The Reserve Bank of India in its bi-monthly policy review, has decided to maintain the status quo by keeping the key rates unchanged. In the sixth and the last monetary policy review of the financial year and the first post the Union Budget 2018 – 19, RBI Governor Dr. Urjit Patel has left interest rates, Statuary liquidity ratio (SLR) and Cash reserve ratio (CRR) unchanged. This means that the RePo rate stands at 6 percent, Reverse RePo at 5.75 percent, Marginal Standing Facility (MSF) at 6.25 percent, CRR at 4 percent and SLR at 20 percent. This has been done keeping in view the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.
The Reserve Bank of India’s stance of keeping the repo rate unchanged at 6% is exactly along the lines of our expectations. Considering that the inflation has inched up (Dec-17 CPI at 5.21%, up from 3.58% in Oct-17 and well-above the target of 4%), crude oil prices are rising in the international market and the Government plans to increase the crop support price, maintaining the lending rates unchanged is justified. We believe that the interest rates will soon start inching upwards, which is already being factored into the rising bond yields for the past few months. The real estate sector can and should look at the long-term economic prospects and implications on which the monetary policy decisions are based, as these will dictate the growth trajectory for the sector.
The last 6 to 8 months have been very dynamic in Indian real estate with the implementation of RERA and GST but further cushion expected in the form of lending rates. Even though the apex bank has not provided any further rate cut for this financial year, new home buyers seeking home loans should not worry much as they may still witness lowered EMIs because of intensifying competition among the lenders, the lending institutions might be forced to start cutting down on the interest rates themselves.
Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz
This decision of RBI to keep the rates unchanged has proved very substantial in the first two quarters post GST was implemented and the apex bank wants to maintain its vigilant approach in the upcoming two months as well. Before questioning the judgement of the apex bank on holding the rates, one must not forget that it has to keep sufficient cushion for the economy with the massive changes that will come about in the next financial year in the form of REITs, InvITs, and SPVs.
Dhiraj Jain, Director, Mahagun Group
In case of an economy dominated by low interest rates and having abundance of cash flow, the risk of inflation exists in abundance. Hence, the decision of the RBI to not reduce the rates until it has been fully convinced about the inflation control is very justified. Since we are closing down on the financial year, a rate cut today would have allowed potential buyers to plan better for their investments in the property market for the next financial year.
Piyush Sharma, Senior Vice President, Sikka Group
Even though the apex bank has kept the rates unchanged, but we still believe that there is room for financial institutions to cut down on their lending rates. Prior to this, there was a 25 basis point cut in the key rates in the month of August, the benefits of which are yet to be fully passed on to the customers. Also, as the Union Budget failed to bring cheer to the market, reduced rates today might have helped sooth the economy to some extent.
Akshay Taneja, MD, TDI Infratech
Looking at the current and projected market scenarios, we were expecting the RBI to keep the rates unchanged. Although, any reduction in the repo rate would have allowed the sentiments in the real estate market to improve as the net cost on the buyer for the housing unit gets decreased but with the market inflation already on the rise and the Union Budget missing out on putting a leash on this, it is appreciative on the part of the apex bank to keep the rates on hold as it will give the market more time to stabilise and allow inflation rates to come down eventually.
Rajesh Goyal, Vice President CREDAI-NCR & MD, RG Group
There is no rate cut in the latest monetary policy by RBI however, A rate cut of 25 bps could have helped ease the pressure off the market which has been balancing itself through the confusions still pertaining with RERA, GST and a not so cheerful Union Budget 2018 – 19. This could have further allowed banks to lower their interest rates further but still keep additional funds allowing their lending capacity to increase and help ease the market to some extent. Although, with no rate cut today, the market is expected to run steadily in the short run with static demand.
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