs would have reduced further in coming months. We hope that the next bi-monthly policy review observes a rate cut as it has been a neutral review for the second straight time.
Dhiraj Jain, Director, Mahagun Group
In case of a low interest rate environment surrounding the economy and cash available in abundance, the risk of inflation moving up exists. Hence, the RBI doesn’t reduce the rates until it has been fully convinced about the inflation control; as even the inflation has been on a rise for the fifth straight month in December. On the other hand though, since demonetisation, banks are keeping a strong credit and a rate cut today would have allowed them to pass on the benefits to the borrowers where reduced EMIs could have made the demand to take an upward movement on the demand graph for the property market.
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